A Research Paper on
Railway Retailing: Perceptions and Expectations of internal and external customers.
By
Mr. Prasad Kulkarni1 and Mr. T. Joel Gnanapragash2.
Senior Faculty, Sikkim Manipal University, Manipal Towers Bangalore ,
E- mail: prasad.kulkarni@manipalu.com
Senior Faculty, Department of Management studies, Sir. M. Visvesvarya Institute of Technology. Bangalore, e-mail: joel_prakash@rediffmail.com
Railway Retailing: Perceptions and Expectations of internal and external customers
Mr. Prasad Kulkarni* and Mr. T. Joel Gnanapragash **
Abstract
The turnaround strategies of railways brought paradigm shift in the profitability and opened up new vistas. Railway management once considered as a white elephant, shown immense managerial skills to venture into new areas. Asset utilization and allocation of resources topped the agenda of management. The railway has 43,000 acres of unutilized land and management aspires to add value to its profit through this asset. Railway is planning to develop malls, food plazas, commercial complexes and budget hotels in this land. Retail industry which is experiencing the phenomenal growth and hungry for expansion, wants to grab this opportunity by both the hands. Railway retailing is not the new format but it exists in nascent stage and ready to explode. Railway retailing is classified into railway owned retailing and privately owned retailing. Railway owned retailing, whose control is with the railway department, is further classified into platform, railway land, non store and train based retailing. Privately owned retailing in India is managed by both the organized and unorganized players. In the organized retailing, we observed ticket retailing, platform store retailing, railway land store retailing and train retailing. The unorganized retailing is mainly through hawkers and small time vendors. To achieve unparallel success, it is critical for any service firm to understand and analyze the customer perceptions. In this article, we analyzed customers’ perceptions about existing and future railway retail formats. The perceptions are analyzed on the basis of convenience, relevance, reliability, motives, cost, time, quality and image. We examined the future expectations of customers like beliefs, personal needs, situational factors, and perception about the alternatives, regarding railway retailing formats and assessed them against the commercial viability.
Key words: Railway retailing, Platform retailing, Ticket retailing, Non store retailing,
Perceptual mapping, commercially viable expectations and internal customers.
Introduction:
The ‘Ubiquitous’ retailing has enhanced the efficiency of supply chain Management. Anywhere shopping tendency of the buyer has opened many opportunities for the marketer to adopt different retail formats. Organized and Modern retail together today forms around 9 % of the total retail in the country[1] With the Maximum number of store per person in the world, averaging 11 store per thousand people, India is ahead of UK and US and relatively higher too for neighboring Asian countries like china, South Korea, Indonesia, Philippines, Thailand, Malaysia.[2] Be it an agriculture, insurance, pharmaceuticals, banking services, the concept of ‘Retailing’ goes hand in hand with almost all sectors in the Industry. Railway is not exceptional as it has already ventured into retailing and advanced in the retail formats like e-tailing.[3]
Conceptual Framework
Retailing – a Powerful Horse:
Retailing is the set of Business activities which adds value to the products and services sold to the consumers. [4] Simply to put, Retailing involves various activities of shopping such as purchasing through the internet, dealing in financial services, eating at the restaurant, etc.
* Faculty, Sikkim Manipal University, Manipal Towers Bangalore, e- mail: prasad.kulkarni@manipalu.com
**Senior Faculty, Department of Management studies, Sir. M. Visvesvaraya Institute of Technology, Bangalore, e-mail: joel_prakash@rediffmail.com
The proliferation of malls, multiplexes and supermarket, are providing completely different shopping experience. In the race of economic growth retail sector, contributes 10% the GDP and source of employment for more than 41 million Individual[5]. Indian Retail sector Analysis (2006-07) indicates both the organized and unorganized retail, together contributes significant revenue with the market size of Rs. 10 Trillion as per 2005. This Powerful Retail horse marrying with Railway, will certainly bring a chunk of revenue to the growth of both the sectors
The ‘turnaround’ of IR- a seed for Modern Railway Retailing:
The emerging scenario of Indian railway retailing could be seen as the outgrowth of the strategic direction provided by the Indian Railway (IR). Expert Group on Indian Railway in 2001has declared Indian railway as one of the possible bankruptcy organization. With the Persistent effort of Indian Railways coupled with the strategic implementation by the Railway Minister Lalu Prasad Yadav, Indian Railway has achieved an unprecedented growth in the recent years. Increased Competition interms of technology has spurred the growth of this PSU. The railways which had a fund balance of just 149 crore in 2000 has improved their financial position to Rs. 9000 crore in 2005 to Rs.14000crore in 2006 to Rs.20000 crore in 2007. [6] The total investment being planned for the eight year time frame (2007-2015) is tentatively in the order of Rs. 3, 50,000 crores. This stupendous performance could be attributed to the turnaround strategy adopted by Indian Railways to increase the share of goods earnings, Passenger earnings and other earnings like Advertising, catering, parcel. The notable turnaround strategies include focus on higher volume business by freezing freight rate increase and rationalizing commodity classification to benefit the high value of goods and charge more from the low rated commodities.[7] Outsourcing through public private partnership (PPP) Model was adopted in areas such as Catering, Parcel and Advertising. Against this backdrop, the avenues for the retailing have been felt and thereby the Railway Ministry is contemplating on the dimension of increased Modern retail formats with Public Private Partnership.
The Burgeoning Middle Class: Driver for the Growth Opportunity:
What underlies the opportunity is the emerging Middle class with its rising consumption in the yester years. The population of the middle class is around 480 million with the Monthly household Income (MHI) ranging from $ 150 to $ 1000.[8].This burgeoning middle class is a major thrust for the increased consumption. It is pertinent to note that the growth in the number of passenger has been 7.1 % in 2004-05 and 7.5 % in 2005 -2006. The data depicts that Indian middle class prefers railway transportation than others.
Accordingly, the Ministry also plans to introduce 53 pairs of new trains and host of benefits to passengers such as 7 % cut in A/c First class, 4 % in A/c Second class. [9] For any retailing business, pulling crowd is a major challenge, and it is apparent from these developments, besides its capacity to pull the crowd for the transport, the railway may attract the commuters as well as non-commuters for the retail business as well. Shoppers may be able to leverage the brand equity of Indian Railway to lure the customers of the burgeoning middle class.
Conceptual Model
Railway Retailing Formats:
Railway retailing could be classified as Railway owned Retailing and privately owned retailing (Fig1.1).
Railway owned retailing
Privately owned retailing
Store retailing
Non store retailing
Platform
Train
Online retailing
Store retailing
Train
Platform
Organized
RAILWAY RETAILING
Unorganized
Railway land
Kiosk and vending
Railway land
Mobile retailing
Ticket
Leveraging the turnaround experience to retailing.
Railway owned retailing is managed by the railway department. Further it is classified as Store retailing, Non-store retailing and train retailing. The store retailing includes platform retailing, and rail land retailing. Platform retailing( Stores on the railway platform) that exists ever since the operation of Indian Railway sells FMCG products. Rail land retailing is the yet to be launched retail format of Indian railways. A railway has 45,000 hectares of waste land in the vicinity of Railway station. The improved financial power of railways influenced its decision makers to convert this waste land into the modern retail hub. The ASSOCHAM (The Associated Chamber of Commerce and Industry of India) has prescribed the development activities that include the establishment of motels, smaller huts and apartments and pizza huts to enhance railways revenue and to make use of the land for profiteering. [10] Rail Land Development Authority has been set up under the Railway (Amendment) Act to pursue this objective of commercial development to generate steady stream of Non-fare revenue. [11] It is also envisaged in the current union Budget 2008; the Railway Development Authority would raise Rs.4000crore during 2008-09 by making commercial use of Railways surplus land.
The Non-store retailing includes kiosk and vending retailing, online retailing and mobile retailing. Kiosks are the machines that provide information to the passengers in the railway stations while vending machines distributes the platform tickets. Online retailing is the emerging and better format of railway retailing. The e- ticket facility has become major hit among the corporate customers. The railway website is one of the top hit website in the world. Further, the e-ticketing facility is simplified so that the passenger are allowed to take a print out after booking the ticket. [12] Further the Automatic ticket vending machine would go up from 250 to 6000. [13] Railways recently started mobile ticket facility also. Incase of mobile retailing customers will be provided the pin which he/ she can show it in the railway station and get the tickets.
Indian Railway- a big leap for Private organized Retailer:
Indian Railway has about 7500 stations and it aims to move 661 crore passenger in the current fiscal. Each destination or station is a market as it is contemplating to allow many different retail formats to operate. To meet the emergency needs, Apollo, Fortis and life spring is to set up pharmacy cum clinics to tap train passengers. In this connection, the Railway has set up a committee to recommend a model for allowing healthcare chains for awarding license to set up pharmacy-cum-clinic at various stations. [14]Passengers could also check in the Budget hotels for a relaxed stay, as Indian Railway has planned for setting up of 100 budget hotels across the country. IRTC has invited bids from private hospitality developers and foreign players for setting up two or three star hotels in 20 locations. The locations include Madurai, Vijayawada, secunderabad, Chandigarh, Mumbai, Tirupati, kanyakumari, etc. Bangalore based ( ROHL) Royal Orchid Hotels has been tied up with IRTC ( Indian Railway Tourism Corporation. For developing these hotels, ROHL plans to set up venture with local developers. [15] The agency mode of ticket distribution is also helping the railways to reach masses very easily. Railway is planning to provide space inside the train to private companies to sell their products. This may eventually terminate the unorganized train retailing by hawkers and improve the private players’ retail services like catering. Some of the major initiatives in bringing private players to railway retailing are discussed below.
The prominent one is the plan to invite firms to invest in setting up infrastructure on its land for creating a supply chain to move agricultural products from their points of produce to demand destinations. The Railway has announced its plans to have 7500 agricultural outlets at stations. Retail players who want to use these outlets will be required to invest in the back-end infrastructure as well. These outlets can also sell non-agricultural commodities. In view of this, the Indian Railway had a meeting with several players including ITC, Cargill India, Adami Enterprises, Pantaloon, Godrej Agrovet. [16]
The pleasant experience need not come only from railway journey; it can also come from shopping experience in the places which comes under the purview of Indian Railway. The fabulous performance of railway has given rise to the developmental strategies including bid for the private players to set up kiosks. 287 bids have been awarded to ABCTL ( Amalgamated Beans coffee Trading Limited), Hindustan unilever limited, Hindustan Coca-Cola Beverages Pvt Ltd, Fresh and honest café Ltd. Surya Food and Agro Ltd, the makers of the priyagold biscuits, and Nestle India recently won bids. Out of these already more than 90 Kiosks have been commissioned. [17] Café Coffee Day, owned by ABCTL has won the maximum bids and would be putting up 121 kiosks. Coca-Cola has bagged the bids for putting 61kiosks, followed by Fresh and Honest (49).IRTC has been mandated to develop catering services, budget hotels and food plazas at major stations through involvement of private entrepreneurs.[18]
In an effort to facilitate the tourism, the railway has plan to tie-up with private rental car players such as Hertz and India Travel House and several hotel operators to offer off-the-shelf packages along with rail tickets. The IRTC CMD PK Goel has told to Economic Times that the idea of tie-up is to create tourism products and services specifically tailored for the mid-segment. Yet another effort is to make the internet easily available to passengers, VSNL has been working on setting 68 Internet kiosks in 68 different locations on Indian Railway. [19] Beyond this, the Indian Railway is also launching Mobile Ticketing facility to delight its customers. In line with this, Reliance communications introduced railway ticket booking on its mobile phones through its tie-up with Indian Railway Catering and Tourism Corporation for the first time in the country in April 2004. In alliance with Indian Railway the SBI announced ‘The SBI Railway card” specifically to meet the need for efficient payment processes by India’s growing number of consumers. [20]
Perceptions and Expectations of the Internal and External Customers:
It is against this background, this study is intended to identify the effects of these trend shift in Railway Retailing on the perceptions and expectations of internal and external customers. Clearly, the Internal Customers are the Employees of Indian Railways and the external customers are the passengers. Any marketing program of a service company firstly is marketed to the internal customers. The quite obvious reason is that these internal customers have direct contact with the external customers. Any new policy at the corporate level may have impact on its internal customers. Recognizing this, railway minister in his budget speech 2008, brought the credit of the
Success of to the Indian Railway employees saying,”14 Lakh railway employees have worked relentlessly, day and night, for the financial turnaround of the Railways. In recognition of this we have increased their Bonus for 2006-07 from 65 to 70 day s” [21]Hence the importance of internal customers should never be overlooked.
The implementation of any corporate level strategy depends on the whole hearted commitment of its employees whether they are directly or indirectly related to the corporate strategy. As the Indian Economy is witnessing retail boom, marketers are trying to tap this opportunity. As railway is inherently surrounded by people, it is not surprising for the railway to adopt different railway formats. But what is important is the perception and expectations of the external customers about the new retail formats since it may require more co-ordination from the employees of various departments of railway and the private parties setting up ventures. While the impressive growth of railway has brought applause from all quarters, it has exposed the problems of infrastructure, congestion and saturation of the network especially on the high-density corridor connecting the four metropolitan cities.[22]
Methodology:
A survey was conducted from 10th January 2008 to 10th February 2008. The questionnaire was personally administered for the sample of 50 customers and 20 employees through random sampling method. The research was conducted on the basis of two objectives. First, assessing the customer perceptions about the existing and future railway retail formats and second, analyzing the customer expectations about the existing as well as future railway retail formats. Here customer means both internal and external. A pilot study was conducted to generate hypothesis required for the research.
Hypothesis:
The research was focused on perception variables like convenience, relevance, reliability, motives, cost, time, quality and image. Analyzing these variables from the pilot study data we were able to deduce the result into the following hypothesis
H1: the customer is having negative perception about the existing railway retail services.
H2: The customer is having negative perception about the future railway retail services.
Hypothesis testing rule: The weightages are given for perception and expectation variables for total of 1 each and result of testing of each variable is adjusted to analyze the acceptance or rejection of the hypothesis.
Results:
Testing of hypothesis:
We examined the perceptions of internal and external customers regarding existing railway retail services. The data is analyzed using chi- square test. The statistical output is shown in the table 1
Table 1: The Customers perceptions towards the existing railway retail services.
Food
Books
Newspaper
Stationary
Internet
Coffee/tea
Train information
Ticket information
Chi square
14.6
20.4
25.9
39.12
38.72
12.72
32.60
14.48
Asymp significance
0.006
0.000
0.000
0.000
0.000
0.007
0.000
0.002
Except food and coffee/tea all other parameters are accepted i.e. there is a negative perception about the services provided by railway retailers. Hence null hypothesis should be accepted.
Table 2: The customer perception towards the future railway retail services
Test Statistics
VAR00001
Chi-Square
.667
Asymp. Sig.
.955
The statistical analysis shows us that null hypothesis should be rejected i.e. customers are having positive perception towards future railway retailing
Findings:
The statistical interpretation of the data collected form internal customers and external customers have thrown light on the strengths, weaknesses, opportunities and threats of railway retailing. Customers are having positive outlook towards future retailing like conversion of railway land into retail malls and shops. They also expressed their dissatisfaction and concern towards some of the existing retail services offered by the railway retailer. Food and coffee/tea retailing have positive opinion from the customers but newspapers, books, train information, stationary, ticket information, and internet service provider didn’t enjoy the customers’ favorability. Interestingly, most of the coffee/ tea retailing are either through vending machine or hawkers, which is non store format, enjoys customer loyalty. Indian railway website www.irctc.com which has highest number of hits in the Asia did not live up to the expectations of the customers. When asked about their perception towards rail land development into retailing both internal and external customers are positive about its attractiveness, value addition to profit, and better services. Some respondents voice their concern about the security threat from terrorists in such retail outlets. Employees particularly railway police responded that it will become very difficult for them to segregate genuine customers and terrorist elements. Hence their work load will go up. Mobile ticketing, the new retail baby of railways has thumbs up from the customers who are aware about the services. Some respondents have opposed the idea of opening bars inside the train. Respondents are positive about the convenience of ticket retailing by third party but they feel middlemen charges are too high.
Prior to the research we were interested to find out is there any service gap exists between customer perception and expectations. If the gap exists whether it is within the zone of tolerance? The outcome of the research has shown some untapped potential and also underneath current of dissatisfaction. Customers would like to have hospitality services near to railway stations. They want railways to have their own transportation facility for pickup and drop the customers. The concern about online retailing exists mainly because of extra amount customer pays. Some of the respondents pressed railways to tie up with big retailers to have better in train services. Other demands of customer include mobile recharge coupons, battery recharge facility, tour packages and easy availability of tickets in case of urgency.
Conclusions:
In the post independence era railways enjoyed their monopoly. The advent of metro train and no frill airlines took customers to next level of services. Hence in the globalized world it is inevitable for railways to upgrade their services. A railway has to professionalize their channels of distribution, value added services on the platform and inside the train. Railway land conversion a very good initiatives needs proper backup, tie up with professional companies and transparency in the operation. It should try to reduce the service charge levied on mobile ticketing and online ticketing. As expressed by the respondents’, railways need to integrate their services to become full line service provider from just transporter.
[1] Gibson G.Vedamani, Comprehensive Policy vital, Survey of Indian Industry 2007
[2] The Economic Times, Dec 15, 2006
[3] The Economic Times, Feb 15,2007
[4] Micheal Levy, Barton A.Weitz, Retailing Management, 5th Edn, Tata McGraw Hill Publishing Company Ltd, New Delhi 2003.
[5] RNCOS Retail Research, http://rncos.com/Blog/retail/archive/2007_01_01_retail_archive.html
[6] http://www.quamiekta.com/englishnews/p.php?q=1297
[7] G.Raghuram, ‘Turnaround’ of Indian Railways: A critical Appraisal of Strategies and Process, February 2007, PP 5-8
[8] The Survey of Indian Industry 2007.
[9] Business Line,27th February 2008
[10] Utilise Railways wasted land for Real estate: ASSOCHAM/INRNews
[11] IR News- Indian Railways: Running to be No.1 Network; http//www.inrnews.com/realestate property/India/policy/utilize_railways_wasted_land_f.html
[12] http://www.commodityonline.com/news/columns/newsdetails.php?id=5095&cont=2
[13] Business Line 27th February
[14] Business Line, February 14, 2008
[15] Business Line, April 30,2007
[16] Financial Times Information Limited- Asia Africa Intelligence wire ( The Economic Times, India)
[17] Business Line, January, 01, 2007.
[18] http://www.commodityonline.com/news/columns/newsdetails.php?id=5095&cont=2
[19] http://www.inrnews.com/realestateproperty/indian_railway_projects_to_be.html
[20] Business wire, Feb 20,2006
[21] http://www.outlookindia.com/full.asp?fodname=20080226&fname=railways&sid=2&pn=15
[22] http://www.irnews.com//realestateproperty/indiapolicy/utilise_railways_wasted_land_f.html
Railway Retailing: Perceptions and Expectations of internal and external customers.
By
Mr. Prasad Kulkarni1 and Mr. T. Joel Gnanapragash2.
Senior Faculty, Sikkim Manipal University, Manipal Towers Bangalore ,
E- mail: prasad.kulkarni@manipalu.com
Senior Faculty, Department of Management studies, Sir. M. Visvesvarya Institute of Technology. Bangalore, e-mail: joel_prakash@rediffmail.com
Railway Retailing: Perceptions and Expectations of internal and external customers
Mr. Prasad Kulkarni* and Mr. T. Joel Gnanapragash **
Abstract
The turnaround strategies of railways brought paradigm shift in the profitability and opened up new vistas. Railway management once considered as a white elephant, shown immense managerial skills to venture into new areas. Asset utilization and allocation of resources topped the agenda of management. The railway has 43,000 acres of unutilized land and management aspires to add value to its profit through this asset. Railway is planning to develop malls, food plazas, commercial complexes and budget hotels in this land. Retail industry which is experiencing the phenomenal growth and hungry for expansion, wants to grab this opportunity by both the hands. Railway retailing is not the new format but it exists in nascent stage and ready to explode. Railway retailing is classified into railway owned retailing and privately owned retailing. Railway owned retailing, whose control is with the railway department, is further classified into platform, railway land, non store and train based retailing. Privately owned retailing in India is managed by both the organized and unorganized players. In the organized retailing, we observed ticket retailing, platform store retailing, railway land store retailing and train retailing. The unorganized retailing is mainly through hawkers and small time vendors. To achieve unparallel success, it is critical for any service firm to understand and analyze the customer perceptions. In this article, we analyzed customers’ perceptions about existing and future railway retail formats. The perceptions are analyzed on the basis of convenience, relevance, reliability, motives, cost, time, quality and image. We examined the future expectations of customers like beliefs, personal needs, situational factors, and perception about the alternatives, regarding railway retailing formats and assessed them against the commercial viability.
Key words: Railway retailing, Platform retailing, Ticket retailing, Non store retailing,
Perceptual mapping, commercially viable expectations and internal customers.
Introduction:
The ‘Ubiquitous’ retailing has enhanced the efficiency of supply chain Management. Anywhere shopping tendency of the buyer has opened many opportunities for the marketer to adopt different retail formats. Organized and Modern retail together today forms around 9 % of the total retail in the country[1] With the Maximum number of store per person in the world, averaging 11 store per thousand people, India is ahead of UK and US and relatively higher too for neighboring Asian countries like china, South Korea, Indonesia, Philippines, Thailand, Malaysia.[2] Be it an agriculture, insurance, pharmaceuticals, banking services, the concept of ‘Retailing’ goes hand in hand with almost all sectors in the Industry. Railway is not exceptional as it has already ventured into retailing and advanced in the retail formats like e-tailing.[3]
Conceptual Framework
Retailing – a Powerful Horse:
Retailing is the set of Business activities which adds value to the products and services sold to the consumers. [4] Simply to put, Retailing involves various activities of shopping such as purchasing through the internet, dealing in financial services, eating at the restaurant, etc.
* Faculty, Sikkim Manipal University, Manipal Towers Bangalore, e- mail: prasad.kulkarni@manipalu.com
**Senior Faculty, Department of Management studies, Sir. M. Visvesvaraya Institute of Technology, Bangalore, e-mail: joel_prakash@rediffmail.com
The proliferation of malls, multiplexes and supermarket, are providing completely different shopping experience. In the race of economic growth retail sector, contributes 10% the GDP and source of employment for more than 41 million Individual[5]. Indian Retail sector Analysis (2006-07) indicates both the organized and unorganized retail, together contributes significant revenue with the market size of Rs. 10 Trillion as per 2005. This Powerful Retail horse marrying with Railway, will certainly bring a chunk of revenue to the growth of both the sectors
The ‘turnaround’ of IR- a seed for Modern Railway Retailing:
The emerging scenario of Indian railway retailing could be seen as the outgrowth of the strategic direction provided by the Indian Railway (IR). Expert Group on Indian Railway in 2001has declared Indian railway as one of the possible bankruptcy organization. With the Persistent effort of Indian Railways coupled with the strategic implementation by the Railway Minister Lalu Prasad Yadav, Indian Railway has achieved an unprecedented growth in the recent years. Increased Competition interms of technology has spurred the growth of this PSU. The railways which had a fund balance of just 149 crore in 2000 has improved their financial position to Rs. 9000 crore in 2005 to Rs.14000crore in 2006 to Rs.20000 crore in 2007. [6] The total investment being planned for the eight year time frame (2007-2015) is tentatively in the order of Rs. 3, 50,000 crores. This stupendous performance could be attributed to the turnaround strategy adopted by Indian Railways to increase the share of goods earnings, Passenger earnings and other earnings like Advertising, catering, parcel. The notable turnaround strategies include focus on higher volume business by freezing freight rate increase and rationalizing commodity classification to benefit the high value of goods and charge more from the low rated commodities.[7] Outsourcing through public private partnership (PPP) Model was adopted in areas such as Catering, Parcel and Advertising. Against this backdrop, the avenues for the retailing have been felt and thereby the Railway Ministry is contemplating on the dimension of increased Modern retail formats with Public Private Partnership.
The Burgeoning Middle Class: Driver for the Growth Opportunity:
What underlies the opportunity is the emerging Middle class with its rising consumption in the yester years. The population of the middle class is around 480 million with the Monthly household Income (MHI) ranging from $ 150 to $ 1000.[8].This burgeoning middle class is a major thrust for the increased consumption. It is pertinent to note that the growth in the number of passenger has been 7.1 % in 2004-05 and 7.5 % in 2005 -2006. The data depicts that Indian middle class prefers railway transportation than others.
Accordingly, the Ministry also plans to introduce 53 pairs of new trains and host of benefits to passengers such as 7 % cut in A/c First class, 4 % in A/c Second class. [9] For any retailing business, pulling crowd is a major challenge, and it is apparent from these developments, besides its capacity to pull the crowd for the transport, the railway may attract the commuters as well as non-commuters for the retail business as well. Shoppers may be able to leverage the brand equity of Indian Railway to lure the customers of the burgeoning middle class.
Conceptual Model
Railway Retailing Formats:
Railway retailing could be classified as Railway owned Retailing and privately owned retailing (Fig1.1).
Railway owned retailing
Privately owned retailing
Store retailing
Non store retailing
Platform
Train
Online retailing
Store retailing
Train
Platform
Organized
RAILWAY RETAILING
Unorganized
Railway land
Kiosk and vending
Railway land
Mobile retailing
Ticket
Leveraging the turnaround experience to retailing.
Railway owned retailing is managed by the railway department. Further it is classified as Store retailing, Non-store retailing and train retailing. The store retailing includes platform retailing, and rail land retailing. Platform retailing( Stores on the railway platform) that exists ever since the operation of Indian Railway sells FMCG products. Rail land retailing is the yet to be launched retail format of Indian railways. A railway has 45,000 hectares of waste land in the vicinity of Railway station. The improved financial power of railways influenced its decision makers to convert this waste land into the modern retail hub. The ASSOCHAM (The Associated Chamber of Commerce and Industry of India) has prescribed the development activities that include the establishment of motels, smaller huts and apartments and pizza huts to enhance railways revenue and to make use of the land for profiteering. [10] Rail Land Development Authority has been set up under the Railway (Amendment) Act to pursue this objective of commercial development to generate steady stream of Non-fare revenue. [11] It is also envisaged in the current union Budget 2008; the Railway Development Authority would raise Rs.4000crore during 2008-09 by making commercial use of Railways surplus land.
The Non-store retailing includes kiosk and vending retailing, online retailing and mobile retailing. Kiosks are the machines that provide information to the passengers in the railway stations while vending machines distributes the platform tickets. Online retailing is the emerging and better format of railway retailing. The e- ticket facility has become major hit among the corporate customers. The railway website is one of the top hit website in the world. Further, the e-ticketing facility is simplified so that the passenger are allowed to take a print out after booking the ticket. [12] Further the Automatic ticket vending machine would go up from 250 to 6000. [13] Railways recently started mobile ticket facility also. Incase of mobile retailing customers will be provided the pin which he/ she can show it in the railway station and get the tickets.
Indian Railway- a big leap for Private organized Retailer:
Indian Railway has about 7500 stations and it aims to move 661 crore passenger in the current fiscal. Each destination or station is a market as it is contemplating to allow many different retail formats to operate. To meet the emergency needs, Apollo, Fortis and life spring is to set up pharmacy cum clinics to tap train passengers. In this connection, the Railway has set up a committee to recommend a model for allowing healthcare chains for awarding license to set up pharmacy-cum-clinic at various stations. [14]Passengers could also check in the Budget hotels for a relaxed stay, as Indian Railway has planned for setting up of 100 budget hotels across the country. IRTC has invited bids from private hospitality developers and foreign players for setting up two or three star hotels in 20 locations. The locations include Madurai, Vijayawada, secunderabad, Chandigarh, Mumbai, Tirupati, kanyakumari, etc. Bangalore based ( ROHL) Royal Orchid Hotels has been tied up with IRTC ( Indian Railway Tourism Corporation. For developing these hotels, ROHL plans to set up venture with local developers. [15] The agency mode of ticket distribution is also helping the railways to reach masses very easily. Railway is planning to provide space inside the train to private companies to sell their products. This may eventually terminate the unorganized train retailing by hawkers and improve the private players’ retail services like catering. Some of the major initiatives in bringing private players to railway retailing are discussed below.
The prominent one is the plan to invite firms to invest in setting up infrastructure on its land for creating a supply chain to move agricultural products from their points of produce to demand destinations. The Railway has announced its plans to have 7500 agricultural outlets at stations. Retail players who want to use these outlets will be required to invest in the back-end infrastructure as well. These outlets can also sell non-agricultural commodities. In view of this, the Indian Railway had a meeting with several players including ITC, Cargill India, Adami Enterprises, Pantaloon, Godrej Agrovet. [16]
The pleasant experience need not come only from railway journey; it can also come from shopping experience in the places which comes under the purview of Indian Railway. The fabulous performance of railway has given rise to the developmental strategies including bid for the private players to set up kiosks. 287 bids have been awarded to ABCTL ( Amalgamated Beans coffee Trading Limited), Hindustan unilever limited, Hindustan Coca-Cola Beverages Pvt Ltd, Fresh and honest café Ltd. Surya Food and Agro Ltd, the makers of the priyagold biscuits, and Nestle India recently won bids. Out of these already more than 90 Kiosks have been commissioned. [17] Café Coffee Day, owned by ABCTL has won the maximum bids and would be putting up 121 kiosks. Coca-Cola has bagged the bids for putting 61kiosks, followed by Fresh and Honest (49).IRTC has been mandated to develop catering services, budget hotels and food plazas at major stations through involvement of private entrepreneurs.[18]
In an effort to facilitate the tourism, the railway has plan to tie-up with private rental car players such as Hertz and India Travel House and several hotel operators to offer off-the-shelf packages along with rail tickets. The IRTC CMD PK Goel has told to Economic Times that the idea of tie-up is to create tourism products and services specifically tailored for the mid-segment. Yet another effort is to make the internet easily available to passengers, VSNL has been working on setting 68 Internet kiosks in 68 different locations on Indian Railway. [19] Beyond this, the Indian Railway is also launching Mobile Ticketing facility to delight its customers. In line with this, Reliance communications introduced railway ticket booking on its mobile phones through its tie-up with Indian Railway Catering and Tourism Corporation for the first time in the country in April 2004. In alliance with Indian Railway the SBI announced ‘The SBI Railway card” specifically to meet the need for efficient payment processes by India’s growing number of consumers. [20]
Perceptions and Expectations of the Internal and External Customers:
It is against this background, this study is intended to identify the effects of these trend shift in Railway Retailing on the perceptions and expectations of internal and external customers. Clearly, the Internal Customers are the Employees of Indian Railways and the external customers are the passengers. Any marketing program of a service company firstly is marketed to the internal customers. The quite obvious reason is that these internal customers have direct contact with the external customers. Any new policy at the corporate level may have impact on its internal customers. Recognizing this, railway minister in his budget speech 2008, brought the credit of the
Success of to the Indian Railway employees saying,”14 Lakh railway employees have worked relentlessly, day and night, for the financial turnaround of the Railways. In recognition of this we have increased their Bonus for 2006-07 from 65 to 70 day s” [21]Hence the importance of internal customers should never be overlooked.
The implementation of any corporate level strategy depends on the whole hearted commitment of its employees whether they are directly or indirectly related to the corporate strategy. As the Indian Economy is witnessing retail boom, marketers are trying to tap this opportunity. As railway is inherently surrounded by people, it is not surprising for the railway to adopt different railway formats. But what is important is the perception and expectations of the external customers about the new retail formats since it may require more co-ordination from the employees of various departments of railway and the private parties setting up ventures. While the impressive growth of railway has brought applause from all quarters, it has exposed the problems of infrastructure, congestion and saturation of the network especially on the high-density corridor connecting the four metropolitan cities.[22]
Methodology:
A survey was conducted from 10th January 2008 to 10th February 2008. The questionnaire was personally administered for the sample of 50 customers and 20 employees through random sampling method. The research was conducted on the basis of two objectives. First, assessing the customer perceptions about the existing and future railway retail formats and second, analyzing the customer expectations about the existing as well as future railway retail formats. Here customer means both internal and external. A pilot study was conducted to generate hypothesis required for the research.
Hypothesis:
The research was focused on perception variables like convenience, relevance, reliability, motives, cost, time, quality and image. Analyzing these variables from the pilot study data we were able to deduce the result into the following hypothesis
H1: the customer is having negative perception about the existing railway retail services.
H2: The customer is having negative perception about the future railway retail services.
Hypothesis testing rule: The weightages are given for perception and expectation variables for total of 1 each and result of testing of each variable is adjusted to analyze the acceptance or rejection of the hypothesis.
Results:
Testing of hypothesis:
We examined the perceptions of internal and external customers regarding existing railway retail services. The data is analyzed using chi- square test. The statistical output is shown in the table 1
Table 1: The Customers perceptions towards the existing railway retail services.
Food
Books
Newspaper
Stationary
Internet
Coffee/tea
Train information
Ticket information
Chi square
14.6
20.4
25.9
39.12
38.72
12.72
32.60
14.48
Asymp significance
0.006
0.000
0.000
0.000
0.000
0.007
0.000
0.002
Except food and coffee/tea all other parameters are accepted i.e. there is a negative perception about the services provided by railway retailers. Hence null hypothesis should be accepted.
Table 2: The customer perception towards the future railway retail services
Test Statistics
VAR00001
Chi-Square
.667
Asymp. Sig.
.955
The statistical analysis shows us that null hypothesis should be rejected i.e. customers are having positive perception towards future railway retailing
Findings:
The statistical interpretation of the data collected form internal customers and external customers have thrown light on the strengths, weaknesses, opportunities and threats of railway retailing. Customers are having positive outlook towards future retailing like conversion of railway land into retail malls and shops. They also expressed their dissatisfaction and concern towards some of the existing retail services offered by the railway retailer. Food and coffee/tea retailing have positive opinion from the customers but newspapers, books, train information, stationary, ticket information, and internet service provider didn’t enjoy the customers’ favorability. Interestingly, most of the coffee/ tea retailing are either through vending machine or hawkers, which is non store format, enjoys customer loyalty. Indian railway website www.irctc.com which has highest number of hits in the Asia did not live up to the expectations of the customers. When asked about their perception towards rail land development into retailing both internal and external customers are positive about its attractiveness, value addition to profit, and better services. Some respondents voice their concern about the security threat from terrorists in such retail outlets. Employees particularly railway police responded that it will become very difficult for them to segregate genuine customers and terrorist elements. Hence their work load will go up. Mobile ticketing, the new retail baby of railways has thumbs up from the customers who are aware about the services. Some respondents have opposed the idea of opening bars inside the train. Respondents are positive about the convenience of ticket retailing by third party but they feel middlemen charges are too high.
Prior to the research we were interested to find out is there any service gap exists between customer perception and expectations. If the gap exists whether it is within the zone of tolerance? The outcome of the research has shown some untapped potential and also underneath current of dissatisfaction. Customers would like to have hospitality services near to railway stations. They want railways to have their own transportation facility for pickup and drop the customers. The concern about online retailing exists mainly because of extra amount customer pays. Some of the respondents pressed railways to tie up with big retailers to have better in train services. Other demands of customer include mobile recharge coupons, battery recharge facility, tour packages and easy availability of tickets in case of urgency.
Conclusions:
In the post independence era railways enjoyed their monopoly. The advent of metro train and no frill airlines took customers to next level of services. Hence in the globalized world it is inevitable for railways to upgrade their services. A railway has to professionalize their channels of distribution, value added services on the platform and inside the train. Railway land conversion a very good initiatives needs proper backup, tie up with professional companies and transparency in the operation. It should try to reduce the service charge levied on mobile ticketing and online ticketing. As expressed by the respondents’, railways need to integrate their services to become full line service provider from just transporter.
[1] Gibson G.Vedamani, Comprehensive Policy vital, Survey of Indian Industry 2007
[2] The Economic Times, Dec 15, 2006
[3] The Economic Times, Feb 15,2007
[4] Micheal Levy, Barton A.Weitz, Retailing Management, 5th Edn, Tata McGraw Hill Publishing Company Ltd, New Delhi 2003.
[5] RNCOS Retail Research, http://rncos.com/Blog/retail/archive/2007_01_01_retail_archive.html
[6] http://www.quamiekta.com/englishnews/p.php?q=1297
[7] G.Raghuram, ‘Turnaround’ of Indian Railways: A critical Appraisal of Strategies and Process, February 2007, PP 5-8
[8] The Survey of Indian Industry 2007.
[9] Business Line,27th February 2008
[10] Utilise Railways wasted land for Real estate: ASSOCHAM/INRNews
[11] IR News- Indian Railways: Running to be No.1 Network; http//www.inrnews.com/realestate property/India/policy/utilize_railways_wasted_land_f.html
[12] http://www.commodityonline.com/news/columns/newsdetails.php?id=5095&cont=2
[13] Business Line 27th February
[14] Business Line, February 14, 2008
[15] Business Line, April 30,2007
[16] Financial Times Information Limited- Asia Africa Intelligence wire ( The Economic Times, India)
[17] Business Line, January, 01, 2007.
[18] http://www.commodityonline.com/news/columns/newsdetails.php?id=5095&cont=2
[19] http://www.inrnews.com/realestateproperty/indian_railway_projects_to_be.html
[20] Business wire, Feb 20,2006
[21] http://www.outlookindia.com/full.asp?fodname=20080226&fname=railways&sid=2&pn=15
[22] http://www.irnews.com//realestateproperty/indiapolicy/utilise_railways_wasted_land_f.html
