An empirical investigation of unique traits of retailing industry in emerging economies: The perspective of consumer-packaged goods manufacturers

Abstract

Emerging economies have traits that distinguish them from developed economies. These include (1) distribution channels involving a large number of traditional fragmented stores competing with emergent chain stores, (2) rapid urbanization and the movement of population from rural to urban areas, (3) poor transportation/internet infrastructure and media penetration leading to challenges faced by CPG firms in distribution and consumers in purchasing, and (4) regulation mandating CPG firms to print the maximum product price on the product package. We investigate how these traits endemic to emerging economies impact a CPG firm’s product sales and profitability and the implications. While product sales increased over time in the chain stores (the MTO channel) at all price levels, they barely rose in the traditional channel. On the other hand, product profitability for low-priced products increased over time in the traditional channel and fell in the MTO channel. Further, the CPG firms’ product sales over time in both channels were ordered per the population of the city tier. However, while the product profitability in the traditional channel rose at the same pace in all city tiers, that in the MTO channel fell in the medium-sized cities.