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Palash
NMIMS, Mumbai
Team name- ROOT
Company name – Palash
College name- NMIMS
Year - 2nd
Team members
1. Ankit Prasad
2 .Amey Kanekar
3. Sachin Kamath
8/20/2013
Palash
Contents
Executive Summary ............................................................................................................................. 4
Detailed background of business purpose ....................................................................................... 6
The Indian Retail sector ...................................................................................................................... 7
The Retail Sector in India – Key Challenges ............................................................................. 10
Genesis of concept ............................................................................................................................ 11
What would it take to be Walmart ?............................................................................................ 11
Our Starting Point ........................................................................................................................... 12
Our Concept .................................................................................................................................... 18
Proof of concept for Palash ......................................................................................................... 30
Pentagon Model for Palash Stores .................................................................................................. 31
Organizational structure .................................................................................................................... 37
Expansion Plans ................................................................................................................................. 39
Financials ............................................................................................................................................ 41
Assumptions.................................................................................................................................... 42
Market share ................................................................................................................................... 47
Balance Sheets............................................................................................................................... 48
Cash Flow Statements .................................................................................................................. 50
Investors Section ............................................................................................................................ 52
Exit strategies ..................................................................................................................................... 53
Human Capital and Industry Evaluation ......................................................................................... 55
Performance management system.............................................................................................. 56
Application of Strategic tools ............................................................................................................ 59
Cash and Carry Detailed Analysis ................................................................................................... 62
Cash and carry model once established, can bring multiple benefits to all ...................... 67
Shortens multi-level supply chain across verticals................................................................ 68
Direct procurement also reduces wastage and helps retain quality ................................... 69
Other benefits of a good supply chain .................................................................................... 71
How RFID helps ......................................................................................................................... 71
Reduction in transaction costs and time, thereby avoiding stock outs for customers ..... 71
Efficient supply chain management................................................................................................. 74
Cash and Carry Competitive environment ..................................................................................... 75
Metro in India .............................................................................................................................. 76
The METRO Concept:.................................................................................................. 77
Palash
Metro Key Account Managers ...................................................................................... 78
METRO Customer Consultant...................................................................................... 79
E-Retail Program ......................................................................................................... 79
Line Of Business ................................................................................................................. 80
Services .............................................................................................................................. 81
Installation Services .............................................................................................. 81
Bulk Purchase Assistance..................................................................................... 81
Delivery Solutions ................................................................................................. 81
Dedicated Relationship Manager .......................................................................... 81
Booker India .................................................................................................................... 84
Convenience Store Detailed Analysis ................................................................................. 86
Convenience Store Competitive Environment ..................................................................... 91
KB-Fair Price Investment Details ................................................................................. 92
KB-Fair Price Property Details ..................................................................................... 92
KB-Fair Price Training Details ...................................................................................... 92
KB-Fair Price Other Details .......................................................................................... 93
Appendix ............................................................................................................................................... 97
Palash
Executive Summary
‘Palash’
-Achieving sanghatan
Vision
To become the pre-eminent daily household retailer and wholesaler of India.
Mission
To leverage the best of organised and unorganised retail and deliver daily household
offerings of a standard quality and price with an India-wide reach.
Premise
Palash
With modern trade only constituting 8% of India's $500 Bn retail market, it is
apparent that Mom and Pop stores are here to stay. They have been accepted by
the population of India and the convenience they offer has moulded Indian shopping
habits. Achieving large-scale success in India depends on understanding the
complexities of our diverse country and planning for the Indian consumer.
As several global majors have learnt over the years, simply implementing a triedand-tested formula in India doesn‘t guarantee success. What works abroad generally
doesn‘t work here and most offerings require some tweaking. To cater to the many
Indias that exist in terms of tastes, preferences and demands, it is critical to tailor
and customize the offering for multiple segments.
The Idea
We see two formats achieving sustained acceptance and success over the next
decade. Cash and Carry and Mom&Pop type convenience stores. We aim to offer
the Indian consumer all the convenience of a neighbourhood Kirana-wala with the
price, quality of service and standardisation of a large format retailer via franchising.
Using stringent criteria regarding store location, Market potential value, store size,
and cultural fit, we will pinpoint prospective retailers and offer them a franchise. Our
existing Cash & Carry format (to be named Vruksh) will offer our franchises complete
backend support including procurement, order fulfilment, inventory management,
store layout, planogram and also handle promotions, advertisements and related
marketing activities.
The Plan
Bharti-Walmart is currently operating Cash & Carry format. We rename this format
as Vruksha (Tree) Cash and Carry and expand it significantly over the next 10 years
to cater to a wide range of businesses as well as unattached customers as permitted
by the existing norms regarding retailing in India. ‗Palash‘ stores will branch out and
realise our vision to be India‘s retail giant within the next ten years through the
following plan -
Palash
We will target tier 1 cities as well as tier 2 cities where acceptance of modern
retail has been limited and laggard. As a proof of concept to encourage franchising,
we will initially open up company owned Palash stores to provide a model. We will
leverage this model to open up new franchises. Existing retail owners stores will be
strategically chosen and given the option of becoming franchises. After securing our
initial channel partners we will be in a stronger position and will be able to generate a
demand for more and more franchises. Strict selection criteria will minimize channel
conflicts. Our franchises‘ stores will receive a comprehensive facelift and rebranding.
After understanding the merchandising mix of each retailer and using our own knowhow, we will develop a planogram to enhance point-of-sale.
Supply Chain + Profit Center
Our company would handle the entire supply of merchandise for the franchises from
our existing and new Vruksh Cash & Carry warehouses. With economies of scale we
would be able to source goods at the most competitive prices. This would enable our
franchises to pass down the low prices and promotions to their customers and gain
competitive advantage.
Business model
Enhanced revenues driven by consumer promotions, advertising and brand
awareness coupled with lower costs from not having a dedicated distribution center
will increase profitability. In lieu of the partnership, our company would be entitled to
royalties from our franchises in addition to the one-time payment for setting up a
franchise.
With Vruksh Cash & Carry as the trunk coupled with the blossoming Palash stores,
we aim to become synonymous with daily retail in India.
Detailed background of business purpose
India is a schizophrenic country where old and modern co-exists, where paradoxical
elements live together like a married couples. It‘s a kaleidoscope. Every time you
turn it, you get a different perspective- enticing, different and ‗real‘. Best way
understanding consumer India is to recognize that there are no simple algorithms to
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segment it. It is the methodological nuances that allow one to get at the heart of
opportunities.
From the consumer market perspective, there is no one India. There are very rich.
There are the young service class who aspire to go global and have high
expectations. There is the aspiring middle class. The self-employed India. The
agriculture-dependent subsistent farmers. The urban poor. The rural poor. They all
have different approaches to consumption. It‘s crucial for a business to know which
India are they targeting and customize the product accordingly
The rural India is not very poor; nor is it totally agriculture dependent. This is an
important insight. Rural India accounts more than 50% of India‘s GDP and 50% of
non-rural GDP come from not-agricultural activities. It comes from the self-employed
in all kinds of services. Although they are rural, they are not very different in their
consumption in their aspirations from the urban consumers. They like FMCG
products, jeans, two-wheeler and cell phones. They have their own logic for
consumption.
While India is complex undoubtedly, there are still some simple truths that managers
have to accept. Indian consumers are very value-conscious. They may be poor but
they are not backward. They can make difference to the global positions of individual
firm. If you can understand the Indian consumer right and tweak your business
models, the Indian market will surprise you. One cannot flog old and tried products in
India and expect to create mass base.
India‘s twin growth engines of economic growth and demographic profile set it apart
from other nations and present a compelling business case for global retailers
looking to enter the market.
The Indian Retail sector
India has witnessed a revolution in the last two decades owing to rapid urbanization
and changing consumption. This has led retailers to concentrate their energies and
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leverage their capacities to harness the potential. The entry of the leading corporate
houses into retail created a surge into the growth of the industry. The Indian retail
industry is estimated to be $500 billion. The organized or modern retailing with 6%
share stands at $26 billion. The Indian retail sector is projected to reach US$ 1.3
trillion by 2018 and the organized retail market is estimated at compounded annual
growth rate of 40% which is anticipated at 107 billion US$ by the year 2013.iiAs per
the McKinsey Report, 'The rise of Indian Consumer Market', by the year 2025, the
Indian consumer market is expected to
grow four-fold. India with its current retail growth rate turns out to be one of the most
prominent countries for global retailers.
This sector is the second largest employer after agriculture, employing more than 35
million people with wholesale trade generating an additional employment to 5.50
million more. The growing disposable income in the country is resulting in increasing
consumer spending habits.
India has a large and aspirational middle-class of 75 million households or 300
million individuals. Middle-class consumers want products which are value-driven.
India also has 500 million Indians under the age of 25. Young Indians are driving
purchases in mobile phones, fashion, accessories, food and beverages, quick
service restaurants, etc.
Young Indians have access to more money than before and with this has come
independence, aspirations and a demand for products. According to the 2010 World
Wealth Report by Capgemini and Merrill Lynch Wealth Management, the rise in the
total number of millionaires (or Indians with investible assets, excluding main
residence and consumer durables, of more than US$ 1 million) grew almost 51%,
the second fastest in the Asia-Pacific region.
The 700 million Indians residing in rural India are an opportunity that retail and
consumer (R&C) companies cannot ignore. Penetration levels for several products,
such as personal care, hair care, skin care, consumer durables and electronics are
low in rural India. Retail and consumer companies who localise their products for this
Palash
market, with regard to price points, packaging, stock-keeping units (SKU) size,
promotion, will succeed.
With all said and done, question remains that why is India not coming to terms with
modern retail despite providing one stop-shop, low prices and other attractive
services and schemes. What is really wrong with this particular business model ?
Why Retail honchos like reliance, future group, Tata retail have not been as
successful to change deeply entrenched habits of consumer India as it was
expected.
Why is FDI in retail not picking up as fast as expected ?
Who‘s really the anchor that is holding the ship of modern retail back?
One of the answers is that the guy who is there for last many years home-delivering
the basket of products to consumers as and when ordered offering the best of
convenience. He enjoys the immense trust earned over the long period. He is the
mom-and-pop store owner. There are around 12 million such shops in India
contributing to around 93-95% of retail business.
Modern retail has been around in India for years now but it‘s not growing at extra
ordinary pace also many of the modern retailers have closed down. Growth of
modern retails substantially comes from urban area where consumers are getting
familiarized with this particular shopping behaviour. Acceptability of modern retail is
as good as nothing in non-urban places in India. And at these places mom-n-pop
rule and will rule in future. They are quite efficient in their business models be it
managing customer or be it inventory turnover. They are smart. They know what
their core competency is.
It‘s high time to accept that in India rise of modern retail is not going to be a cake
walk. It‘s going to take a lot of investment in terms intellect, marketing strategies,
product mix, supply chain management , shaping consumer behaviour etc. It‘s not
modern retail versus mom-n-pop but its efficient ones versus non-efficient be it
modern retail, be it mom-n-pop.
Both the format will co-exist and those who can do the business efficiently will go out
of business. We have enough examples that kiranas are morphing their model of
Palash
business to survive and thrive against the next door competitor not necessarily
modern retail it could be a next mom-n-pop too.
The Retail Sector in India – Key Challenges
Impending entry of many global players, basis the Government‘s FDI policy
changes, leading to ambiguity in the sector
Growing acceptance of modern retail formats
Markets expanding beyond metros and Tier 1 cities
Strong emphasis on profitable growth
Toughening of internal efficiencies and cost or manpower optimization
Optimization of technology usage
Developing supply chain efficiencies
Focus on effective store management and enhancing availability
Consumer behaviour(Shopping habits)
Handling very high attrition rates and low employee engagement levels
In a developing economy like India, the one of the biggest challenges a marketer
faces would be to tackle the ever changing consumption practices. The majority of
the Indian consumers are shifting from brand loyalist to value conscious, which
would require greater efforts on the part of a retailer to satisfy the billion demands
and provision of enduring services. These changes are reflected in the growing
disposable income and per capita growth in the table below
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Genesis of concept
In the light of above mentioned factors, it‘s evident that there is no one formula for
success in India. There has to be multiple business sutras to cater to various
customer segment.
Acceptability of modern retail in non-metro or rural India is not going to be happening
any time soon. Somebody has to be shape the behaviour of the consumer by being
there.
Hence there is a need to have small modern convenient stores which will increase
the reach of modern retail.
What would it take to be Walmart ?
1.
Customized business model
In country like india,to be iconic as walmart its important to understand its customers
and customize the business model and products to suit its customer preferances.
One who can do it would have easier to be a leader.
2.
Cost management
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Also India being price sensitive market, to achieve penetration low cost is going to be
important. This low cost could be achieved through local sourcing, efficient supply
chain management/distribution , economies of scale/scope.
3.
Influence customer
To be a giant modern retailer its also important to shape the consumer behaviour of
consumers who are more habituated to buying from neighbourhood kirana store who
offers more convenience. So cracking the code of convenience would be key to
success.
4.
Private labels
According to a report published by consulting firm Deloitte, consumer‘s perceptions
and attitudes toward private label brands are changing significantly; and offers
insight into the notion that spending less for private label brands doesn‘t mean
consumers are settling for less from private label brands. According to the report
only one-third of the respondents endorsed the statement ― I often feel that I am
sacrificing when I purchase a store brand instead of a national brand‖. This is no
surprise when one stops to think that many consumers today believe that store
brands and national brands are essentially made of the same ingredients. According
to the report, 80 percent believe the statement ―most store brands are manufactured
by the national brands‖. Thus private labels in certain categories where brand
consciousness is not high is going to be margin builder and increase profitability.
Our Starting Point
Bharti Walmart
Bharti-Walmart is a joint venture between Bharti group companies and iconic MNC
Walmart group of U.S., the world‘s biggest retailer. The venture is for wholesale
cash-and-carry and back-end supply chain management operations in India. Its
wholesale cash-and-carry stores are named ‗Best Price Modern Wholesale‘
Best Price Modern Wholesale
Format: Business-to-Business (B2B), cash and carry wholesale format
Palash
Mission: Enabling small businesses to prosper.
Best Price Modern Wholesale Store offers over 5,000 items under one roof across
multiple product categories. The sourcing for produce and fresh is done through local
& regional sourcing teams.
Special pack sizes have been developed across categories for customers from
HoReCa segment (Hotel, Restaurant, Caterer) and Offices & Institutions.
The focus is to meet the unique needs of every member segment. These include Kirana shop owners,
General merchandise resellers
Hotels
Restaurants
Caterers
Offices and institutions
Benefits to Kirana Shop Owners from Best Price Modern Wholesale
Kirana store owners, who are members of Best Price Modern Wholesale stores,
derive ‗special‘ benefits in numerous ways:
1. There are an estimated 12 million kirana stores in India of which as much as 90%
are not directly serviced by India‘s FMCG majors. Best Price stores offer them
access to quality products at the lowest prices they need and when they need them.
2. Assortment, service and store layout of Best Price stores are customized to their
specific needs to help them get the benefit of high quality products at best prices to
enhance their business profitability.
3. Best Price stores help kirana stores manage their inventory better by enabling
them to purchase in quantities they need and at the time they require. They can
hence take advantage of Best Price store by using it as their own godown, thus
freeing up their capital for business rather than lock it up in inventory.
4. Best Price stores have also created an innovative kirana model ―Mera Kirana‖ that
Palash
is tailored for kirana stores to provide them training and insights into areas such as
assortment planning, hygiene, in-store displays, inventory management, value added
services etc.
"Mera Kirana” is an innovative program which has been developed to help the
kirana stores grow their business and compete better against modern retail.
5. In addition, different education programs for members with customized modules
like taxation (‗My Partner‘ programme that includes seminars on taxation for Kirana
owners), food safety & hygiene workshops & live demonstrations for hotels,
restaurants and caterers. Food preparation, food safety and category workshops
have also been introduced for different target segments.
Other Services offered 1.
Third Party Delivery Solution
To facilitate delivery at members‘ doorstep
Delivery at very competitive rates to both city and upcountry locations
The solution has been designed to allow members to book part load as
well as full load
Transparent rates and timelines for delivery - displayed prominently at
the store
2.
Remote Booking Office
A special solution designed for upcountry members in select cities.
Members get most current information on prices and a complete range
of available products at the parent store.
Members can pay, book orders and receive merchandize through the
official 3rd party delivery solution.
3.
Private Label Brands
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Under the umbrella of Bharti Walmart‘s own private brands, nearly 400
items of assured quality are available at great prices across various
categories.
Private label brands provide the store members with a unique
opportunity to increase their profits.
Some Private label brands 1. GREAT VALUE - brand of grocery that provides national brand quality at a cost
that is much lower, without compromising on taste or quality.
Great Value range of products includes
Staples: Pulses, Flours, Rice, Dry fruits
Processed Foods: Tea, Fruit Drinks, Snacks, Cookies, Corn flakes, Instant
Noodles, Soups, Sauces, Jam etc.
Home Care: Toilet, Floor, Glass and Dish cleaners, Detergents, Air
Fresheners, Paper Napkins, Foils etc.
2. EQUATE - brand of personal care products
Equate product range includes
Oral Care
Bar and Liquid Soaps
Baby Care Products
Cosmetics
3. HOMETRENDS - brand of home furnishing and house ware (latest trends at an
affordable price)
Home Trends product range includes
Crockery
Cookware
Glassware
Table Ware
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Kitchen Tools
Furnishings and Home Décor
4. GEORGE - international apparel and accessory brand sold in global fashion
markets such as the United Kingdom, Japan and France. Bringing its latest
international styling to India, George caters for the entire family‘s needs through
products that are smart, original yet great value for money.
George product range includes
Men‘s Formal & Causal Wear
Ladies Western Wear
Kids and Infant wear
5. ASTITVA - ethnic apparel brand
Astitva product range includes both seasonal & special festive collections of Men‘s
and Women‘s Ethnic Wear such as
Kurtas
Kurtis
Salwar Kameez Sets
Ready to Stitch Fabric
6. MAINSTAYS - brand of basic home essentials
Mainstay product range includes
Cookware
Utensils
Bathroom Accessories
Glassware
Furnishing such as Towels, Bed Linen, Cushion Covers etc.
7. SIMPLY BASIC - brand of good quality every day apparel
Simply Basic product range includes
Men‘s, Women‘s, Kids and Infants Innerwear
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Essentials such as socks and handkerchiefs
A range of seasonal items
8. Right Buy range offers good quality products across food, grocery, cleaning aid
and general purpose products,
9. Member’s Mark range offers premium quality at attractive prices as compared to
national brand equivalents.
10. Bakers and Chefs range is especially designed to cater to hotel, cafes and
restaurant needs.
Also, some of the Private Label items available in the store that are sourced locally
includes Rice, Stationery, Besan, Idli and Dosai mix, Atta, Pulses, Edible Oil, Ghee,
Spices etc.
Locations
A note on their performance –
Palash
Despite strong sales growth, Bharti Walmart had accumulated losses of `765
crore as of December 31, 2011, largely on account of investing in logistics,
supply chain and opening new stores.
Logistics expertise has helped Bharti Walmart cater to small-town retailers.
When Bharti Walmart set up its Amritsar store, it met shopkeepers who
travelled to Delhi to buy cutlery, condiments and speciality foods such as
turkey . It saw the demand and stocked these things.‖
Specific needs of Kirana store
Kirana stores‘ use of Cash and Carry is set to increase significantly in the coming
years. Today's informed consumers expect better variety and value added services
even from their neighbourhood stores and more often than not, Kirana owners
struggle to control costs and keep pace with their customers.
The specific needs of kirana stores are:
Effective use of displays
Inventory optimization
Customer retention
Efficient lay out
Correct stocking of products
Maximizing paid displays
Our Concept
Brand elements
Palash
Name of the company –Palash, Achieving Sanghatan.
Palash means flowering trees which stands for our franchise Palash stores.
Achieving sanghatan speaks about our intention to involve people to run our
profitable stores to achieve our long term strategy of becoming retail giant. This also
indirectly explains our objective of penetrating India to the best extent and benefitting
customers in remotest corner by giving high quality products and services.
Concept
Business model has two channels one is cash and carry and other is franchises
(‗Palash‘ stores).
As we have selected Bhati-Walmart which operates in cash and carry format, which
we would scaling up in numbers and strength.
We believe that every franchise model should be proved by company owned
franchise first in order to build brand and also to instil confidence in prospective
customers.
With successful marketing, efficient procurement and distribution and wide product
assortment we would prove these exemplary models (company owned) successful.
With this thought we would be opening up company owned stores which would be
similar to Palash stores.
After a year we would open up franchise for prospective buyers in similar areas. Both
of these company owned Palash stores and franchises Palash stores would co-exist
in the vicinity of the Vruksha Cash and Carry which would function as backbone of
the business in that vicinity.
This opening up of Vruksha Cash and Carry and Palash stores would happen year
wise. Locations have been chosen on the basis of certain parameters like per capita
income, population, infrastructure etc. In next 10 years we intend to reach almost all
of the Indian important cities and states to achieve pan-India presence.
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We dream to have a significant pie of Indian consumption share in future. According
to worked out plan we would be having 2000 Palash stores, 47 Vruksha Cash and
Carry stores and 45 company owned Palash stores at the end of 10 years.
Pentagon model for Vruksha Cash and Carry
1. Place (Size, Location, Layout and Design)–
Vruksha Cash and Carry will occupy an estimated total area of 150000 sq. ft. Of this
area, 50000 sq. ft. will form the trading area. The remaining 100000 sq. ft. will serve
as parking and space for distribution and warehousing. The 50000 sq. ft. trading
area will be in the form of a single floor rectangular layout. The merchandise area for
customers will be of a grid layout, with warehouse-type pallet-stacking up to 20 feet
high. Aisles between shelves would have to be wide enough to enable the use of
large trolleys for customers, as well as the use of fork-lifts for stocking and managing
inventory pallets. The standard aisle width associated with a ‗Stand-up Deep-reach‘
forklift is 9‘ 0‖. To allow for customers, we would require aisles to be 16‘ 0‖ wide.
Alongside the customer trading area there is also space to be allotted for
administrative offices, incoming stock unloading area and outgoing stock loading
Palash
area, cashier area, security, toilets. We plan to have incoming stock unloading area
and outgoing stock loading areas on opposite sides of the building. The cashiers will
be located at the front of the store near the check-out gate. Administrative offices will
line an upper level along the inner perimeter of the warehouse. Security will be
managed using two outposts – one at the entrance to the compound, which will be
responsible for security checks, entry and exit, vendor validation, etc. and the other
at a control room located in the office area inside the warehouse, that will house
staff, CCTV surveillance, PA-system, sprinkler controls, etc.
The loading and unloading areas will follow a gate-wise system where each
incoming vendor will be allotted a ticket with an associated loading/unloading space
where they can load/unload their goods, respectively. Once unloaded, out staff
operating forklifts will handle the in-store stacking of the goods.
A section near the entrance will house the cloak-room and the customer service
desk will be located in a demarcated section next to the cashiers.
Location – 20 Best Price Cash and Carry stores are currently operational in 19 cities
across India. In addition to these 20 stores, we plan to open 2-3 new stores each
year, to take our total up to 47 stores in 10 years. The locational break-down of the
stores is as follows –
Existing Stores –
1. Jammu
2. Amritsar
3. Ludhiana
4. Jalandhar
5. Zirakpur (Chandigarh)
6. Bathinda
7. Meerut
8. Arga
9. Lucknow
10. Kota
11. Bhopal
12. Bhopal (2nd store)
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13. Indore
14. Raipur
15. Aurangabad
16. Amravati
17. Hyderabad
18. Rajahmundry
19. Vijayawada
20. Guntur
Planned –
Number
Year
City
21
1
Mumbai
22
1
Pune
23
2
Delhi
24
2
Bhubaneswar
25
2
Kolkata
26
3
Bangalore
27
3
Chennai
28
4
Mumbai
29
4
Surat
30
4
Ahmedabad
31
5
Jaipur
32
5
Nagpur
33
5
Delhi
34
6
Bangalore
35
6
Trivandrum
36
6
Vizag
37
7
Patna
38
7
Ranchi
39
7
Rourkela
40
8
Madgaon
41
8
Mangalore
42
8
Vadodara
Palash
43
9
Kozhikode
44
9
Coimbatore
45
9
Jamshedpur
46
10
Shimla
47
10
Aizawl
These locations have been chosen by taking into, two factors –
1. Standard methods of location determination such as - Market Potential Value
or MPV, which measures absolute market potential, Market Intensity Index or
MII, which measures per capita potential, Classification of Indian cities and
Population of catchment area.
2. Ability of location to cater to our network of planned convenience stores
‗Palash‘ in the surrounding towns.
2. Product (Style and Fashion, Intensity, Assortment) Best Price Cash and Carry
offers over 5,000 items under one roof across multiple categories such as –
1. Fresh – Fruits, Vegetables, Poultry, Mutton, Fish
2. Dairy – Milk and Milk Products
3. Snacks – Savouries, Biscuits, Wafers
4. Hot beverages – Health food drinks(HFDs), Tea, Coffee
5. Cold beverages – Juices, Concentrates, Nectars, Carbonated soft drinks
(CSDs)
6. Packaged foods – Honey, Jams, Ketchup, Sauces, Preserves, Pickles,
Spreads, Breakfast cereals
7. Confectionaries – Chocolates, Candies, Gums, Sweets
8. Commodities – Oils, Ghee, Aata, Rice, Sugar, Dals, Grains, Cereals, Pulses
9. Dry Fruits
10. Spices
11. Household Items – Cutlery, Crockery, Paper towels, Home Work Play (HWP),
etc.
12. Restaurant Supplies – Pots, Pans, Crockery, Cutlery,
Palash
13. Linens – Bedcovers, Pillows, Covers, Tablecloths, Curtains
14. Hair and Personal Care – Shampoos, Oils, Conditioners, Colours, Potions,
Soaps, Moisturizers, Lotions, etc.
15. Detergents and Cleaning Aids – Detergent soaps, powders, liquids, Phenyl,
Harpic, etc.
16. Luggage
17. Apparel and Footwear
18. Office supplies and stationery – Desk-phones, printers, paper and related,
Shredders, etc.
19. Electronics and house-hold appliances – TVs, Refrigerators, Microwaves,
Food processors, Ovens, Fans, Bulbs and Lighting, etc.
The sourcing for produce and fresh is done through local and regional sourcing
teams. Special pack sizes have been developed across categories for customers
from HoReCa segment (Hotel, Restaurant, Caterer) and office and institutions.
3. Value (Price and Quality) –
Our prices are low and transparent. They are meant to meet the needs of our wide
client base ranging from Kirana shop owners, general merchandise resellers, hotels,
Restaurants, caterers, offices and institutions, to independent consumers who have
come to purchase their monthly baskets, by offering relevant items at very
competitive prices, ensuring consistent availability and customer convenience.
Commitment to Quality –
Food Safety and Quality Standards at Vruksh Cash and Carry Stores
Best Price stores provide safe and affordable food, so people can live better. This is
achieved through the 4Cs followed at Best Price:
Care –We care for our community by selling only safe food.
Customer Service – We serve our members through a team of food handlers
trained in food safety best practices.
Courage – We always do the right thing for our members. Food safety is nonnegotiable.
Palash
Continuous Improvement – We have a dedicated food safety team which
continuously works towards monitoring and improving the food safety standards.
High Five – Five Best Practices followed at Vruksh Cash and Carry Stores
Be Clean, Be Healthy: Personal hygiene of very high standards is followed by
the food handlers through frequent hand wash, use of hand gloves, hair nets &
other protective gear to preserve the wholesomeness of fresh food. This ensures
that only healthy associates handle the fresh food.
Keep it Cold, Keep it Hot: All perishable food items are preserved to ensure
high quality of food. A superior cold holding infrastructure at Best Price Modern
Wholesale stores preserves quality of fresh and frozen product assortment.
Don’t
Cross
Contaminate: Vegetarian
products,
Dairy,
Meat
&
Fish
departments are physically separated from each other. Best Price respects the
science of food safety and quality and the religious sentiments of our members.
Wash, Rinse & Sanitize: Modern and international best practices for sanitation
and hygiene are followed at Best Price Modern Wholesale stores. All food
equipments are sanitized every four hours. A combination of science and care
ensures providing an excellent shopping experience to the Members.
Cook it & Chill it: Products are cooked and chilled using scientific principles for
offering safe and high quality food to the members.
HACCP is a Food Safety System. It is an internationally accepted methodology to
reduce and manage risk. It is a preventive system for food safety that addresses
chemical, physical and biological (microbiological) risk.
The HACCP system, which is science based and systematic, identifies specific
hazards and measures for their control to ensure the safety of food. HACCP is a tool
to assess hazards and establish control systems that focus on prevention rather than
relying mainly on end-product testing.
HACCP provides businesses with a cost effective system for control of food safety
from ingredients through production, storage and distribution to sale and service to
the final consumer. The preventive approach of HACCP not only improves food
safety management but also complements other quality management systems.
Palash
The main benefits of HACCP are:
Saves customers‘ business money in the long run
Avoids customer‘s poisoning your customers
Food safety standards increase
Ensures customer‘s compliance with the law
Food quality standards increase
Organizes customer‘s process to produce safe food
Organizes customer‘s staff promoting teamwork and efficiency
Due diligence defence in court
4. People (Service Knowledge Climate)
Each Best Buy will be operated by a staff of 150 employees. These employees will
be fully trained in their respective domains, ranging from P/L heads, Category heads,
Shop-floor operators, Housekeeping staff, Security personnel. Additionally, staff will
also be responsible for operating supply chains, both into the store, and from the
store to the Palash franchises in the store‘s area. Our trained human resources with
their clear roles and objectives will enable us to operate stores efficiently, while
offering our customers unrivalled service at a sustainable cost.
Our 47 locations across India will enable us to service countless individual
customers and businesses, including our very own Palash convenience stores. The
date generated from these sales will enable us to identify key trends and insights
that we will leverage to further improve our offerings and product portfolio. Our data,
fed into the Automatic replenishment systems (ARS) will ensure that we do not face
stock-outs or indeed, over-stocking of merchandise. Our integrated supply chain will
be the backbone that keeps our satellite Palash stores running, enabling us to reach
a wider customer base with an outstanding mix of products and Stock Keeping Units
(SKUs).
The climate of the store will be one of friendly helpfulness. Our shop-floor staff will be
able to assist our customers in obtaining the products they want in the quantities that
are most suitable for them. The key to this task is the planograming of our shelves
Palash
which will be done according to scientifically proven methods that will enable us to
make the customers‘ shopping experience easy and intuitive.
At the same time, we will be following a very disciplined system with our supply
chain. Vendors will be required to make advance bookings with our inwarding office
for delivery, and we will hold them to their appointments to maintain a smooth flow of
goods.
5. Communication (Positional and promotional)
Over the past decade, Indians have been exposed to a wide range of modern retail
formats. Convenience stores, malls, supermarkets, hypermarkets, etc. They have
however, never been introduced to Cash and Carry type warehouses. In terms of
what has existed in India so far, our offering is has most in common with a hybrid of
an Army style canteens and a Hypermarket. It is however much larger than either in
scope and communicating this will be our first challenge. With this in mind, initial
campaigns will be towards promoting the concept and category.
Just as important as positioning our Cash and Carry towards regular customers
would be to position it towards businesses, especially the HoReCa segment (Hotel,
Restaurant, Caterer) and Offices & Institution.
Television commercials will be the most effective in demonstrating the visual
wonders that our Cash and Carry stores will be in India. They will position the stores
as a place where the whole family can go to purchase their monthly basket at the
lowest price and have a shopping experience like never before. Print media would
reinforce the message and also provide information about discounts and price
differences between our Cash and Carry and the traditional market. Digital media,
where time is more affordable, will be leveraged to engage with prospective
customers.
For Businesses, we will have to synchronize the Above-the-Line (ATL) activity with
an effective Below-the-line (BTL) and sales strategy. Apart from having general onesize-fits-all activities, we would like to explore a semi key-account-management
concept, that would better enable us to gain customer loyalty through modern
methods of Customer Relationship Management (CRM).
Palash
Apart from these we will also have Loyalty programme – Members on enrolling for the loyalty programme would be
entitled to certain fixed points on their shopping transaction each time (slab-wise
fixed points rewards structure), which they can later redeem for goods at the cash
and carry outlet on reaching a certain cumulative shopping value till date.
Special offers/discounts on select product categories and brands like on chocolates
and sweets during Diwali.
In-store Sampling to push Private labels
a. Systems –
Our aim is to become India‘s pre-eminent retailer with a scope as wide as Walmart
has in the United States of America. It would be impossible to efficiently operate a
business of this potential without having pertinent system in place. In our endeavour
to provide customers with an unmatched shopping experience, we will equip our
Cash and Carry stores with industry standard systems. Logistics, Inventory
management, Replenishment, Decision support systems, Customer relationship
management are some of the adaptive systems that we will leverage to get an
operational advantage.
b and c. Supply Chain –
There are an estimated 12 million kirana stores in India of which as much as 90%
are not directly serviced by India‘s FMCG majors. Partnering with manufacturers will
bring benefit to both parties. By procuring merchandise directly from the
manufacturers, we will provide wholesale services without hassle and increase the
manufacturers reach and penetration by being able to pass on the lowered prices to
our customers.
We plan to ally with farmers and also, Original merchandise manufacturers to
develop a wide, robust and high-quality private label range. Farmers are one of our
Palash
most critical stakeholder groups and by assisting them we aim to reduce the burden
by making business more convenient and reducing risk.
As a responsible company, we will strive to improve the quality of life for our
employees, customers and communities through various interventions and the Direct
Farm Program is one of them. Through this program we aim to enable the
development of a robust supply chain, link farming communities directly to our
consumers, introduce farming best practices and improve the overall quality of life of
the farming communities we engage with.
Our Company has invested in establishing an efficient back-end supply chain
management operation to help make it efficient, thereby maximizing value for
farmers and retailers as well as consumers. The supply chain operation supports
farmers who have limited infrastructure and distribution strength and helps in
minimizing the wastage of fresh fruits and vegetables. An efficient supply chain can
play an important role in transforming farmers into successful entrepreneurs.
Palash
Our Cash and Carry
Traders/HoReCa/Small
Businesses
Companyowned/Franchisee
Palash stores
Consumer/EndConsumer
Consumer/EndConsumer
Proof of concept for Palash
As a proof of concept for our business model, we would initially scale-up Vruksha
cash and carry outlets pan-India.
and then open company-owned Palash stores in these cities where cash and carry
is opened, leveraging on our cash and carry stores as our very own warehouses to
feed our Palash stores.
After both our cash and carry format as well as the Palash company-owned
neighbourhood convenience store format gains visibility, we will go for further
expansion of Palash stores through the franchisee route and scale up.
This way, with our cash and carry and Palash convenience neighbourhood stores
present pan-India, we plan to be as iconic a retail giant as Walmart and a household
name in the next 10 years.
Palash
Pentagon Model for Palash Stores
1. Place (Size, Location, Layout and Design)
An average Kirana store in India occupies between 400 to 600 square feet. Palash
stores will occupy between 1000 to 1200 square feet indoors and have place for
indoor/outdoor prepared food stalls. Although we expect Palash stores to open with
a variety of floor plans, we will have some aspects common to all of them. The
cashier‘s desk will be located to one side of entrance/exit. It will be a standing
terminal. Within the cashier‘s reach will be an assortment of quick moving products
that customers can quickly purchase without browsing through the store‘s shelves
just like they‘d do at a Kirana shop. The majority of the floor area would be occupied
by 5 foot tall shelves. Baskets and floor trolleys would be used by customers to carry
merchandise so as to reduce the requirement for aisle width. Against one of the
walls of the store would be the cold storage and refrigerators. Against another wall
would be the fresh section. A demarcated area with a dedicated attendant would
play host to the open staples and commodities section.
The store will have provision for air conditioning, though it will be used on a whenneeded basis, and ceiling fans would provide ventilation under normal
circumstances.
The main factor influencing the location of the store is each Palash‘s proximity to one
of our cash and carry stores. As supply of goods would be completely from the cash
and carry stores, following a version of the hub-and-spoke model, each of the Palash
stores would be tied down to its mother Cash and Carry. To bypass this limitation
and achieve maximum reach, we have proposed to open our 47 Cash and Carry
stores in a manner so as to feasibly maximize our geographical spread. This will
enable us to open Palash stores in all corners of India, from metros like Mumbai to
the interiors of Orissa and service them effectively.
2. Products (Style and Fashion, Intensity and Assortment) –
Our Palash stores are a similar in many respects to both Kirana stores as well as
Supermarkets. The product categories Palash stores will stock will also be similar to
these two formats.
Palash
Tentatively, the following are the categories of products that are likely to be stocked
at a Palash store 1. Fresh – Fruits, Vegetables
2. Dairy – Milk and Milk Products
3. Snacks – Savouries, Biscuits, Wafers
4. Hot beverages – Health food drinks(HFDs), Tea, Coffee
5. Cold beverages – Juices, Concentrates, Nectars, Carbonated soft drinks
(CSDs)
6. Packaged foods – Honey, Jams, Ketchup, Sauces, Preserves, Pickles,
Spreads, Breakfast cereals
7. Confectionaries – Chocolates, Candies, Gums, Sweets
8. Commodities – Oils, Ghee, Aata, Rice, Sugar, Dals, Grains, Cereals, Pulses
9. Dry Fruits
10. Spices
11. Household Items – Bulbs, Paper towels, Home Work Play (HWP), etc.
12. Hair and Personal Care – Shampoos, Oils, Conditioners, Colours, Potions,
Soaps, Moisturizers, Lotions, etc.
13. Detergents and Cleaning Aids – Detergent soaps, powders, liquids, Phenyl,
Harpic, etc.
Our own private label will find a place on the shelves of Palash where possible.
In addition to the above categories, we also mean to set up fresh food counters
outside the store or inside the store depending on the availability of space. We will
get in touch with vendors for the setup and operation of these stalls. Items will be
chosen after keeping in mind local tastes and preferences, size of stall required and
rent expected. Tea, Coffee, Machine made ice cream, Boiled corn, Chaat, Idlis and
Dosai are some of the Items for which we could look for vendors.
Our intensity and assortment will vary as per requirement in the local area and
GIMROI expected per category. Empirical data as well as the inputs of the Franchise
owner will help us predict what should be the correct product mix for each Palash
store. We expect to keep each shelf fully stocked with merchandise at all times.
Palash
3. Value (Price, Quality) –
Kirana stores are the dominant retail format in India and have occupied that position
for a number of decades. There are multiple reasons for their success. Kirana stores
are enormously convenient. They offer a set of services that are difficult for other
formats to imitate. Palash will aim to bridge that gap between Kirana and Modern
Retail. A major advantage Palash stores will have over Kirana stores and in-fact,
several of the modern retail format stores will be their procurement and backend.
Palash stores will procure merchandise from our Cash and Carry stores at Rates
that are significantly lower than what wholesalers sell to Kirana stores. Palash stores
will be able to pass down these discounted stores to customers without affecting
their own margins. Running discounts and offers will be promoted on various media
platforms, something that the unorganized mass of Kirana stores would not be able
to afford.
The Quality of goods sold at Palash stores will surpass that of Kirana stores. Timely
availability of merchandise and the in-shop infrastructure such as refrigerators and
freezers will maintain the quality and freshness. By utilizing better inventory
management practices than their Kirana counterparts, Palash would inhibit stockouts and product expiry.
4. People (Service Knowledge Climate)
Palash Stores will be staffed by a minimum of 4 full time employees, with potential of
adding more employees based on need. We will encourage the employment of
family members, as we would like to borrow from the Kirana store tradition of
keeping it in the family when possible. The stations that would need to be occupied
are –
1. Cashiers desk - the cashier will be equipped with a check-out counter
with a bar-code reading cash register. His will be a standing job, as
we‘d like to give a feeling of energy in the store and it would enable him
to deal with customers more efficiently. At the cashier‘s desk will be an
easily accessible range of quick moving and/or shrinkage causing
products such as confectionaries, basic stationary, tobacco products,
condoms, batteries, small SKUs of basig products such as Instant
Palash
noodles, Shampoo sachets, Savouries and chips, Biscuits etc. There
will also be a cold box containing small bottles and boxes of fast
moving beverages and carbonated soft drinks.
2. Staples counter – Loose staples and commodities like Oil, Atta, Rice,
Sugar, eggs will be placed in their own separate section to one side of
the store. The attendant who is situated at this counter will have indepth knowledge of the products he is selling. This would include
information about variety, price, quality and origin. His would be a
selling job and he would assist the customers in choosing the staples
they are looking for. Once the customer has made his choice and
selected his quantity, the staples attendant will package and weigh the
items. He will then attach a barcode sticker to the package so that the
items can be checked out quickly at the cashiers desk.
3. Fresh (Fruits and Vegetables) will have their own full time attendant
with similar product knowledge, although here, we expect customers to
require less help choosing their fruits and vegetables than they do for
staples. Similar to the staples counter, the person occupying the Fresh
section will weigh and package the customer‘s selections and attach
the relevant bar-code for easy billing.
4. General attendant - In addition to the three fixed stations there will be
one additional person who will be responsible for keeping track of all
packaged goods that are placed on the shelves. This person will have
in-depth product knowledge and should be able to assist the customer
in the most efficient and courteous manner, while also keeping an eye
out for any suspicious activity such as shoplifting. This is a job that
could also require the hiring of one more employee.
All employees of Palash stores will be formally trained in their own roles, and will
also have a working knowledge of other roles within the shop in case of contingency.
They will also be trained in soft skills in the relevant languages.
5. Communication (Positional and promotional) –
Palash stores will be positioned as being the centrepiece of the neighbourhood they
are in. They are a place where people living within a 1-1.5 km radius can fulfil their
Palash
daily shopping needs, as well as shop for their weekly baskets at the lowest prices
around. Shoppers can also bring their families with them for evening snacks at the
food counters. This will expose more people to the Palash concept and make it an
any-time destination.
Two of the more significant advantages Palash stores will have over their
competitors will be the lower prices and variety of promotions on products, and the
widespread integrated marketing communication that keep prospective customers
informed about product offerings. Aside from these, every Palash store will aim to
provide a standard experience, ranging from product mix, to service standards and
even to the look and feel of the store. Customers would know just by looking at the
store from a distance that it is a Palash outlet. The theme and décor would be bright,
modern and clean with the Palash colours, boards and banners wherever they can
be suitably applied.
Advertising – We plan to have a comprehensive advertising campaign for the launch
of Palash stores. The advertising will be localized to the prevailing language of the
area and will be targeted predominantly at women with a familial background.
Television commercials will be telecast on local channels, for example, Sun TV in
Tamil Nadu and also on popular entertainment and news channels like Star Plus,
Sony TV, Zee News etc. The aim of this initial campaign will be to get the
prospective customers to believe that Palash stores provide a greater value than
regular Kirana stores and aren‘t prohibitively expensive as they‘d expect modern
retail stores to be. It would also emphasize that apart from just grocery and general
shopping, there is also tasty and hygienic prepared food.
There will be print ads on major dailies that will notify customers about prevailing
offers and promotions and emphasize that Palash is their friendly neighbourhood
store that offers products at lower prices than any other place.
a. Systems –
Palash stores will eliminate the receipt-free transactions that take place in general
stores by having a modern check-out and billing system. The system will be
equivalent to those being used in modern retail chains around the world. Cashiers
will be trained in their use. The Cash registers will be linked with our larger network
Palash
and will enable us to keep track of inventory levels, provide us with sales and
empirical data and help us maintain the integrity of the business.
b and c. Supply Chain –
Palash stores will be directly connected with their parent Cash and Carry stores. All
products will be sourced from these parent stores, eliminating the need to deal with
wholesalers and distributors, and haggle for prices. Alongside the automatic
replenishment systems, franchise owners will be able to place orders for products in
case they feel the need to do so for whatever reason.
150 square feet of each Palash store will be set aside for food stalls. These food
stalls will be placed after a comprehensive vendor selection and will have fixed terms
for all the vendors. The vendors will be responsible for the operation of their stalls
and any profit earned will be retained by them. The vendors will pay a premium rent
for the floor space they occupy within the Palash premises. This rent will go to the
Franchise owner. Additionally, the vendors will pay our company a fixed vendor fee.
We would be creating value for the stakeholders as below:
Vruksha Cash and carry customers (retail consumers largely) - would be able to
get branded goods at low prices
Palash franchise owners – We would usher in modern retail experience in the
neighbourhood convenience (kirana) store format and thus help the
kirana/entrepreneurs/investors live the dream of running a state-of-the art modern
retail outlet with an appropriate ROI.
End-consumers of Palash stores – can avail branded goods at lower prices than
that found at kirana stores with modern shopping experience in a neighbourhood
convenience format.
Government – We would help the country develop in terms of modernizing by
investing in back-end supply chain and infrastructure like cold-storage and also
invest in supplier relations thus providing improved margins for the suppliers
Palash
(farmers, fisher-men etc.). We would contribute to India‘s GDP and government‘s
treasury by way of tax.
Organizational structure
Our company is a Joint Venture between a United States based Retail Giant and an
Indian based Telecom giant. Both are global companies. The Indian company enjoys
a 51% stake whereas the remaining 49% is with the foreign company.
Each of the Cash and Carry stores will be headed by a Store Manager. The store
manager will be charged with the running of the store and maintaining the store‘s
profitability by inventory control, shelf space allocation and staff allocation. Handling
promotions and offers, sales and discounts will fall under the broad range of the
store manager‘s responsibilities, as will the operations of the Palash stores being
serviced by a particular Cash and Carry.
The Store Manager will have under him/her three Department heads. The three
heads will be in charge of Pricing, Supply Chain and Palash operations. Also under
the store manager fall ten category heads. These Category Heads will be
responsible for the upkeep of the various product categories that they are assigned.
The assignment of categories would be one-to-one as well as many-to-many. There
will be a staff of 25 category assistants who will work with the Category heads and
maintain the product mix. 10 Cashiers will keep the check-outs happening at a quick
pace and a team of 30 Logistics Executives will handle the inward bound and
outward bound material and logistics with the Company‘s own delivery Vans trucks,
as well as the upkeep and replenishment of inventory with the use of technology
such as Forklifts and Cranes. There will be teams for Security and Housekeeping
and drivers for the trucks. There will be 4 sales representatives who will be
charged with order-taking, billing and delivery to Palash outlets, as well as selling to
other stores in the Cash and Carry‘s proximity.
The 47 Cash and Carry stores will be supported by a corporate team that will be
headed by the Chief Executive Officer of the company. Working with the CEO
would be the Chief Finance Officer, the Chief Marketing Officer, the Chief
Palash
Information Officer, the Chief Operations Officer, the head of Sales and the
Group Head of Human Resources.
The CFO and his team will look after the Finances of the company and be in-charge
of managing the financial risks of the organization. She/He would also be
responsible for financial planning and record-keeping, as well as financial reporting
to higher management. She/He would supervise the finance unit and be the chief
financial spokesperson of the organization. Making available the funds needed to
fulfil the expansion plans of the company will be the CFO‘s task.
The CMO will be the corporate officer responsible for marketing activities in the
organization. She/he would have two broad tasks. The first task would be to market
the offerings of Cash and Carry as well as Palash. The second task would be to
bring in more Palash franchises under the umbrella in conjunction with the head of
sales.
The CIO will be the senior executive in the enterprise responsible for the information
technology and computer systems that support enterprise goals. As our businesses
are heavily dependent on the systems that we have in place, she/he will be charged
with keeping them up-to-date. The CIO would play a major role in formulating
strategic roles for the organization. She/He would be abreast of the latest
technologies and trends in retail and would keep in consultation with the company‘s
Information Technology or IT providers. Dissemination of information to the various
levels of the organization would be another crucial goal of the CIO.
The Chief Operations Officer or the COO would be in-charge of the day-to-day
functioning of the organization. She/he would effectively be the second-in command
of the company after the CEO and along with his team, would manage the running of
all the company owned outlets as well as the franchises with a bird‘s eye view. The
head of sales would have targets set by and be answerable to the COO.
The Group head of Human Resources would be in charge of keeping track of the
human capital of the organization and also, the fulfilling of the personnel needs of the
organization. Hiring, franchise and vendor selection, etc. would constitute a major
portion of the HR head‘s responsibilities and the Training Programs for staff would
be in his/her department.
Palash
With the assistance of these key personnel, the CEO would be able to handle the
running of the company, and would be able to divert his attention to his/her primary
responsibility, which would be to head the Expansion department of the organization.
The Expansion department would be made up of a core group of staff and would
also constitute of a variable rotating group of employees whose sole task would be
the setting up and opening of the different Cash and Carry outlets which are
expected to be completed over the next decade.
Expansion Plans
Terms for franchise 1. The initial investment required to become a Palash Franchise is Rs.20 lakh.
This amount is inclusive of the brand fee.
2. The prerequisite for becoming a Palash franchise would be that the
prospective business owner be willing to lease out a shop space of between
1000 to 1200 square feet near an area that has a reasonable Market Potential
Value, and/or shows potential of becoming such an area in the near future.
3. Our company‘s expansion team that is headed by the CEO of the company
will assist prospective franchise in selecting a location and a retail space. We
will do periodic surveys and MVP evaluations of different areas in multiple
cities, so as to be able to expand by opening new stores with minimum hassle
and time spent.
4. Once the Store location has been chosen and the initial investment has been
made, our company will quickly turnaround the shopping space. Standardized
hardware and infrastructure will be provided to the store and placed in manner
that is in line with the planogramming model we have developed for Palash
stores. This would include shelves, cashier‘s desk with a networked billing
terminal, Fruits and vegetables rack, chillers and refrigeration, lighting and
ventilation, air conditioners, fire extinguisher, branding material including
glowsign board and posters, etc. The owner and staff he brings along with
him would undergo training in the running of Palash stores and will be
provided with two sets of uniforms to be worn while running the store.
5. We will also provide the first stock of merchandise to the franchise and
handover the shop to him once both shop and staff are ready to open. The
Palash
opening of the store will be accompanied by promotional offers and discounts
to get the shop going.
6. In addition to the points mentioned above, we will also provide the Palash
store with the following services –
Installation of IT infrastructure.
We will provide Automatic Replenishment Service of merchandise.
Inventory management.
Marketing activities both on company level and store level
Products would be sold to Palash franchises at prices that are less
than those usually found at our Cash and Carry
7. The Franchise owner would have to bear the following costs towards the
running of his store –
His Staff‘s salary, after notifying us of the same.
Electricity and maintainance.
Rent of the Shop
Miscellaneous expenses.
Out of the 1000 to 1200 square feet area, 150 square feet will
demarcated for fresh prepared food stalls.
These vendors would be charged a premium rent which would be payable to the
store owner and would pay our company a combined monthly fee of Rs. 20000 or
5% of total revenues, whichever is higher.
Royalty
A royalty of 4.5% of annual revenue, or a fee of Rs. 7 lakh, whichever is higher
would be charged yearly from the Palash franchise.
The term of the Franchise is 10 years and would need to be renewed thereafter.
If the owner wants to opt out of the franchise he should inform the company 1 year
prior. If this happens within the first five years of agreement then appropriate
penalty would be charged.
Palash
In all matters and disputes, the Franchise Agreement is sacrosanct,
Terms and conditions are subject to change.
Financials
Following financial projections of the Palash for next 10 years are in Exhibits
1. Income statement
2. Balance sheet
3. Cash flows
Following is the expansion plan of next 10 years. At the end of 10th year we will have
47 cash-and-carry stores, 45 company owned palash stores and 2000 franchise
palash stores.
0th year is status of bharti walmart at this time.
Year
cash and carry
Company owned
franchise palash
Palash stores
stores
0
20
0
0
1
22
20
200
2
25
22
400
3
27
25
600
4
30
27
800
5
33
30
1000
6
36
33
1200
7
39
36
1400
8
42
39
1600
9
45
42
1800
10
47
45
2000
Palash
All the financial calculations are done on the basis of above plan.
Following is the split up of how three different formats affect the balance sheet of the
company in 1sy year. All this is later consolidated.
Assumptions
Vruksha Cash and carry.
1. Area of cash and carry is 150000 sq feet
2. Monthly revenue – 20 cr.
3. Margin – 10%
4. Vat – 8% on an average of all the product
5. No. of staff 150 with average salary of 10000 a month. This includes people
from store manager with salary of 100000 to ground level staff with salary
of 7000.
6. Rent – Rs.15 per sq. feet per month. This is taken as low because it would
be long term lease.
7. Electricity – Rs. 1500000 per month
8. Shrinkage is taken as 0.1 % of revenue.
9. Miscellaneous cost is taken as Rs.10 per sq. feet trading area(1/3rd of total
area) which 50000 sq. feet
10. Depreciation – life of asset is taken as 25 years
11. Interest rate of debt 8%
12. Income tax 30%
13. Depreciation – life of asset is taken as 25 years. Its taken on capital
expenditure which goes in making store set up and hardware installations
14. Interest rate of debt 8%. Debt is on capital expenditure which is as following
Some of the additional assumptions/facts for Palash /company owned Palash
stores.
Palash
1. Area – 1000-1200 sq. feet out of which about 150 sq. feet would rented to
eateries. Such vendors would give rent to franchise owners and 5% cut of
their revenue to company. These figures are added in the consolidated
revenue of company.
2. No of employees – 5
3. Monthly revenue – Rs. 2500000
4. Stocks to franchise are sold at cost. Only revenue source from palash
stores is royalty from his annual revenue share
5. Apart from royalty initial investment of 2000000 is paid to company by
franchise owner out of which company‘s margin is 25% i.e. 5 Lacs. This
amount is included in revenue of company on the basic on new number of
Palash stores opened.
6. Royalty of 4.5 % on revenue is charged by company
7. Rent – Rs.30 per sq. feet per month
8. Electricity – 20000 per month
9. Shrinkage is taken as 0.1 % of revenue.
10. Miscellaneous cost is taken as 10rs per sq. feet trading area(1/3rd of total
area) which 50000 sq. feet
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Balance Sheet Model
For calculations of income sheet we have created reference income sheet of one of
each Cash and carry stores, company owned Palash stores and franchise Palash
stores. Depending upon number of each of these in each year we have projected
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income sheet of all of these stores. At the end we have consolidated the income
sheet from all three channels.
Also consolidate income sheet has certain revenues and expenses which are
irrespective of number of stores like corporate expenses like salary of corporate,
marketing expenses.
Revenue also includes the part vendors cut that company receive from eateries
outside stores. This is monthly Rs.20000 or 5% of their revenue whatever is higher.
Growth factor
Year on year revenue of cash and carry store is increased by the factor of 1.3. This
is the factor with which modern retail is growing. And so is COGS increased which is
90% of revenue for cash and carry store.
This factor is 1.22 for palash stores. Factor is reduced because it‘s a small
convenience store.
Factor is 1.07 for the expenses like rent, staff salary and electricity.
This factor accounts for inflation too.
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Secured loan is for capital expenditure and current liabilities are for the stock that
company purchased from vendors on credit. So company is working on zero working
capital that means company is rolling its income for the payment of its creditors who
provided the stock. Company maintain the inventory of one month.
Market share
Indian current retail market is $500 b. Out of which 7 % is modern retail that is $35 b.
With projected growth(20% modern retail and 14% overall retail) at 10 th year from
now following would be the figures
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Balance Sheets
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Cash Flow Statements
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Investors Section
Company name – Palash- Achieving sanghatan
Industry – Retail
Format – Cash and carry and franchise convenience stores
Business concept
Business model has two channels one is cash and carry and other is
franchises(‗Palash‘ stores). This is basically a scale up plan of bharti-walmart
business which currently works in cash and carry market and has its cash and carry
stores across many states.
Franchise convenience stores would be the other critical channel for our success.
We believe that in order to have pan India reach retailer should have a format which
is implementable in pan India. Massive potential that rural India offers we are certain
about the success.
We believe that every franchise model should be proved by company owned
franchise first in order to build brand and also to instil confidence in prospective
customers.
With successful marketing, efficient procurement and distribution and wide product
assortment we would prove these exemplary models (company owned) successful.
With this thought we would be opening up company owned stores which would be
similar to palash stores.
According to worked out plan we would be having 900 palash stores, 47 cash-ncarry stores and 45 company owned palash stores at the end of 10 years.
The US$ 500 billion market, growing at an annual rate of about 20 per cent, is largely
dominated by small shops and stores as of now. The organised segment is in its
nascent stage and has huge potential to harness in the sub-continent. We would
have significant pie in India‘s consumption because following core competencies of
our business.
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Low prices
Efficient procurement distribution
Palash‘s potential to tap most of the India
Brand equity
Exit strategies
No matter how successful the business venture may be, the time may come when
our investors will no longer want to continue its operation, or may be forced to pull
out due to changing economic conditions.
When this occurs, we have provided the following options to pull out of business
activities 1. Owner Buyout
In this case company will buy out the stake of the investor at an appropriate price. In
case company decides to declare buy out on its own investors could be offered an
appropriate premium.
2. Sell to other investor
Palash
The investor must inform the company of their impending exit at least 3 months in
advance, so as to enable us to search for an alternate investor. Alternately, the
outgoing investor could find a buyer for his investment.
3. IPO
Company has plans of going public some years down the line depending on market
conditions and company‘s performance. In this case Investor would be freed from
their share of investment.
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Human Capital and Industry Evaluation
Human resources, training and development
The evolution of the retail industry in India over the past few years has been
propelled by rising consumerism, demographic dividend, increasing disposable
incomes and the large middle class population. The retail formats in India have
evolved vastly over a relatively short period of six to seven years, without any past
blueprint or precedent to refer back to. Therefore, the retail industry in India has
been defined by experimentation, risk-taking and trial-and-error methods. Its
manpower intensive nature and unique requirements have resulted in human
resource considerations taking on paramount importance for the sustainable growth
of the sector.
While designing HR policies following things should be considered as critical and the
policies will revolve around these factors.
Strong customer service orientation
Effective communication skills
Fast decision making capabilities
Ability to collaborate and operate within a team, interpersonal skills
Strong result orientation
Meticulous planning
Analytical and problem-solving abilities
Flexibility and ability to deal with ambiguity
Creativity and innovation
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Performance management system
Balanced scorecard will be used to gauge how employee‘s job contributes to the
success of the organization by linking work efforts with company‘s mission, vision
and objectives
It will also help employee know what needs to be done to be successful on the job by
focusing attention on setting clear performance expectations (results + actions &
behaviour)
It Focuses department on what needs to get done and provides a solid rationale for
eliminating unnecessary work with the use of objectives, standards, and
performance metrics
It gives employees a clear path for growth by defining job-mastery and career
development goals as part of the process
Enables employees to quickly identify problems and change course of project or
work assignment through regular check-in discussions, which include status
updates, coaching and feedback
Shifts focus from performance as an annual event and set it as an ongoing process
by basing performance evaluations on the summary of check-ins & status updates.
Variable pay pattern
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Variable pay, also known as performance pay, will be used to recognise and reward
employee contribution above and beyond their normal job requirements, towards
company productivity, profitability, quality and the like.
Variable pay would be based on two main factors: employee‘s own performance and
company's performance. So, most schemes will have a target-setting and actual
payout based on that combination. Variable pay is one of the five main components
of total rewards in any organisation, and is usually a percentage of fixed pay.
Learning and development
Periodic training and development programs would take place both on corporate and
store level. These programs will basically concentrate on following things for store
people which are nothing but business getters for us.
Increase conversion rates
Higher the conversion rate, higher would be the sales with same number of
work force. It is indicator of how efficient sales force is in converting
customers.
Increase average transaction values
This will focus on teaching up-selling and cross-selling products. Increase in
average transaction values of each people on floor will lead to great increase
in sales.
Generate repeat customers
This would be result of how effective and warm the ambience and human
interaction of store is. In future connecting with loyal customers is going to be
important. This is the reason why mom-n-pop are so successful in India.
it would be more cost effective and make more sense to have existing
customers return time and time again and buy from us. Delighted customers
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will be happy to demonstrate their brand loyalty by returning to the stores they
love.
Improving staff engagement and interaction, making customers feel special
and important whilst ensuring they are offered the right solution for their
individual needs, are all key to achieving this ‗holy grail‘ of retail – skills and
experience that many retailers need in today's market to be successful.
Develop product and sales knowledge
How knowledgeable and confident sales staff is on the products they sell?
Sales features should be translated into tangible ‗real world‘ benefits that
customers understand and feel they can‘t do without. They should have the
confidence to sell higher ticket items.
Improve product placement and merchandising
Product displayed on the shop floor has a great chance of being sold. Product
in the store room has significantly less chance.
Good product placement and merchandising is absolutely key in today‘s
increasingly competitive and crowded retail market. How confident are you
that your stock and manner in which it‘s displayed will increase the likelihood
of a sale?
Put the ‗WOW‘ into window dressing.
People should walk into your stores just because of the impact of your window
displays. Most of them should simply stop by because the display does a lot to wow
or entice them?
A well-dressed window might mean simple or intricate, minimal or full, many colours
or few, thought provoking or obvious. What you do in your window can have a
marked effect on foot fall and mean the difference between hitting sales targets and
not.
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Beyond The Box retail our training will provide the sales people and in-store staff the
confidence, skills and ability to achieve consistently better results in all these areas,
whilst helping create positive cultures and behaviours.
Application of Strategic tools
Porter’s Five forces for Palash stores and Cash and Carry
Bargaining Power of Suppliers – (LOW)
1. Cash and Carry accounts for a miniscule fraction of India‘s current retail
market. Suppliers make majority of their revenues from other formats
2. More convenient for suppliers to cater to Cash and Carry. Potential to reach a
wider user base including businesses and HoReCa.
3. Private labels doing very well in India
4. Low likelihood of forward integration
5. Competitive environment in the supplier side increases options for Cash and
Carry.
Bargaining Power of Customers – (MEDIUM-HIGH)
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1. Wide variety of retail options available to customers.
2. Low switching costs for customers.
3. Customers will have to be drawn away from their existing Kirana stores and
supermarkets to purchase from Cash and Carry and Palash
4. Palash and Cash and Carry will be able to provide customers with best-inmarket prices
Threat of new Entrants – (MEDIUM)
1. Highly capital intensive business. High barriers to entry.
2. Economies of scale are difficult for new entrants to achieve. They would have
to sacrifice profits to gain market share
3. High Government influence
4. Cost of retail space becoming prohibitively high in most Indian cities
5. Modern retail market attracting big names with deep pockets including foreign
giants
Threat of substitute products – (HIGH)
1. Indian Retail market is enormously widespread and unorganized.
2. Difficult for any format to attain pan-India penetration and success.
3. Kirana stores and wholesalers have proved to be highly resilient and are
unlikely to go away anytime soon.
4. Online retail market in India is set to grow significantly in the next decade
Competitive Rivalry within Industry (soon to be HIGH)
1. Multiple Cash and Carry brands establishing themselves in India
2. Convenience store format such as Palash to be emulated by a number of
players, old and new such as Futures Group and Sahara.
3. Low product differentiation
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BCG Matrix –
The Indian Retail industry is estimated to exceed $750 Bn by 2015. Of the
total current market, organized retail accounts for approximately 8% and is
estimated to grow at a rate of almost 30% by 2015. This is a much faster pace
than the overall retail market which is expected to grow at a rate 16% in the
same period.
Cash and Carry falls into organized retail and has a high growth rate, but a
small market share at the moment. These will fall into the ‗Question Mark‘
category on the BCG matrix.
Palash stores will fall under organized retail and are expected to grow as
such, but their format shares several similar traits with Unorganized retail
stores that have a high market share and would be most likely to fall between
‗Cash Cows‘ and ‗Stars‘.
Vruksha
Palash
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Cash and Carry Detailed Analysis
Cash and carry wholesale represents a type of operation within the wholesale
sector. Its main features are summarized best by the following definitions:
Cash and carry is a form of trade in which goods are sold from a wholesale
warehouse operated either on a self-service basis, or on the basis of samples
(with the customer selecting from specimen articles using a manual or
computerised ordering system but not serving himself) or a combination of the
two. Customers (retailers, professional users, caterers, institutional buyers,
etc.) settle the invoice on the spot in cash, and carry the goods away
themselves.
Though wholesalers buy primarily from manufacturers and sell mostly to
retailers, industrial users and other wholesalers, they also perform many value
added functions. The wholesaler, an intermediary, is used based on principles
of specialisation and division of labour as well as contractual efficiency.
There are significant differences between "classical" sales at the wholesale
stage and the cash and carry wholesaler: These differences are based in
particular on the fact that customers of the cash and carry wholesaler were
mainly businesses and that they arrange the transport of the goods
themselves and pay for the goods in cash and not on credit.
Up until now, A cash and carry store was different from regular retail chains in the
sense that it targeted professional registered customers who bought in bulk
rather than end-consumers.
The core customer groups are Hotels, Restaurants, Caterers(HoReCa)
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Traders
Other business professionals
Thus, the nature of the cash and carry business was B2B till now, excluding B2C
(i.e. not serving end-consumers) due to government regulations.
But with the removal of this constraint on nature of the cash and carry business, the
format has become a new channel to cater to end-consumers‘ needs directly.
As the cash and carry formats have well-established supplier relations and procure
from farmers and manufacturers directly cutting middlemen like distributors,
wholesalers which traditional retailers procure from, the cash and carry format is able
to provide goods at prices often lower than any other wholesalers/trade channel as it
is nearest to the manufacturer in the supply chain.
A "one-stop" food and non-food format is convenient for professional customers.
Scale and the self-service model also reduce costs and consequently prices to
consumers. The lower prices than other wholesalers are also due to the self-service
aspect and cash payment nature of cash and carry compared to the deliveries and
invoice aspect of the traditional wholesaler.
The (no-fee) membership format prevalent in a cash and carry format allows
aggregation of detailed data on customers, which enables more targeted promotional
and advertising activities and, over time, the ability to better match the stores'
offerings to consumer needs.
Beyond the benefits Cash & Carry offers its own customers, it also brings "positive
externalities" to countries where it operates by a modern distribution chain with
improved quality and the safety of a supply chain. These benefits make Cash &
Carry attractive to planning authorities, especially in emerging markets
FDI policy
At present, India‘s FDI policy restricts foreign investment in multi-brand retail sector
to 51 % from the earlier completely prohibited and has increased FDI limit in single
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brand retail from the earlier 49% to 100% now. This slow pace in relaxation in FDI
limits was mainly because of fears among many small retailers—who number over
12 million—that the entry of global retailers would put them out of business. Such
fears are arguably unfounded; small retailers actually have many advantages, such
as low costs, proximity to the customer and hence their convenience nature, knowing
their customers intimately, a strong trust factor between the two and also services
like free home delivery. But India is a democracy, and the government cannot afford
to ignore the strong opposition to retail liberalisation.
By contrast, liberalisation of the wholesale-trading sector poses fewer political
challenges. Partly because the lobby groups opposing FDI in the sector are fairly
weak, foreign investment of up to 100% has been permitted. Unsurprisingly then,
most of the global retailing giants that have directly invested in India have focused on
wholesale trading, and specifically on cash-and-carry operations.
However, FDI restrictions are not the only reason for foreign companies‘ interest in
wholesale trading. Another key factor has been the primitive state of India‘s
wholesale-trading sector, which has not changed in step with the requirements of
economic growth. If modern distribution outlets are created, the sector would present
enormous potential for growth.
Scope for improvements
Because of inadequacies in India‘s wholesale-trading system, there is enormous
scope to improve the supply chain that links producers to huge numbers of small
retailers and businesses. The main advantages of the modern cash-and-carry outlets
that foreign companies are setting up, compared with the traditional Indian
distribution system, include the following:
•
Reduced time and transaction costs.
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The Indian retail sector is dominated by a large number of small
neighbourhood grocery stores (known as ―kirana‖ stores). These stores have to deal
with a variety of different distributors, which is time-consuming and
carries substantial transaction costs. Even if the distributors visit the stores (in which
case their visit costs are
likely to push up the price of whatever they are selling), they rarely do so on a daily
basis. All these costs
and inconveniences are reduced considerably when kirana stores source their
products from cash-and-carry centres, where almost everything they need is
available in one place.
•
Freeing up working capital.
The traditional Indian distribution system often requires small retailers and
other businesses to keep excessive inventories of products, owing to uncertainty that
additional products will be available from their distributors
when needed. With cash-and-carry centres, retailers can be sure that all their
requirements would be
available in adequate quantities all the time. Cash and carry is also more flexible for
a retailer than using delivered wholesaler. Nothing is more frustrating to a retailer
than finding out that the expected delivery is short of certain lines due to 'stock-outs'.
At a cash and carry, the retailer can immediately choose an alternative product and
not lose out on sales.This enables the distribution centres in effect to function as
warehouses for small retailers, freeing up working capital that can be put to better
uses.
•
Expanding product range.
The huge variety of goods stocked by cash-and-carry outlets makes it easy
for small retailers to expand the range of products that they sell.
A retailer can also try new product easily because he can buy in single units and see
how they sell (how much his end customers buy of it) ;avoiding the minimum order
restrictions placed on them by the delivered wholesaler as the cash and carry does
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not place restrictions on minimum quantities to be ordered for a particular product
but places a restriction on the minimum transaction value.
e.x.: Bharti Walmart in India places a restriction on the minimum transaction value as
Rs.500/-
•
Lower, transparent pricing.
Retail supply chains in India are often fragmented, with products changing
hands several times before reaching the customer. The cash-and-carry model
shortens the supply chain, producing cost savings. Moreover, cashand-carry companies have considerable bargaining power with suppliers because
they source such huge quantities of goods. This enables them to charge lower prices
in turn. Another important advantage is that, unlike the practice followed by
traditional Indian wholesalers, who often charge different prices for different
customers, the prices charged by cash-and-carry outlets are fixed and transparent,
irrespective of the quantity purchased.
•
Convenience.
Cash-and-carry outlets typically maintain very long hours. Metro‘s outlets, for
instance, are open daily from 6 am to 10 pm. This makes it easier for small retailers
and other businesses to arrange to replenish their stocks.
•
Cold-chain infrastructure.
Although India is the second-largest producer of fruits and vegetables in the
world, as much as 25-30% of output is wasted during distribution because of
inadequate cold-chain facilities. Modern cash-and-carry firms, with their
own temperature-controlled supply chain infrastructure, refrigerated trucks and large
cold-storage spaces in their outlets, are able to ensure better quality and hygiene of
their food products.
Regulatory confusion
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The other major problem is that, owing to the legacy of earlier decades of food
shortages and exploitationof farmers by distributors , wholesale trading in agricultural
produce is regulated by the government.
Moreover, regulations vary from state to state. In Karnataka, for instance, until last
year wholesale trading was permitted only in designated yards by small-scale,
licensed merchants. Policymakers have recognised that such regulations are archaic and need to be modified to encourage large
private wholesalers to interact directly with farmers, to modernise the trading system
and to sell the produce in their distribution centres. Unfortunately, since these
regulations fall within the purview of the various state governments, progress in
reforming agricultural trade has been piecemeal and slow.
Cash and carry model once established, can bring multiple benefits to all
The need to have a sound supply chain system is of paramount importance in the
C&C wholesale business as revenue leakage can have a significant bearing on
player profitability. Good supply chain management covers the following aspects;
just-in-time inventory,
retail information systems,
cold chain infrastructure, and
GPS for truck and trailer tracking
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Shortens multi-level supply chain across verticals
Traditionally, in India, supply chain for all verticals including fresh produce, staples,
fast moving consumer goods (FMCG), apparels, consumer durables etc involves
several layers.
For instance, in case of fresh produce and staples, agricultural markets in many
states are regulated under the State APMC (Agriculture Produce Marketing
Committee) wherein no person or agency is allowed to freely conduct wholesale
marketing activities. These regulated wholesale markets prevented the development
of a competitive marketing system in the country, thereby restricting direct marketing
and smooth supply of raw materials to agro-processing industries, and adoption of
innovative marketing systems and technologies.
Due to higher bargaining power and capacity to invest in back-end, organised
wholesalers and retailers are in a position to directly procure goods from the source,
do away with middle-men and thereby eliminate multiple profit points. Although the
APMC Act is not amended for all states, in states where it has been amended,
retailers and wholesalers are permitted to source directly from the farmers.
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Direct procurement also reduces wastage and helps retain quality
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This pertains more to the fresh produce and staples vertical. Movement of goods
across different states and regions, sometimes arising out of differential tax rates,
leads to high wastage due to inadequate transportation and cold storage facilities.
In the fresh grocery segment, losses can be as high as 25 per cent, as compared
with 15 per cent in countries where organised players have a significant share of
wholesale and retail trade. CRISIL Research believes that organised wholesaling
helps in reducing avoidable supply chain cost in F&G vertical and contributes to
increase in farmers' incomes and reduces the price for the end-consumer
Thus, savings which accrue through lower supply chain costs and reduced wastage
can be passed on in the form of higher realisations to farmers and through lower
food prices to consumers.
For instance, in China, in a programme initiated by the government ‗200 Markets
Upgrading Programme', Metro Cash and Carry sources directly from the farmers and
sells the produce in a market close to Shanghai. In this case, Metro gains by cutting
several cost components by shortening the supply chain. Thus, the Chinese ministry
has tried to improve the link between farmers and end consumers via an organised
wholesale market. Metro Cash and Carry jointly works with the Chinese government
to improve quality and food safety.
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Apart from this, companies also invest in activities like training the farmers on how to
improve the quality and output. For instance, in India, Metro C & C has trained 40,
600 sheep farmers and 1,150 fishing crews.
Other benefits of a good supply chain
Helps in better inventory management for C & C players
The client mix of a cash and carry mainly constitutes HoReCa and mom and pop
stores which typically purchase goods in bulk. Hence, a C & C model entails huge
investments in inventory as it has to stock a wide assortment across verticals and
brands under one roof. In order to reduce stock—outs and also to improve customer
service levels, it is crucial for the companies to:
optimize inventory levels
minimize stock levels and
improve working capital management
Some of the technologies used to attain the above by C & C operators across the
world are Radio Frequency IDentification (RFID) and smart sensors.
How RFID helps
Radio Frequency Identification technology permits the contact-less transmission of
product and process data via radio waves. These technologies help to attain lean
supply chain capabilities. It also helps improve process flow and reduce shelving
errors. Since the processes are almost automated, they help reduce employee costs.
For instance, mobile RFID readers enable staff to check the availability and location
of articles which in turn enable them to provide real-time information on articles'
availability and optimise inventory. To reduce losses/theft shrinkage, RFID gates
equipped with motion sensors can also be placed at all transition points from the
warehouses to the front store and the dressing rooms.
Reduction in transaction costs and time, thereby avoiding stock outs for
customers
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In India, mom-and-pop stores get their supplies from the respective
distributors of FMCG companies, national brands etc. These distributors
deliver goods once in 2 weeks in certain fixed quantities to the mom-and-pop
stores. The transaction costs involved in co-ordinating with various distributors
can be avoided as a C & C wholesaler stocks all brands and products under
one roof. Also, unorganised retailers can optimise their shelf space by
stocking only brands and products which are in demand. Thus the retailer
need not invest in inventory which is slow moving as one can decide his own
assortment and avoid stock-outs by stocking the right products and brands.
Similarly, HoReCA also can get all their requirements like fish, poultry,
utensils, FMCG and cutlery etc all under one roof. It enables them to save on
the transaction costs and also offers convenience.
These wholesalers also assist unorganised retailers to increase their margins
by encouraging them to stock their private labels.
For instance, in Poland, the Metro Cash-and-Carry model has an Aro brand
programme (Aro is one of Metro's private labels). Metro and an unorganised retailer
have signed an agreement for minimum sales for which the shop gets a discount on
Aro brand products. In return, the shop receives merchandising consultation and
support (advice on assortment, merchandizing, equipment, and layout) from Metro.
The shop gains visibility, quality standard branding, a mass marketing programme,
product price discounts, and special procurement deals with suppliers.
An efficient supply chain consisting of infrastructure, systems, distribution concepts
and format go hand in hand.
Efficient supply chains have several important bearings on development.
a) Lower costs leading to lower prices, which leads to higher consumption
b) Reduction in investment as stock holding in the supply chain is reduced
c) Reduced losses from point of production to consumer. This is particularly true in
the case of fresh produce like fruits, vegetables, meat and fish.
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d) Improvement of quality and food safety. It has been proven globally that modern
systems of distribution for both food and general merchandise are a pre-requisite for
economic development.
Virtually all categories of goods are available in India. The supply chain remains
inefficient and one-dimensional. There is a multi-layered chain which includes C & F
agents, distributors, wholesalers/dealers and retailers. The chain of agricultural
commodities also has intermediaries (often as high as seven to eight) before what is
produced in the farm reaches the consumers. Further, the chain is distorted by a
series of rules and regulations that restrict movement between states, define limited
areas where trading can take place and how much can be stored by one person or
entity.
The damages and loses for fresh products in India are as high as 35% between the
farm gate and the consumers. This colossal waste not only reduces nutritional value
and raises price, but also means that the farmer does not receive the full value of his
harvest. Intermediaries bear much lower risk & get a much higher return. This leads
to urban Indians spending over 40% of their disposable income on food, as
compared to below 30% for most developed countries.
Is there anything that can keep intermediaries at bay and ensure the welfare of the
Farmer/Supplier as well as the Consumer? The answer is Cash and Carry - a supply
chain infrastructure. It brings the suppliers together with business customers.
There are immense advantages:
For Retailers
a) Reduction in working capital – They have the access to stocks at their
convenience and the quantity they need. There could be free Shelf Space due to
reduced need for stocking
b) Access to niche/low volume products
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For Suppliers
a) There can be a marked decrease in distribution and marketing costs
b) At the same time their customer base would increase
For Farmers
a) There is a very transparent written agreement with the farmers along with
Regular orders. The payment is guaranteed within the agreed time and goods once
purchased would not be returned.
b) There is a direct pick up from growing areas in cooled vehicles and will be stored
in temperature controlled conditions, thus multiple handling is avoided.
c) Regular Training in the areas of Grading, processing and packaging and also
productivity improvement are given to the farmers.
Modern, multi-dimensional distribution formats using the latest but relevant
technologies are the need of the hour in India. The country has already
demonstrated its ability to master technology, especially the IT-based management
systems that characterize efficient supply chains. Innovative concepts such as Cash
and Carry can help dramatically improve the supply chain, especially for the benefit
of the farmers and fishermen.
Efficient supply chain management
By establishing modern logistics infrastructures and supporting suppliers and
manufacturers in safeguarding quality as well as social and environmental
standards, we will take systematic steps to prevent food from spoiling and being
wasted – an issue that is increasingly becoming the focus of public discussions. Our
initiatives aim at improving the output and quality of fresh produce and reducing food
waste. This in turn contributes to improving the farmers‘ income situation.
Optimised purchasing strategy
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In order to cater for the needs of professional customers and further ramp up our
collaboration with local producers, we will optimised our purchasing strategy for ultrafresh products such as fruit, vegetables, fish and meat.
Local collection centres
We also aim to contribute to sustainable procurement structures by setting up local
collection centers for farmers. As the centers will be close to the areas where
produce is grown, vegetables will be delivered to stores in less than 15 hours after it
was picked, compared to the previously taken 36 hours. Customers can buy highquality vegetables as a result. This minimises the amount of food going off on its way
from the field to the store. Additionally, we will open Poultry Consolidation Points.
The freshest catch of local fishermen and freshest meat will carefully iced and
packed at the Consolidation Point every morning. The complete consignment will be
transported the very same day to Cash & Carry wholesale distribution centre.
Consolidation Points will be highly beneficial for both Cash & Carry customers as
well as for local fishermen and poultry raisers. On the one hand, Cash & Carry will
have a quick and reliable access to fish suppliers along both India‘s coasts and
saves transportation costs, as the catch is collected at a logistical junction point.
Furthermore, fishermen align to the company‘s quality standards and therefore
customers can be ensured to buy fresh and consistently available seafood products.
On the other hand, the fishermen will profit from an assured market, reasonable and
guaranteed payments and the best technical know-how through Cash & Carry‘s
training programs.
Cash and Carry Competitive environment
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1. Metro
METRO Cash & Carry is an international self-service wholesaler. It operates across
Europe and in some countries of Asia and Northern Africa. It is the largest sales
division of the German trade and retail giant METRO AG.
Metro in India
The first METRO Cash & Carry wholesale center in India opened in Bangalore in
2003. Currently there are 15 wholesale centers in operation, including two in
Bangalore and two in Hyderabad, of which one was opened on 30 November 2006.
The first Mumbai store was opened in 2008 at Bhandup The Kolkata store located at
Kalikapur, EM Bypass was opened in 2008. A Metro Cash & Carry store was opened
at Ludhiana city in Punjab in the first week of September 2011, located on the
Jallandhar Bypass road. The second store in Mumbai was opened on 17 November
2011, near Western Express Highway, Borivli (E). In the beginning of 2012 Metro
opened 2 more stores in northern India including one in New Delhi and one in Jaipur,
with plans to open more.
Metro has stores in the following cities:
Bangalore (x2)
Hyderabad (x2)
Mumbai (x2)
Delhi
Kolkata
Ludhiana
Jaipur
Jalandar
Vijayawada
Zirakpur
Indore
Amritsar
India is a key market in the company‘s global expansion strategy. With modern trade
on the threshold of exponential growth in India, METRO is poised to extend its
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presence in existing markets by further deepening its network of customers and
suppliers. The company will also expand its footprint into newer markets within the
country bringing these markets the benefit of its unique wholesale concept.
Format : Business-to-Business(B2B), cash and carry wholesale format
The METRO Concept:

Wholesale exclusively for business customers
Metro cash and carry caters to the below customer segments
Hotels
Caterers
Canteens
Restaurants
Guesthouses and Lodges
Corporates & SMEs
Educational Institutions
Self-employed Professionals
Traders & Resellers
Wholesalers & Distributors
Supermarkets & Pharmacies

Customers are registered and need a customer card to enter the premises

The point of sale is a large warehouse

The customer picks merchandise, pays and transports the goods or uses our
transportation services

A high percentage of the goods are from local suppliers
Business Solutions and Services
Services for Corporates & Commercial Offices
METRO Delivery Services
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METRO offers a variety of customized delivery and logistics solutions. Combining
speed, reliability and reasonable rates, these solutions are another way in which
METRO strives to become its customers‘ partner in business success.
Key Account Delivery
On signing up for METRO Key Account Manager program, one can avail of this
special solution. Benefits include special delivery rates and priority delivery to ensure
faster receipt of goods.
Bulk Delivery
A customer stocking up in massive quantities can avail special free deliveries on bulk
purchases at negotiated rates.
Non-Food Delivery (White Goods)
Large appliances like refrigerators, washing machines or large televisions are
delivered for free to customers‘ doorstep.
Slabbed Delivery Solution
Purchases delivered to customers‘ location by METRO‘s logistics partner at these
great slab rates:
Rs. 35 on purchases of Rs. 5,000 – 10,000
Rs. 60 on purchases of Rs. 10,001 – 25,000
Rs. 100 on purchases of Rs. 25,001 – 40,000
Charges for the whole vehicle will apply for bills above Rs. 40,000. If the billing is
only for commodities, the minimum delivery charge is Rs. 100 and rates as per our
tariff cards apply.
Metro Key Account Managers
To help customers drive profits with a dedicated relationship manager who knows
the customers‘ industry.
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
Has an intensive knowledge of customers‘ industry, his market and his
competition

Gives the customer information on the latest products and offers

Helps the customer source the products he needs the most

Provides personalised business advice

And will do all this at customer‘s premises, when the customer is free
Health and safety training for the hospitality and catering industries
Other General Services
METRO Customer Consultant
Studies customer‘s product needs and sales cycles
Suggests the right products and brands to maximise profits
Makes sure all important products are always available at customer‘s store
Ensures speedy, timely restocking.
E-Retail Program
As a special initiative, METRO provides e-Grocers and e-Retailers value added
services, helping them with in-store facilities, product & pricing information for direct
upload.
As an e-retailer, one depends on a reliable distribution model, which provides one
with a complete back-end solution. On partnering with METRO, METRO provides
one with a complete warehousing solution, so all one has to do is set-up one‘s frontend and delivery model.
2. Carrefour
Carrefour S.A is a French multinational retailer headquartered in Boulogne
Billancourt, France, in Greater Paris. It is one of the largest hypermarket chains in
the world (with 1,452 hypermarkets at the end of 2011), the second largest retail
group in the world in terms of revenue, and the second in profit (after Wal-Mart).
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Carrefour operates mainly in Europe, Argentina, Brazil, China, Dominican Republic,
United Arab Emirates, Qatar and Saudi Arabia, but also has shops in North Africa
and other parts of Asia, with most stores being of smaller size than hypermarket or
even supermarket. Carrefour means "crossroads" and "public square" in French.
Carrefour, the world‘s biggest retailer after Wal-Mart, has set up two different entities
in India: Carrefour WC & C India Pvt Ltd, and Carrefour India Master Franchise India
Pvt Ltd. ―The Indian franchisee will open Carrefour brand hypermarkets in the
country and Carrefour‘s 100 per cent-owned cash-and-carry stores will feed them.
Carrefour operates cash and carry stores in India under the name "Carrefour
Wholesale Cash&Carry". The first store opened on 30 December 2010 in Shahdara,
Delhi This was followed by a store in Jaipur in late 2011 and one in Meerut in
October 2012 and later in Agra. Carrefour currently operates 4 cash and carry stores
in India.
Line Of Business
Offices & companies
Govt. offices & institutions
Hotel & hospitality
Restraunts & bar
Kirana & food trader
Stationary & home office
School , college & educational institute
Manufacturing
Beauty , massage & spa
Hypermarkets & supermarkets
Medical & drug store
Janitorial & cleaning
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Services

Installation Services
Carrefour‘s customer service representative not only help the customer in choosing
from the best range of furniture or appliances at its stores, but also ensure that the
installation for these products is completed as per the customer‘s business
convenience. From purchase of the products to the actual ready to use state,
Carrefour offers its customers a ‗start to finish solution‘.

Bulk Purchase Assistance
own personal assistant assigned for those who want to buy a large quantity or
products for their business to guide them through the entire process, offering you the
best rate and choice of product suitable to their needs.

Delivery Solutions
Once one makes one‘s purchase, one can simply book one‘s purchase onto
Carrefour‘s Jhatpat Delivery Service and get purchases delivered to the address of
one‘s convenience.
Slabs are as below:
On purchase of:
Rs. 1,000 to Rs. 9,999 – Rs. 30/- per delivery
Rs. 10,000 to Rs. 24,999- Rs. 50/- per delivery
Rs. 25,000 to Rs. 40,000- Rs. 100/- per delivery
Free delivery for selected articles like TV, Refrigerator and more.

Dedicated Relationship Manager
For HORECA (Hotels, Restaurants and Caterers), Institutional & Office customers,
Carrefour offers its customers a dedicated relationship manager who role includes to
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understand the customers‘ business and develop solutions for the customer to have
a one stop shop solution for all his needs.
3. Tesco
Tesco PLC is a British multinational grocery and general merchandise retailer
headquartered in Cheshunt, Hertfordshire, England, United Kingdom. It is the
second-largest retailer in the world measured by profits (after Wal-Mart) and thirdlargest retailer in the world measured by revenues (after Walmart and Carrefour). It
has stores in 14 countries across Asia, Europe and North America and is the grocery
market leader in the UK (where it has a market share of around 30%), Malaysia, the
Republic of Ireland and Thailand.
Tesco has had a limited presence in India with a service centre in Bangalore, and
outsourcing. In 2008 Tesco announced their intention to invest an initial £60m
($115m) to open a wholesale cash-and-carry business based in Mumbai with the
assistance of the Tata Group.
Tesco has a number of interests in India.
Tesco currently operates a wholesale business in Mumbai supplying products to Star
Bazaar - stores operated by Trent, which is the retail arm of Tata. We have a
Franchise arrangement with Trent to help with the growth of the Star Bazaar chain.
Tesco is also entering into an exclusive franchise agreement with Trent, the retail
arm of the Tata Group. Under the terms of the agreement, for which Tesco will
receive a fee, Trent will be able to draw on Tesco‘s extensive retail expertise and
technical capability to support the development of its hypermarket business, Star
Bazaar. Trent currently has four hypermarkets, with plans to grow to 50 stores over
the next five years.
Tesco‘s wholesale business will supply merchandise to Star Bazaar, enabling the
two companies to benefit from the rapid development of a modern supply chain.
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Tesco already sources over £170 million worth of Indian products each year, with
sourcing offices in Delhi, Bangalore and Tirupur. It also employs nearly 3,000 Indian
staff at its Hindustan Service centre in Bangalore, providing IT, financial and
business services to the entire Tesco Group.
4. Reliance Retail
Reliance Retail, the country‘s leading retailer has initiated a furious expansion drive
with special emphasis on the wholesale cash-and-carry segment to take the battle to
multinationals such as Walmart and Carrefour that have to build up their retail
presence from scratch.
"Reliance Retail plans to take the battle straight to multinational chains operating in
the wholesale cash-and-carry segment.
Reliance Retail, has opened its first cash & carry store — Reliance Market — the
eighth store in the country at Madurai.
Located on the Madurai-Melur Road, Uttangudi, it is spread over 65,400 sq.ft. and
has a collection of over 6,000 products and is equipped with modern storage
facilities.
The assortment ranges from fresh fruits and vegetables, detergents and toiletries,
staples, groceries, stationery, footwear, and electronics and IT products. The store
aims to cater to the needs of the local kirana traders and the traders of nearby
towns, small businesses, hotels, restaurants and offices, offering a range of regional,
national and international brands to its partner members at wholesale prices.
To become a member, one needs to have a business licence issued either by the
Government, Municipality or Panchayat and is initially offered free of cost.
The seven other stores in the country are located at Ahmedabad, Mumbai,
Bangalore, Anand, Faridabad, Guntur and Chennai.
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5. Booker
Booker Group plc is the United Kingdom's largest food wholesale operator, offering
branded and private-label goods to over 400,000 customers including independent
convenience stores, grocers, pubs and restaurants.. The Group now comprises
Booker Wholesale, Makro, Booker Direct, Classic Drinks, Ritter Courivaud, Chef
Direct and Booker India.
UK-based Booker, a $6.5-billion cash and carry chain, has in the first five months of
2012 already surpassed last year‘s store launch. This calendar year, it has opened
two wholesale centres, with more planned, against just one in 2011.
Booker India
In September 2009, Booker opened its first business centre in Mumbai. Booker now
has12,000 customers. Booker has also launched 185 Happy Shopper symbol
retailers which harness the lessons from Premier in the UK for the Kirana stores of
Mumbai. In 2011, Booker opened its first joint venture business centre in Pune. Its
partner in Pune is Kohinoor Foods‘ promoter Satnam Arora to open wholesale stores
in India., who has expertise which compliments its own. Booker now has 3 branches
in Mumbai and one joint venture in Pune. Booker anticipates opening a further two
branches in 2013/14.
Through the tie-up with Kohinoor Foods, the basmati rice producer and distributor, it
is looking to gain local know-how.
Under the new entity, Booker Satnam Wholesale Pvt Ltd, the retailer opened a store
in Pune in 2011.
This is the second store of Booker in India and specialises in fast moving consumer
goods, grocery and staples, fresh foods and beverages, personal care, tobacco and
home-care products, primarily selling to mom-n-pop stores, caterers and restaurants.
Presently, the chain has three stores in Maharashtra and now it is seeking expansion
of its stores in other parts of the country. It could open as many as 20 stores over the
next five years. The company is not expected to set up multi-brand retail stores and
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will continue with the brand‘s UK model of a pure wholesaler in India and cater to the
local independent retailers.
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Convenience Store Detailed Analysis
Neighbourhood Convenience store format
India is referred to be a nation of shopkeepers with about 15 million retail outlets of
all kinds. Of these, the majority are small neighborhood grocery stores called "kirana
stores". Food and grocery constitute a major portion of the private consumption. This
offers a large potential market for the organized retail companies to tap into.
However, the high proliferation of local kirana stores with their unbeatable advantage
of proximity and customer familiarity questions the success of organized retail in this
category.
"Location convenience", "customized services" and "easy goods
return/exchange facilities" drive a customer towards kirana stores while
"product choice", "efficient store-management" and "value-enhancing
services" attract customers towards modern retailers.
The Co-existence of Kirana Stores and Supermarkets: A Potential Possibility?
The neighbourhood kiranawallahs have been successful in establishing a strong
rapport with customers that have proved to be lucrative so far. However with the
changing demographic profile and rising level of disposable income in the country,
Indians are increasingly inclined to shop at supermarkets for their daily needs which
in a way is evolving as a potential threat for kirana stores in the country. The
kiranawallahs have been found to identify and rectify the grey areas in their
businesses. They are also being effectively partnered by some FMCG giants in the
country in this endeavor which makes one believe that the phenomenal growth of
organized retail (supermarkets) in the country will not witness the death of the kirana
stores. In fact a healthy competition will exist between the two.
It is a matter of debate as to whether Indian Kirana stores would be able to survive in
the face of competition from organized modern trade grocery retailers. Although
traditional retail currently constitutes over 98 per cent of the total sales in the country,
smaller kiranas that are unable to compete with new age retailers in terms of variety
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and scale have begun losing volume in several parts of the country. Internationally,
while some studies suggest that large scale retailers like Wal-Mart are responsible
for widespread closings of mom & pop stores and question whether cost to
communities in terms of labor displacements and higher poverty is offset against
benefits of lower prices and greater convenience, other studies suggest that the
process of creative destruction unleashed by Wal-Mart has had no statistically
significant long-run impact on the overall size and profitability of the small business
sector in the United States.
In India modern trade or organized retailing already account for 30 to 40 per cent of
grocery sales in the top 6-7 cities of the country.
Organized Retailing
Any retail outlet chain (and not a one shop outlet ) that is professionally
managed (even if it is family run) , can be termed as organized retailing in
India if it has the following features—accounting transparency (with proper
usage of MIS and accounting standards), organized supply chain
management with centralized quality control and sourcing
Unorganized Retailing
Any retail outlet that is run locally by the owner or the caretaker of the shop
.Such outlets lack technical and accounting standardization. The supply chain
and the sourcing are also done locally to meet the local needs.
It is largely the Indian consumer behaviour that is supposed to sustain the
existence of kiranas in the country.
A survey conducted by the Economic Times found that 63% of the country‘s
population wants to shop both at kiranas as well as in the supermarkets and
malls. Another 26% of the population seems to be totally attracted to shopping
at malls and supermarkets while there is 11% of the population that is least
interested in try out shopping at the modern retail formats. While surveying
the buying habits, it has been found that 69% of the country‘s population treat
shopping at malls and supermarkets as weekend outings but when it comes
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to daily consumption, they prefer shopping at kiranas. Customers prefer
shopping for unique situation products and low shelf-life products at kiranas
while for planned grocery and high valued products, customers prefer
shopping at supermarkets. There are a number of factors which if looked
closely will reveal that neighbourhood kirana stores enjoy a number of other
advantages vis-à-vis the supermarkets.
Kirana Stores: The Drawbacks
Among the 6Ps of retail (otherwise called the Retail Marketing Mix), there are two Ps
exclusively related to retailing. They are People and Presentation. The other 4Ps
being Product, Price, Place and Promotion.
It is the People and Presentation component where kirana stores have severe
limitations. There‘s a saying quite popular in the Hindi lingo: ―Jo Dikhta Hai
Wohi Bikhta Hai‖ meaning what gets seen actually gets sold. In kirana stores
we as customers often do not get to locate items which we would have
otherwise purchased. This happens because the merchandise is arranged as
per the convenience of the shopkeeper and not the consumer. Mostly , kirana
stores offer a filthy appearance as their shop fronts are more or less covered
by hanging sachets of shampoos or packets of snacks or some such stuff.
Often the exterior facades of Kirana shops are not clearly visible. The name of
the store is often blurred or damaged which makes it difficult for any passer-
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by to identify the items sold by the store. kirana stores offer an impression of
an extended godown rather than a selling area. Merchandise is improperly
and illogically kept.
Lately ,kirana owners are waking up to the reality that supermarkets have
arrived in a big way in India and they are out to take advantage of the
loopholes in the kirana system. The supermarkets provide better shopping
ambience, facilitate shopping convenience by presenting products in a
customer-friendly manner and have well-groomed and well-trained staff to
cater to customer‘s in-shop queries and complaints.
Hence the kirana owners are making sincere efforts to secure customers by
enhancing their product display techniques and also grooming themselves in
an improvised way.
Kirana Stores: How Are They Fighting Back?
In recent times, a number of neighborhood retail stores have graduated to
being called semi-supermarkets. They have improvised their shops in terms of
look and feel, merchandise range and variety and also the way salesmen
within the shop interact with customers. In such shops, customers get to feel
the products, observe them for their BBDs (Best Before Dates) before
purchasing. In other words, some of the erstwhile kirana owners have not
gone for extensive grooming of their stores but also grooming themselves and
their support staff to appeal to those who are inclined to purchasing at
supermarkets
Apart from the initiatives being taken at the store level, there a number of
FMCG major that have come forward with interesting tactics keeping in mind
their own growth and also the betterment of kirana stores. The reason behind
such initiatives is that FMCG companies like Hindustan Unilever, Marico and
Dabur have observed that 95% of their sales take place at kiranas. Hindustan
Unilever Limited has embarked upon the ‗Super Value Store‘ program where
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the company buys shelf space and offers 3% discount on all its products to
retailers in lieu of seeking better visibility at the stores
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Convenience Store Competitive Environment
1. KB Fairprice
KB‘s Fairprice is a neighborhood convenience store concept. With changing lives,
people want to go to modern destination stores, which are closer to their homes.
That‘s where KB‘s Fairprice comes in. It is a modern, self service neighborhood
convenience store which stocks all the essential needs of a household in one store.
KB‘s Fairprice is currently active in 3 markets Mumbai
Delhi
Bangalore
It currently has 176 stores all across India and is located in areas within the city that
are densely populated large urban markets. It plans to expand the store count to
1500 across eight major cities in the country. The store size varies between 600-900
sq. ft.
The stores operate over an average of 800 sq. ft. of carpet area and are located in
neighbourhood, markets, near railway or metro station, large bus stations etc. Fresh
fruits and vegetables, staples and grocery item, processed foods, home care,
personal care and general merchandise are some of the item categories that are
stocked in the stores. Each store typically carries 1200 to 1300 unique items.
KB's Fairprice has now established itself as one of the primary shopping options for
daily necessities in its catchment Going forward the idea is plan is to share this great
opportunity in neighborhood convenience retail with all through the medium of
franchising by partnering with like-minded entrepreneur /mom and pop store
owner/a modern corporate to help them reach this unique offering to a larger set of
customers..
What does the franchisee receive from KB's FairPrice?
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A comprehensive 9-day training programme on how to operate and manage a
KB's FairPrice store.
A relationship manager will visit the store weekly to provide counsel on every
aspect of the business.
Monthly financial records prepared by KB's FairPrice, including Profit & Loss
statements, balance sheets, etc. will be shared.
A quarterly franchise meeting giving franchisees a voice in issues of interest.
Various forms of advertising and marketing campaigns, ranging from
broadcast and print media to point-of-sales signage.
Full product and services range with supply chain with pre-determined retail
and cost pricing. Point-of sales system and integrated ordering and receiving
systems are available for every franchisee.
KB-Fair Price Investment Details
Investment - Rs. 20lac - Rs. 30lac
Franchise/Brand Fee - Rs. 1,00,000
Exclusive territorial rights given to a unit franchise
Likely pay back period of capital for a unit franchise - 6 months
KB-Fair Price Property Details
Yype of property is required for this franchise opportunity - Ground Floor/Residential
/Highstreet Area
KB-Fair Price Training Details
Do you currently have detailed Operating Manuals for franchisees? : Yes
Where is the franchisee training done? : Delhi
Is field assistance available for franchisees? : Yes
Will someone from Head Office assist me when I open my franchise? : Yes
What IT systems do you presently have that will be included in the franchise? : Yes
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KB-Fair Price Other Details
Do you have a standard Franchise Agreement? : Yes
How long is the franchise term for? : 5 years
Is the term renewable? : Yes
The stores has low operational cost to pass on goods at lower price to customers.
The stores are not air-conditioned and do not have fancy displays.
Globally, corner shops such as 7-Eleven in Japan, Taiwan and Singapore, Lawson in
Japan and Oxxo in
Mexico are among the largest retailers in their respective countries, reflecting the
growing business of small outlets in several countries despite the markets being
opened for retail giants.
Future Group is trying to replicate a similar scalable corner shop business in India.
KB‘s Fairprice will also drive Future Group‘s private label strategy to get better
margins and improve profitability for the convenience and neighbourhood store
format.
KB's Fairprice will be the key channel and catalyst for the growth of company-owned
FMCG (fast moving consumer goods) brands and help make Future Consumer
Enterprises among the leading FMCG companies in the country.
At present, private labels contribute 40 per cent of KB‘s Fairprice‘s sales turnover,
but going forward, this is expected to soar. Private labels brands such as Golden
Harvest (staples), Ektaa (community based products) and Sach (toothpaste, juice,
ghee) will get adequate shelf space at the ‗neighbourhood‘ formats of KB‘s Fairprice.
However, the company is to stay away from the premium segment in categories
such as lifestyle and baby care, where it will continue to stock established brands.
Future group‘s foray into the cash-and-carry format, in partnership with the Hong
Kong-based Li&Fung, will also help in servicing formats such as KB‘s Fairprice in the
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future. As part of its cash-and-carry business, the group has recently created a
market called ‗World Market‘ in Bengaluru, with average shops size ranging from 400
sq ft to 550 sq ft. These shops will offer traders and wholesalers an opportunity to
buy, own, invest and run their own shop.
Considering the group is already getting ready to serve other retailers, it would also
be in a position to service its own retail formats.
As part of the cash-and-carry business, it is the most logical step to take, as Future
Group expects cash-and-carry to help in consolidating sourcing operations within the
group-owned formats.
2. Sahara Q Shop
'Sahara Q Shop', the FMCG and quality consumer merchandise retail company of
Sahara India Pariwar, launched its operations in Delhi and the national capital region
with 100 neighbourhood convenience stores.
Sahara Q Shop has plans to open 400 such stores by March 31, 2014 in the region.
Currently, there are 901 such stores operating in 12 states. By the end of the current
financial year the company plans to have 10,000 stores across India, two thousands
of these stores being opened in metro cities.
These stores have been set up with the aim to provide unadulterated, standardized
high quality products and offer items in the category of food (staples and processed
food), non-food (personal care and home care), general merchandise, consumer
durables and lifestyle.
3. Nilgiri
Nilgiri's was one of a kind – a hybrid mom and pop department store that seemed
content to coast along placidly. The 108 year-old brand traditionally had a very
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guarded and gradual approach to expansion. From 1959 to 1995, only 10 stores
were opened.
Nilgiris is South India's leading chain of retail stores
Nilgiris has grown from being a Dairy Farm specializing in butter to a supermarket
chain of over 100 plus stores spread across India‘s southern states- Karnataka,
Tamil Nadu and Kerala
It is the only supermarket chain that lays special emphasis on its own products, sold
under the brand name of Nilgiris 1905. With in-house capabilities centering on
Bakery and Dairy products, Nilgiris has grown to become a household name in the
south with consumers spanning successive generations.
Nilgiris is one of India‘s pioneering champions of organized retail and has ushered in
the age where consumers now seek more value in their shopping experience than
before. Beginning with a single store on Brigade Road in Bangalore with butter as its
mainstay, Nilgiris has scripted a story of success with multiple stores across cities
each delivering unmatched value in terms of range and shopping experience to the
consumer, offering a wide range of grocery, general merchandise and personal care
products.
In a shift from its earlier strategy, the South-based regional player Nilgiris intends to
concentrate on the retail sector and divest itself of interests in standalone bakeries
and restaurants. It wants to focus on small-format stores in the metros, tier-II and
tier-III towns in South India for the next three years at least.
The company, however, intends to continue to expand through the franchising model
for its retail business as this is the ―most appropriate model in the Indian context for
small size supermarkets.
Franchising follows the spirit of FDI regulation in retail, giving the kirana store owner
an ability to actively participate in the Indian modern trade opportunity. The 100-yearold retail chain is also streamlining its franchising network model. It wants to get
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more individual entrepreneurs to run stores rather than give the business to a few
master franchisees handling several stores.
Private labels
Nilgiris also plans to add to its private label list which already has close to 700 stock
keeping units including dairy and bakery products, spices and condiments. About 22
per cent of the company‘s turnover comes from private labels..
In line with this strategy, the company has launched several ready-to-eat foods in
Bangalore.
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Appendix
financial
calculations.xlsx
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