Assignment- Retail Story Board

ASSIGNMENT REPORT Retail Story Board

Prof.Ranjan Chaudhuri
Retail Management

Indian Institute of Management, Kozhikode A.P SUPER MARKET

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

Introduction of AP.Super market

This is the story of a family hailing from a tiny hamlet near Tirunelveli (south of Tamilnadu) who entered Indian retail industry with a humble beginning of selling keresone and bi cyles. Today they have grown into full-fledged super market in Chennai competing with big time retailers like Food bazzar, Nilgris etc.,

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

Introduction of Retail Industry in India:

The Indian retail industry is the 5th largest in volumes and 2nd attractive in investment in the world. Indian retail contributes 8-10% towards GDP as per 2007 report and is likely to reach 22% in 2012. A McKinney report The rise of Indian Consumer Market estimates that the Indian consumer market is likely to grow four times by 2025. The Economic liberalization by Govt of India had given the confidence of the growing demand in retailing in India. Key policies to mention are National manufacturing policy and Strategy tfor doubling Exports have been announced. The Indian Govt had now permitted 51% FDI in multi-brand retail and 100% in single-brand retail is giving confidence of a positive move towards globalization. An CII report says an estimate of USD 60billion is required to build modern retail supply chains in India. FDI entering India would be able to bring this money and also the technology and the expertise. There is a huge opportunity in Indian retail and FMCG. Most of the Indian retailing happens in open markets which are ranging from small independent shop to a professional retail. The Indian retailer keeps a

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

limited assortment of stocks and varieties. Usually Indian customer picks stocks available at the counters. When a customer demands for a particular stock which is not available at the racks, the retailer tries to push the alternative brand stating both are equal. This practice starts at the road side shop to Gold shops and even to Medical products. The price paid by the customer for a single product varies from customer to customer. In most situations, the customer do not have time or an opportunity to examine to details of the brand name, manufactured date, expiry date etc about the product. Indian retail industry both organized and unorganized employs 40million people. Out of 14million shops in India, only 4% of the shops are more than 500sq.ft in size. The unorganized small retail shops mostly employ family members in the retail shop. As these people are running the shop for the basic livelihood, they do not have the advantages of scales as with organized retails. Unorganized retails usually have few middlemen as contact points for purchase of the products required for the shop. Indian retail industry has limited growth due to non availability of technology and investment. For eg. Cold storage facilities available in India is only 5386 which are not integrated and they have a capacity of approx 24million metric tons of which 80% capacity is used only for storing potatoes and the remaining capacity is equal to approx 1% of annual farm output in India and it is inadequate during harvest seasons. A Report says there is an approx loss of 30% of the produce in India due to lack of facility. Indian laws had permitted 100% investment in cold-storage in India. On the contrary, FDI investment is not attractive for them as they quote the need for contractual demand for the setup from organized retailers. In the absence of organized retail competition and a ban on organized multi brand retailing, FDI are unlikely to begin their investments in cold storage. To become a truly flourishing industry, retailing in India needs to cross the following -Absence of developed supply chain and integrated IT management. -Lack of trained work force. -Low skill level for retailing management. -Lack of retailing courses and study options.

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

-Intrinsic complexity of retailing-rapid price changes, constant threat of product obsolescence and low margins. -Regulations restricting real estates purchases and cumbersome local laws. Recommendation across the industry has different views for FDI investment in India. A few segment of the industry has a fear of FDI investment in India and a few segment of the industry are positive of the FDI investment. By looking at the current status of Retailing in India, FDI could be beneficial in bringing technology and scale to Indian retail industry.

Retail Story:
The story of a retailer is about AP Super Market located at 1A, Vembuliamman Koil Street, Virugambakkam, Chennai-600092. Ph-23640333,23642666. The family business was started in 1971 in Tirunelveli by Mr. Pandian dealing with kerosene and bicycle. On an optimistic vision of future and a confidence of running the business, came to Chennai from the tiny hamlet in the year 1996. Initially they started with ice-creams, cool drinks and had a STD booth. This was started by his three sons Mr.Ramachandran, Mr.Velkannan and Mr.Mahesh and all of them educated. The Reason for choosing ice creams is because of good margins as it is made locally. Cold drinks offered decent margins with assurance of return of broken and damaged bottles. STD booth was a way to earn a small amount of assured money. Their initial objective was to invest and do a business with assurance for the capital invested and to earn maximum margin during initial period. This phase was expressed as a phase of learning the culture of the community and buying time to decide on the future. It took almost 6yrs to understand the city and to decide on the future plans. In 2003, they decided to start a retailing shop named AP Stores. The reason to choose the location was interesting.

Location Decision:
AP stores dealing with ice creams, cold drinks and a STD booth had heard about the huge housing complex being planned by ths famous builders like Ceebros, Jaina, Siddarth etc housing nearly 1500 apartments. These builders are the renowned builders of Chennai and the future owners would be the upper middle class people. This decision had given Mr. Pandian to buy a land

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

and start a shop. The shop has some decent number of tenants to start with initial operations. The location was almost in the heart of the city. The shop had pass buyers moving towards city and others moving towards Porur, Poonamallee. As the shop was located on the road, it was a attractive point for sale of cold drinks, cigarettes, pan masala etc which were fast moving with good margins. The tenants started with buying products initially required for the house-warming ceremony which were highly profitable and an opportunity to exhibit to the customers of the shop having unique products. On the same time, the shop was charging higher margins for these unique products. These customers slowly started buying emergency products like milk, juice, curd etc from the shop and still continuing to buy groceries from the bigger outlets. The tenants of 1500 houses started buying all groceries from the store once confidence sets in. The decision of investing in the shop was a wise decision by Mr.Pandian.

Customer Service:
The customers were offered the choice of all branded products and instore brands also. Branded products include brands from ITC, P&G, Colgate etc to home brands like AP Rice, AP Dal, AP Chilli etc. The customers were assured of quality products at affordable prices. The store offered door delivery of the products with 24hrs. The store was a single contact point for the purchase of all groceries, fruits & Vegetables, Soft drinks etc. The customers had a good choice of product assortment and variety to choose from. The most liked service offered by AP Stores was the understanding the customers needs and satisfying their needs. For eg. the apartments house few people from Kerala & few people were Jains. These people demanded products which was traditional for them, was not available in other stores. AP Stores had taken the pain of storing these unique products. The customers came to the shop to procure these items which was an opportunity for the store to exhibit about their quality and sensitivity to customer demands.

Visual Merchandising & Display:

AP Super market started with the traditional style of display of products. It displayed products category-wise. During festive seasons, they say they stock more of products of that season and give a larger place for displaying them. They say they will plan few months in advance about procurement and

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

stocking. The common objective which always they want to achieve was how to reduce the cost price of a product compared to previous year or to hold the price as per last year. They even had gone to the extent of stocking some festive season products 1 or 2 months in advance and start selling on a good margin and once the season is coming to an end, they even want to push some products even at cost below cost price and few products retain and sell through out the year. Few products which they retain and sell for the following year are Turmeric, Crackers etc. Some products which they pushed at the end of the season are chalk items, rangoli items etc. Nowadays they keep changing the visual display every month or max once in 2 months. As the consumers are from different states, festivals come one after another. Rakhi threads, Holi colours , onam flowers, navratri gift, ganesh chaturti ensemble, pongal requirements, new year cards diaries are all made available. Instore displays through aisles and pop material are displayed to ensure brand visiblilty.

Employees & People:

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

AP Super market has 25 employess all permanent and regular. They bring staff usually from their villages at Tirunelveli. The employees are given a place to live and food for the day. The salary is given to the guardian or to the parents depending upon the employee. The senior staff trains the fresher for few days. The senior staff uses the fresher as an assistant for a few days so that the fresher always does as per the command. After few months, the fresher tries to stand on its own in handling customers. The employees are given utmost care in serving customerss. As the staffs are from villages and the customers are from urban cities, a vast difference in culture is seen. In order to nullify, the employees are mostly made to respect the customer whoever they are.

Target Customers:
The target customers for AP Super Market were the 1500 families at the nearby locality within 1km. The per day average billing is close to 800 transactions and the average sales per day is Rs.50000/=. Interestingly the average of each bill is Rs.50 to 100 emphasizing the purchase is mostly on daily basis. The fast moving products were vegetables, Milk, Cold drinks, Eggs & banana etc. Other Fruits do not sell regulary. The customers prefer to pick fresh fruits from cold-chain departmental stores. This year, they are planning to go for a cold-chain maintainence to keep the fruits fresh. The cutomers were enrolled in a scheme and points are credited on the A/c according to the purchase they make. The points are converted into gifts at the end of the year and the customers are given choice to pick from the available gift products.

Catchment Area:
AP Super Market were wise in deciding the store location. The catchment area is a blessing for AP Super Market with close to 1500 households at a distance of 1km radius. The location is the prime competency for the stores. The catchment areas has close to 1000 school going kids and almost 1300 office goers. Approx 30% of the parents are going for jobs. They depend on the shop for School utilities, Ready to Eat food, Snacks, Cold Drinks, Eggs, Milk, banana etc on a regular basis making the business having a smooth run.

Sourcing, Purchasing and Buying process: Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

AP Super markets purchases the products from wholesale Vegetable & Fruit market at Chennai Koyembedu. They purchase the products by cash only though they have a facility to buy ob credit also. The reason quoted was they will have a better bargain when buying for cash. The purchase of Vegetables & Fruits are on daily basis. Milk is also on daily basis. Other cereals ,pulses and rice is procured in the season and stocked. They are purchased based on the place of availability and the quality. For eg. Rice is purchased from Mannachanallur near Trichy for the quality of the rice. They are also procured from Karnataka.

Working Capital( Credits & Expenses):

AP Super market started with a capital of Rs.10lacs in 1996.Current turnover is Rs50000 per day and touching Rs75000 to Rs.100000 during festivals seasons. The owner keeps a cash reserve of Rs.1-2lacs during harvest season to procure the farm products. In procuring the farm products, in order to achieve scale, they join with their friends running retail at other side of the city. Usually they procure Rice & Dals in 1-2 lorry loads. These are processed and packed in private labels. AP Super Market had kept a policy of not giving credit and not buying on credit. The expenses were mostly on the food for the employees staying there. This was reduced by arranging a cook for them. Other expenses include transportation of the purchased goods from Wholesale market to the super market and from super market to the customers house. An auto and a tricycle is used for commuting the purpose. Auto is driven by a driver exclusively for the purpose.

Product line/Type Decision:

AP super market is dealing with the entire leading brand. They deal in cosmetics, toys, gifts, stationery, grocery, toiletries and personal care products. Fruits and vegetables ready to eat products are also part of the product range. In a nut shell they are dealing A-Z all products.

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

Pricing:
AP Super Market ensures that the pricing of all its items are at very competitive rates. They are placing the prices between the whole sale and retail market prices. They believe in volume (mass) rather than niche products. According to the owners they are buying products with cash from their supplier which means they are getting better bargain and the advantage gained is shared with its customers.

Promotion:
AP store promotes all the brands they stock the various schemes and offers of all the brands are maintained. They promote their own store by offering goodies to customers during festival. They provide compliments during their annual sale. They have a customer loyalty program through which they track the billing every customer and ensure reward points are credited which can be redeemed for gift. AP stores has its own carry bags in which the shop logo and details which acts as a publicity tool. The delivery boys have uniform

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

wherein logo is embossed which also acts as another point of publicity. They do sponsor local events in the various apartment complexes and ensure constant visibility

Competition:
The AP Super Market is surrounded by rivals like Nilgiris, Big Bazaar, Fresh & Reliance. AP Super Market also has competition from local vendors who are specialized in Vegetables, Fruits, Groceries etc. The challenge for AP Super Market is to find way to succed in this stiff competition.

Demand Statistics:
The demand for household items are steeply increasing in the locality as new houses are coming. The buying capacity of the people is also increasing in the community. As the parents are going for work, a lot of disposable income is available. This area is slowly attracting software people to house because of the HCL office and due to the steep cost at other places.

Brands:
The store maintains almost all possible brand sdemanded by the customer. They say they use to keep almost all brands of soaps, Talc, paste, brushes etc. However only 2-3 options are given in Milk products. The products on offer on TV are given slight importance in display so that the customer will have an option to decide for it.

Customer Expectations:
Customers want to get best products for most economical price. However they do not demand the price difference when the cost is low. Customers want fresh vegetables and fruits on daily basis. They prefer to buy daily and dont want to stock the vegetables as the benefit of stocking is not felt wise for the customers. But working parents go for stocking of 1wk products of vegetables, fruits, eggs, bread etc.

The Biggest Problems currently being faced:

The recent opening of Reliance, Fresh, Big Bazaar & Spencer are attracting the customer to go there for the air conditioned shopping comforts. Other local exclusive retails are also picking up and posing a threat to the store.

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

Store Expansion Plans:

AP Super Market plans to go for Self Service Super Market with Air conditioned halls. Though the cost of the set-up is high, its required to survive in the future against the competition.

Customer Complaints and Servicing:

AP Super market views any complaints from customers strictly. Whenever the customers are not satisfied with the quality of the farm products, they are taken back and fresh stock is given for them to try for. Damaged vegetables and fruits are not entertained for replacements. The usual complaints were delay in door delivery. Nowadays it is reduced and kept within 24hrs.

Conclusion;
The story of Pandians family is truly an inspirational one. The vision and the perseverance is a lesson for lot of upcoming retailers. We say the reason for not allowing FDI in India is that big timers will kill the small retailers but this story does not reflect this sentiment. Here is a super market competing all the leading brands & maintaining an impressive growth and marching forward with Indian aspirations.

Prof. Dr.Ranjan Chaudhuri, Retail Management

Assignment- Retail Story Board

YES.THEY CAN. EVEN WE CAN

Prof. Dr.Ranjan Chaudhuri, Retail Management