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Insights from the Retail stores I visited The visit has been made on certain kirana stores, I spent

around hour to 1 hour standing there and observing the behavior of customers and shopkeeper, I did ask questions about the supply chain Following is the brief of findings 1. Most kirana stores have repeated customers from nearby locality and they do provide credit facility and home delivery facility to loyal customers, as well as they do take orders over the phone. 2. They do give certain discount over the MRP to the regular customer over the total bill. 3. Most of the purchase made are unplanned buying (consumer use their memory to find what has been finished at the home, and what need to be purchase) and impulse buying( instantly without any memory association) 4. Certain consumers do come with the list of item to buy. (Few I Observed, the no. can be high for such buy at the start of the month on weekend) 5. Every kirana store have mix assortment of all the product lines, variety is differentiator in small stores and large size stores. 6. I observed a pattern of keeping the SKU( like most selling items were in front) in individual shop but it differs from store to store( like couple of stores were keeping food item in front or grocery in front, while some of them have personal care in front) 7. Most of them were not aware from the margins they earn across categories( or maybe they were reluctant to tell me) 8. For sourcing of material, usually they order through the phone to the wholesaler/distributor, sales person from respective companies do visit the stores in a week to take the feedback about sales of the product or to take orders ( distributor/wholesaler do send their guys to take orders) 9. All the shopkeepers were on consensus that companys wholesalers/distributors do not provide stock on credit; they have to pay cash for every billing. 10. None of the shops have computerized billing, one said that executives from companies now comes with the tablets and do the ordering and billing process online. I met with the supply chain executive of the Hindustan unilever ( I knew him personally) he throw some light how the HUL supply chain works but even he denied to tell the margins across categories they offer to wholesaler/distributer. Apart from this, I studied many reports over the supply chain of companies and traditional retail, following is a brief of it.

Understanding the supply chain of traditional retail in India India traditional retail market consists of more than 95% of total retail market. There are more than 15 million mom and pop stores across India and it is growing with the CAGR of 6%. The Organized retail market consists of 5% and growing at the rate of 28% CAGR. India due to its huge population base and rising income level has become center of attraction for large players of the world and most of them have been trying hard to understand the consumer of India. All the big business houses of India have also stepped in with the huge cash flows to invest in the retail. But as of now, most of them are non-profitable. It is very hard to draw customer to modern retail chain as the Indian consumers have different shopping habits compared to their foreign counterparts. Therefore major FMCG companies have been identifying the potential retail stores in terms of turnover and helping them to stand against the modern retailer with the traditional values attached. Major FMCG companies have established their information systems to make the flow of smooth and timely, to reduce the stock outs, to improve replenishment time as well as cycle time. Due to the IS, there supply chain have become more responsive than efficient. Lets look at the supply chain drivers in traditional retail first then we will see the supply chain of different FMCG majors. Location Most of these stores are spread across the residential colonies and local markets and covers almost entire population of the town/city. Most of the stores are having size of 200 sq. ft. Inventory Food category is the major category which drives the business, apart from it, these stores keep, vegetables, Non-food, staples, beverages etc. Food items are generally carried for 4 days (avg. values), while vegetables have the 2 days of stock, other items have the 7 days of shelf time. Stock outs are issue in the kirana stores, there is around 5 %-10% of stock out happens generally. Sourcing These kirana stores generally source from the wholesaler, stockiest, distributors and depots based on convenience, special offers and discounts, credit facilities, variety and quality of merchandise They generally procure things by ordering through the phone to wholesalers, then the salesperson visit to the stores, other than this they also procure through the phone to distributors or by personal visit.

Mode of payment is generally cash, but few retailers do get credit facilities. Credit happens generally for one week to two weeks Pricing: Most of the consumers to these kirana stores are repeated and loyal, kirana stores have to provide sufficient discount to keep the service level, therefore most of them give discount of certain percentage on the total bill amount as well as credit facilities. Generally the total discount percentage varies from 2% to 5%. General observations Kirana stores do not focus on visual merchandising Most of the kirana stores are not using computers. Merchandising management is an issue, not aware of slow moving and fast moving. Sourcing on credit is also an issue for small size retailers.

There are certain factors which are named as retail priority factors (RPF) 1. Product assortment in the kirana outlet (variety and quality) 2. Infrastructure (the layout, appearance, amenities, parking, location) 3. Price (price and offers provided) 4. Communication (with consumers, company sales persons, distributors etc) 5. Service (response time, home delivery, payment options, and extra services) 6. Relationship with consumers (loyalty) 7. Proximity (the reach) Price is the most competitive factors followed by the assortment and proximity and service, these 4 factors accounts for almost 75% of total competitiveness. Two types of shopping habits is shown by the consumers Routine shopping (Food and Beverages, personal care) Occasional shopping (clothing and textiles, consumer durables. Home dcor)

Supply chains of Major FMCG. Hindustan Unilever Ltd Wholesaler

Factory

Company Depot

Regional Stockist

Retailer

Amul

Farmer unions

Co-ops societies

Member unions

State federations /GCMHFL

Distributors/whol esaler/stockist

Retailers

Britannia Wholesaler

Manufacturing plants

C&F agents

Distributors

Retailers