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A Project Report
On
“An Analytical study on Customer Acquisition Strategies of
Subhiksha Trading Services in R.T.Nagar, Bangalore”
Prepared in partial fulfillment of Master of Business Administration,
INC, Hubli
College logo
Prepared byMs. A. Beulah Sam Rachel
M.B.A, III Semester
Under the Guidance ofMr. Sadanand.Rodagi
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A Project Report
Submitted by
Ms. A. Beulah Sam Rachel
Enroll No: 6ND10448
Guide
Faculty Guide
Mr. Sadanand. Rodagi
2
A
Project Report
On
“An Analytical study on Customer Acquisition Strategies of
Subhiksha Trading Services Ltd in R.T.Nagar Bangalore.”
Prepared by
Ms.A. Beulah Sam Rachel
6ND10448
INC HUBLI
As per the instructions issued by
INC, HUBLI
On the completion of sixteen weeks in retail sector
And Partial fulfillment of M.B.A course for session of
2006-2008
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To Whomsoever It May Concern
This is to certify that Ms. A. Beulah Sam Rachel, student
of MBA studying in INC National College, Hubli has
undergone summer training from 15-03-07 to 15-07-07.
She has done a project on “An Analytical study on
Customer Acquisition Strategies of Subhiksha Trading
Services in R.T.Nagar Bangalore.”During the aforesaid
period, we found her to be sincere & hard working. She
possesses a good moral character and values.
We wish her all the success in future.
SUBHIKSHA TRADING SERVICES LTD
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College logo
The INC National College, HUBLIAhalya Plaza, Club Road, Behind Centurion Bank,Hubli – 580 020. Karnataka.Phone: 0836-5251566 Fax: 91 836 5251565Website: www.inc.org [email protected]
CERTIFICATE
This is to certify that the Summer Internship Project-2007 titled “An
Analytical study on Customer Acquisition Strategies of Subhiksha
Trading Services Ltd in R.T.Nagar Bangalore” a bonafide work of
A. Beulah Sam Rachel (Enrollment No: 6ND10448 & Center:
Hubli) is original and has been done under my supervision in partial
fulfillment of the requirement for the award of M.B.A for the period of
four months from march 2007 to July 2007.
I am pleased to record here that her performance during the period was
extremely satisfactory.
Mr. Sadanand Rodagi
DECLARATION
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I hereby declare that this dissertation is the outcome of my corporate
exposure learning at “SUBHIKSHA TRADING SERVICES LTD”.
This corporate exposure learning is to find the “An Analytical study
on Customer Acquisition Strategies of Subhiksha Trading Services
Ltd in R.T.Nagar Bangalore” prepared by me during the year 2007
under the valuable guidance of Mr.Sadanand Rodagi Faculty guide of
INC, Bangalore.
This project is submitted to INC HUBLI and to “SUBHIKSHA
TRADING SERVICES LTD”, Bangalore.
Place: Hubli
Date: 9/9/07
Ms. A. Beulah Sam Rachel
(6ND10448)
M.B.A III Semester
INC-Hubli
TABLE OF CONTENTS
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Contents Page No
Acknowledgement………………………………………………………. . 9
List of Tables…………………………………………………………….. 10
Abbreviations…………………………………………………………….. 11
Summary………………………………………………………………… 12
1 Introduction…………………………………………………………… 15
1.1 Objectives……………………………………………………… 16
1.2 Methodology……………………………………………………. 17
1.3 Limitations……………………………………………………. 22
1.4 Findings……………………………………………………… 23
1.5 Conclusion………………………………………………….. 30
2 Industry Profile
2.1 Summary……………………………………………………… 31
2.2 Retail Industry……………………………………………………. 34
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2.3 Indian Retail – An overview…………………………………… .38
2.4 Retail Sector in India…………………………………………… 45
3. Company Profile………………………………………………………… .49
3.1 Vision…………………………………………………………….. 54
3.2 Organization Chart……………………………………………. .54
4. Annexure……………………………………………………………………55
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Acknowledgement
This Summer internship training and Project report was written at the
INC, Bangalore as per the instruction issued and partial fulfillment of
the degree in Master of Business Administration. I wish to express my
deep sense of gratitude and profound thanks to my guide
Mr.Sadanand Rodagi from INC, Bangalore. I am thankful to my SIP
Co-ordinator Mrs.Hemalatha, for all their help and support during this
master’s project.
My sincere gratitude to our institution for the guidance and the other
staff members of Subhiksha Trading Services Ltd for the guidance and
I would like to thank the respondents that helped me gather all the data
needed by dedicating a lot of time and thinking to the questions that I
raised.
Finally, I thank my parents and my friends for their support and
valuable time at every stage of my work.
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Ms. A. Beulah Sam Rachel
List of Tables
1 Predicted mall distribution space in India
2 Retail space distribution in NCR
3 Organization Chart
4 Role of customer acquisition strategies
5 Customer acquisition & customer retention
6 Factors of acquisition
7 Acquisition helpful
8 Acquisition be targeted
9 Acquisition can be made through
10 Word of mouth the strongest medium
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Abbreviations
FDI – Foreign Direct Investment
FMCG – Fastest Moving Consumer Goods
GDP – Gross Domestic Product
HR – Human Resource
IT – Information Technology
MoU – Memorandum of Understanding
NCR – National Capital Region
ROI – Return on Investment
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Summary
Customer acquisition cost is the cost associated with convincing a Customer acquisition cost is the cost associated with convincing a
consumer to buy a product or service, including research, marketing,consumer to buy a product or service, including research, marketing,
and advertising costs. An important business metric, customerand advertising costs. An important business metric, customer
acquisition cost should be considered along with other data,acquisition cost should be considered along with other data,
especially the value of the customer to the company and the resultingespecially the value of the customer to the company and the resulting
return on investment (ROI) of acquisition.return on investment (ROI) of acquisition.
Targeted marketing is a Targeted marketing is a
critical component of marketing success. Attracting and retainingcritical component of marketing success. Attracting and retaining
profitable customers and turning potential customers into actualprofitable customers and turning potential customers into actual
customers is a huge challenge – especially when the multitude ofcustomers is a huge challenge – especially when the multitude of
consumer data is available. Whether it's business-to-businessconsumer data is available. Whether it's business-to-business
marketing or business-to-consumer marketing, you need to knowmarketing or business-to-consumer marketing, you need to know
your customers. By understanding the demographic characteristics,your customers. By understanding the demographic characteristics,
lifestyle behaviors and purchase preferences that drive audience’slifestyle behaviors and purchase preferences that drive audience’s
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decisions, we can successfully tailor marketing strategies to reachdecisions, we can successfully tailor marketing strategies to reach
those most likely to purchase product or service, increase customerthose most likely to purchase product or service, increase customer
loyalty and improve customer profitability.loyalty and improve customer profitability.
The best practices for The best practices for
customer acquisition and customer retention to begin with a completecustomer acquisition and customer retention to begin with a complete
examination of both customer base and market to identify the highestexamination of both customer base and market to identify the highest
value customer segments and best new sales opportunities. This linkvalue customer segments and best new sales opportunities. This link
between internal information and the marketplace provides valuablebetween internal information and the marketplace provides valuable
insight into the customers' purchasing behavior and preferences –insight into the customers' purchasing behavior and preferences –
revealing who is likely to buy more and which products or servicesrevealing who is likely to buy more and which products or services
they want. With this information in hand, we can immediatelythey want. With this information in hand, we can immediately
improve opportunities to increase customer profitability and improveimprove opportunities to increase customer profitability and improve
customer loyalty.customer loyalty.
Lifestyle segmentation is a key component of the customer analysisLifestyle segmentation is a key component of the customer analysis
phase and helps to identify life stages, income ranges, and educationphase and helps to identify life stages, income ranges, and education
levels and media preferences. levels and media preferences.
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INTRODUCTION
Study Background
Purpose
Methodology
Limitations
Activity Period Duration (in weeks)
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1 Introduction
Study Background
This master’s project started with interviews aiming to find a subjectThis master’s project started with interviews aiming to find a subject
and scope. People at company where contacted in order to establish aand scope. People at company where contacted in order to establish a
more specific approach. This master’s project focused on merely onmore specific approach. This master’s project focused on merely on
customer acquisition strategies used by the company.customer acquisition strategies used by the company.
Therefore, the project’s approach were made making the study moreTherefore, the project’s approach were made making the study more
interesting and based on substantial and available data, which couldinteresting and based on substantial and available data, which could
be analyzed, and, in the best case, produce interesting results.be analyzed, and, in the best case, produce interesting results.
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1.1Purpose
The objective of this study is to analyze and accomplish the followingThe objective of this study is to analyze and accomplish the following
objectives:objectives:
Main objectiveMain objective
To conduct survey and find out “Customer AcquisitionTo conduct survey and find out “Customer Acquisition
strategies of Subhiksha”.strategies of Subhiksha”.
Sub ObjectiveSub Objective
I.I. Proper understanding and analysis of “Subhiksha TradingProper understanding and analysis of “Subhiksha Trading
Services”.Services”.
II.II. Proper understanding and analysis of “Customer AcquisitionProper understanding and analysis of “Customer Acquisition
strategies” in R.T.Nagar.strategies” in R.T.Nagar.
III.III. Conduct a survey on a sample selected from population ofConduct a survey on a sample selected from population of
R.T.Nagar.R.T.Nagar.
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IV.IV. Analyze the results of the survey conducted and proposeAnalyze the results of the survey conducted and propose
recommendations to the company-Subhiksha Trading recommendations to the company-Subhiksha Trading
Services LtdServices Ltd so that the existing customers derive maximumso that the existing customers derive maximum
satisfaction and new customers are attracted towards thesatisfaction and new customers are attracted towards the
services. services.
1.2 Methodology
The objective of the present study can be accomplished by conductingThe objective of the present study can be accomplished by conducting
a systematic market study in a systematic design, collection, analysisa systematic market study in a systematic design, collection, analysis
and reporting of data and findings that are relevant to differentand reporting of data and findings that are relevant to different
marketing situations facing the company.marketing situations facing the company.
I)I) Defining the problem and the objective:Defining the problem and the objective:
The objective states what information is needed to solve the problem.The objective states what information is needed to solve the problem.
The objective is to derive the opinion of the customers of SubhikshaThe objective is to derive the opinion of the customers of Subhiksha
Trading Services Ltd.Trading Services Ltd.
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II)II) Developing the research plan: Developing the research plan:
Once the problem is identified, the next step is to prepare a plan forOnce the problem is identified, the next step is to prepare a plan for
getting the information needed to solve the problem. The presentgetting the information needed to solve the problem. The present
study will adopt the exploratory approach wherein there is a need tostudy will adopt the exploratory approach wherein there is a need to
gather large amount of information before making a conclusion. Ifgather large amount of information before making a conclusion. If
required, the descriptive and casual approaches may also be used.required, the descriptive and casual approaches may also be used.
III)III) Collection and Sources of data:Collection and Sources of data:
Primary data and secondary data are required and are the sources ofPrimary data and secondary data are required and are the sources of
data. Being a firm in the retail industry, data gathering will involvedata. Being a firm in the retail industry, data gathering will involve
usage of both primary and secondary data though there will be anusage of both primary and secondary data though there will be an
extensive usage of primary data. Well-structured questionnaires willextensive usage of primary data. Well-structured questionnaires will
be prepared as well as there will be personal interview surveys.be prepared as well as there will be personal interview surveys.
IV)IV) Analyze the collected information:Analyze the collected information:
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This involves converting raw data into useful information. It involvesThis involves converting raw data into useful information. It involves
tabulation of data, using statistical measures on them for developingtabulation of data, using statistical measures on them for developing
frequency distributions and calculating the averages and dispersions.frequency distributions and calculating the averages and dispersions.
V)V) Report findings:Report findings:
This phase will mark the culmination of the marketing research effort.This phase will mark the culmination of the marketing research effort.
The report with the research findings is a formal written document.The report with the research findings is a formal written document.
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Methodology explains the methods used in collecting information.Methodology explains the methods used in collecting information.
Definition of Research ObjectivesDefinition of Research Objectives
Identification of the potential customer’s perception about theIdentification of the potential customer’s perception about the
terminal and the market survey was conducted in Bangalore city forterminal and the market survey was conducted in Bangalore city for
the purpose of the study for the master’s project the data wasthe purpose of the study for the master’s project the data was
bifurcated into primary and secondary data.bifurcated into primary and secondary data.
Primary DataPrimary Data – The data is a first collected directly from the – The data is a first collected directly from the
respondents, it’s the first handed information gathered to solve therespondents, it’s the first handed information gathered to solve the
problem regarding the strategies of acquisition.problem regarding the strategies of acquisition.
Secondary DataSecondary Data –– Data collected from the company’s internal andData collected from the company’s internal and
external resources. Internal data such as annual reports and salesexternal resources. Internal data such as annual reports and sales
reports are collected and the external sources were magazines,reports are collected and the external sources were magazines,
journals and legal documents. This information is readily availablejournals and legal documents. This information is readily available
and can be easily compiled.and can be easily compiled.
Survey ResearchSurvey Research – The method used to collect data for this study wasThe method used to collect data for this study was
through survey research. Survey research in the systematic gatheringthrough survey research. Survey research in the systematic gathering
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of information from respondents for the purpose of understanding andof information from respondents for the purpose of understanding and
predicting some aspects of the behavior of the population of interest.predicting some aspects of the behavior of the population of interest.
Measurements Techniques Measurements Techniques - Measurements may be defined as the- Measurements may be defined as the
assignment of numbers to characteristics of objects, persons, states, orassignment of numbers to characteristics of objects, persons, states, or
events itself but some characteristics of being present. Some of theevents itself but some characteristics of being present. Some of the
measurement techniques used is;measurement techniques used is;
Open-Ended Questions Open-Ended Questions – these questions leave thethese questions leave the
respondents free to offer, any replies that seem appropriate in lightrespondents free to offer, any replies that seem appropriate in light
of the question. Questionnaire administered included open-endedof the question. Questionnaire administered included open-ended
question to find out respondents personal opinion.question to find out respondents personal opinion.
Multiple- Choice –Multiple- Choice – These questions are immediatelyThese questions are immediately
followed by a list of possible answers from which the respondentfollowed by a list of possible answers from which the respondent
must choose. Questionnaire included multiple-choice questions tomust choose. Questionnaire included multiple-choice questions to
find out the interest of level.find out the interest of level.
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Dichotomous questions –Dichotomous questions – dichotomous represents andichotomous represents an
extreme form of the multiple-choice question, allow two responsesextreme form of the multiple-choice question, allow two responses
such as “yes-no”, “agree- disagree”.such as “yes-no”, “agree- disagree”.
Sampling processSampling process
PopulationPopulation – Population of this project is a survey of all– Population of this project is a survey of all
business people, unemployed youth, and housewives.business people, unemployed youth, and housewives.
Sampling unitSampling unit – The sampling unit is the basic unit containingThe sampling unit is the basic unit containing
the elements of the population to be sampled. Elements of thethe elements of the population to be sampled. Elements of the
population are business people, unemployed youth and housewives.population are business people, unemployed youth and housewives.
Time- periods Time- periods – The period of study was also limited to 16The period of study was also limited to 16
weeks.weeks.
Sample planSample plan – Based in the questionnaires information wasBased in the questionnaires information was
gathered and analyzed for identifying potential customer.gathered and analyzed for identifying potential customer.
1.3 Limitations
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This master’s project uses the following limitations: Though theThis master’s project uses the following limitations: Though the
present study aims to achieve the above- mentioned objectives in fullpresent study aims to achieve the above- mentioned objectives in full
earnest and accuracy, it may be hampered due to certain limitations.earnest and accuracy, it may be hampered due to certain limitations.
Some of the limitations of this study may be summarized as follows:Some of the limitations of this study may be summarized as follows:
I.I. Locating the target market area of Subhiksha TradingLocating the target market area of Subhiksha Trading
services is very time consuming and costly and tedious.services is very time consuming and costly and tedious.
II.II. The selection of customers to cover the various strata of theThe selection of customers to cover the various strata of the
society is tedious and time consuming.society is tedious and time consuming.
III.III. Getting accurate responses from the respondents due to theirGetting accurate responses from the respondents due to their
inherent problems are difficult. They may be partial or refuseinherent problems are difficult. They may be partial or refuse
to cooperate.to cooperate.
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1.4 Findings
Awareness on role of Customer Acquisition Strategies for any industry?
Yes 189
No 61
Total 250
Role of customer acquisition in any industry
0
20
40
60
80
100
120
140
160
180
200
1
Yes
No
Interpretation: the table shows that out of 250 customersthe table shows that out of 250 customers
interviewed, about 75% customers opted that customer acquisitioninterviewed, about 75% customers opted that customer acquisition
does play an important role and 25% customers are unaware aboutdoes play an important role and 25% customers are unaware about
the role customer acquisition strategies.the role customer acquisition strategies.
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Does Customer Acquisition & Customer Retention go hand in hand?
Yes 213
No 37
Total 250
Do Customer Acquisition & Customer Retention go hand in hand
Yes82%
No18%
Yes
No
Interpretation: the table shows that out of 250 customers 82% of the table shows that out of 250 customers 82% of
them agree that customer acquisition and customer retention go them agree that customer acquisition and customer retention go
hand in hand. hand in hand.
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Factors by which acquisition can be made effective?
Quality 171
Reliability 26
Convenience 53
Total 250
Quality, 171
Reliability, 26
Convenience, 53
0
20
40
60
80
100
120
140
160
180
Quality Reliability Convenience
Factors of acquisition
Series1
Interpretation: the table shows that out of 250 customers 68.4%the table shows that out of 250 customers 68.4%
opted for quality, 16.4% opted for reliability and 21.2% opted foropted for quality, 16.4% opted for reliability and 21.2% opted for
convenience.convenience.
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Is acquisition helpful in acquiring new customers?
Yes 104
No 146
Total 250
Yes
No
0
20
40
60
80
100
120
140
160
Yes No
Ia acquisition helpful in acquiring new customers
Interpretation: the table shows that out of 250 customers about 58%the table shows that out of 250 customers about 58%
customers opted that acquiring new customers is not helpful.customers opted that acquiring new customers is not helpful.
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Can acquisition be targeted on the basis of?
Lifestyle 41
Income 73
Habits 19
Preferences 62
Needs 55
Total 250
Acquisition be targeted on the basis of
Lifestyle16%
Income29%
Habits8%
Preferences
25%
Needs22%
Lifestyle
Income
Habits
Preferences
Needs
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Interpretation: the table shows that out of 250 customers about 29% the table shows that out of 250 customers about 29%
said that it should be targeted on income, 25% on preferences, 22%said that it should be targeted on income, 25% on preferences, 22%
on needs, 16% on lifestyle, and 8% on habits.on needs, 16% on lifestyle, and 8% on habits.
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Should Acquisition be made through?
Advertising 156
Mailing 13
Phone calls 21
Organizing fares 60
Total 250
Acquisition can be made through
156
13 21
60
250
0
50
100
150
200
250
300
Advertising Mailing Phone calls Organizingfares
Total
Series2
Interpretation: 62.4% opted for advertising, 24% for organizing 62.4% opted for advertising, 24% for organizing
fares, 8.4% for phone calls and 5.2% for mailing.fares, 8.4% for phone calls and 5.2% for mailing.
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Word of mouth the strongest medium?
Yes 218
No 32
Total 250
Yes
No
0
50
100
150
200
250
Yes No
Word of mouth the strongest medium
Series1
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Interpretation: the table shows that out of 250 customers’ about the table shows that out of 250 customers’ about
87.5% people agreed that, the word of mouth is the strongest 87.5% people agreed that, the word of mouth is the strongest
medium.medium.
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1.5 Conclusion
Indian retail sector is booming, accounting 10% GDP (GrossIndian retail sector is booming, accounting 10% GDP (Gross
Domestic Product) and 8% employment. From the above dataDomestic Product) and 8% employment. From the above data
analysis it can be interpreted that acquiring new customer is costsanalysis it can be interpreted that acquiring new customer is costs
more, and customer acquisition and retention go hand in hand.more, and customer acquisition and retention go hand in hand.
The major strength of the company lies in retaining the The major strength of the company lies in retaining the
old customer. If acquisition is to be made, the company shouldold customer. If acquisition is to be made, the company should
focus on certain criteria such as lifestyle, income, preferences,focus on certain criteria such as lifestyle, income, preferences,
habits and needs. The company need to focus more on thehabits and needs. The company need to focus more on the
advertising as many of the customers agreed that advertisingadvertising as many of the customers agreed that advertising
creates awareness about the company.creates awareness about the company.
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2 Industry Profile
2.1Summary
The globalization of the Indian Economy has brought forward aThe globalization of the Indian Economy has brought forward a
change in the Indian consumerism psyche with the consumerchange in the Indian consumerism psyche with the consumer
becoming more aware of his/her value of money strength and theirbecoming more aware of his/her value of money strength and their
economic purchasing power becoming more evident than in theeconomic purchasing power becoming more evident than in the
previous generations. The concept of product quality and serviceprevious generations. The concept of product quality and service
delivery which were earlier not very engraved in the consumerdelivery which were earlier not very engraved in the consumer
psyche are now very much demanded and delivered for in the newpsyche are now very much demanded and delivered for in the new
age format of organized product retailing in the Indian consumerage format of organized product retailing in the Indian consumer
goods market.goods market.
These changes have led to the overall increase of professionalismThese changes have led to the overall increase of professionalism
in the service delivery as well as the consumer purchase patternsin the service delivery as well as the consumer purchase patterns
shifting from "need only" based to "extended storage-based bulkshifting from "need only" based to "extended storage-based bulk
purchase characteristics.purchase characteristics.
These have led to the entry and expression of interest by manyThese have led to the entry and expression of interest by many
global retail majors in the Indian organized retail market whereinglobal retail majors in the Indian organized retail market wherein
many products and services are offered to the same consumer atmany products and services are offered to the same consumer at
the same location which present multiple attractions to theirthe same location which present multiple attractions to their
monthly disposable incomes. The middle class has been a leadingmonthly disposable incomes. The middle class has been a leading
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adaptor of this change process by its changing lifestyles, strongadaptor of this change process by its changing lifestyles, strong
income growth and changing demographic patterns which areincome growth and changing demographic patterns which are
placing the growth projections for this industry comfortably atplacing the growth projections for this industry comfortably at
25% annually. 25% annually.
Today, synergies based on huge consumer bases developed inToday, synergies based on huge consumer bases developed in
unrelated industries like telecom to retail are being seen in theunrelated industries like telecom to retail are being seen in the
Indian market as the combined purchase affinity of the middleIndian market as the combined purchase affinity of the middle
class far outstrips the specialist purchase patterns of the higherclass far outstrips the specialist purchase patterns of the higher
income strata in the Indian sub continent; with the industryincome strata in the Indian sub continent; with the industry
projected to become a US$175-200 billion business by 2016 andprojected to become a US$175-200 billion business by 2016 and
the economy playing a comfortable upswing role, the competitionthe economy playing a comfortable upswing role, the competition
in the marketplace is expected to be fierce.in the marketplace is expected to be fierce.
The present scenario of the industry is focused on forward buyingThe present scenario of the industry is focused on forward buying
of retail real estate in order to reap balance sheet advantages laterof retail real estate in order to reap balance sheet advantages later
in the business cycle and also rapid ramping of operations inin the business cycle and also rapid ramping of operations in
presently operating outlets in order that the loyalty purchase habitspresently operating outlets in order that the loyalty purchase habits
of consumers are built over a period of time before the worldof consumers are built over a period of time before the world
majors enter the market with deeper pockets and buying power.majors enter the market with deeper pockets and buying power.
The Asian retailers are not willing to give in an easy competitiveThe Asian retailers are not willing to give in an easy competitive
fight on their home turf as well as the smart small time mom & popfight on their home turf as well as the smart small time mom & pop
store retailer known as the "kirana store" in India is also wizeningstore retailer known as the "kirana store" in India is also wizening
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up to the challenge and building personal relationships apart fromup to the challenge and building personal relationships apart from
increasing the service spectrum like never before. increasing the service spectrum like never before.
The market in all seems to be ready for a big explosion of intenseThe market in all seems to be ready for a big explosion of intense
competitive activity over ridden by social and economiccompetitive activity over ridden by social and economic
considerations which will make it one of a kind business study inconsiderations which will make it one of a kind business study in
the corporate universe as an economy which did not open up tillthe corporate universe as an economy which did not open up till
the early 1990's where in the industry was dominated bythe early 1990's where in the industry was dominated by
unorganized retailer till then and any kind of central purchase orunorganized retailer till then and any kind of central purchase or
retail formats where only propagated by the government for whichretail formats where only propagated by the government for which
the awareness as well as effort were low.the awareness as well as effort were low.
The Indian Retail Industry is an in-depth and comprehensive crossThe Indian Retail Industry is an in-depth and comprehensive cross
industry review on the Indian Retail Industry which explores theindustry review on the Indian Retail Industry which explores the
macroeconomic scenario of Indian economy which coupled withmacroeconomic scenario of Indian economy which coupled with
growth of GDP led to the shift of consumer purchase patterns andgrowth of GDP led to the shift of consumer purchase patterns and
the build up confidence in the retail sector thereby giving shape tothe build up confidence in the retail sector thereby giving shape to
the government allowance for FDI in the Indian retail sector.the government allowance for FDI in the Indian retail sector.
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2.2 Retail Industry
Retail includes all business activities that involve the sale of goods Retail includes all business activities that involve the sale of goods
and services to consumers for personal, family, or household use. It and services to consumers for personal, family, or household use. It
is the final step in the distribution of these goods and services.is the final step in the distribution of these goods and services.
India's vast middle class and its almost untapped retail industry areIndia's vast middle class and its almost untapped retail industry are
key attractions for global retail giants wanting to enter newerkey attractions for global retail giants wanting to enter newer
markets. Driven by changing lifestyles, strong income growth andmarkets. Driven by changing lifestyles, strong income growth and
favorable demographic patterns, Indian retail is expected to growfavorable demographic patterns, Indian retail is expected to grow
25 per cent annually. 25 per cent annually.
Modern retail in India could be worth US$ 175-200 billion byModern retail in India could be worth US$ 175-200 billion by
2016. With the economy booming, competition in the marketplace2016. With the economy booming, competition in the marketplace
is fierce. According to 'Retail in India Getting Organized to Driveis fierce. According to 'Retail in India Getting Organized to Drive
Growth', a report by AT Kearney and the Confederation of IndianGrowth', a report by AT Kearney and the Confederation of Indian
Industry, retail is one of India's fastest growing industries with a 5Industry, retail is one of India's fastest growing industries with a 5
per cent compounded annual growth rate and expected revenues ofper cent compounded annual growth rate and expected revenues of
US$ 320 billion in 2007. Rising incomes, increasing consumerismUS$ 320 billion in 2007. Rising incomes, increasing consumerism
in urban areas and an upswing in rural consumption will fuel thisin urban areas and an upswing in rural consumption will fuel this
growth to around 7-8 per cent.growth to around 7-8 per cent.
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Retail spaceRetail space
Retailers in India are the most aggressive in Asia in expandingRetailers in India are the most aggressive in Asia in expanding
their businesses, thus creating a huge demand for real estate. Theirtheir businesses, thus creating a huge demand for real estate. Their
preferred means of expansion is to increase the number of theirpreferred means of expansion is to increase the number of their
outlets in a city, and also expand to other regions, revealed theoutlets in a city, and also expand to other regions, revealed the
Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia. Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia.
Deutsche Bank's research report on 'Building up India' says India'sDeutsche Bank's research report on 'Building up India' says India's
burgeoning middle class will drive up nominal retail sales throughburgeoning middle class will drive up nominal retail sales through
2010 by 10 per cent per annum. The country may have 600 new2010 by 10 per cent per annum. The country may have 600 new
shopping centers by 2010. shopping centers by 2010.
Food retail Food retail
Food dominates the shopping basket in India. The US$ 6.1 billionFood dominates the shopping basket in India. The US$ 6.1 billion
Indian foods industry, which forms 44 per cent of the entire FMCGIndian foods industry, which forms 44 per cent of the entire FMCG
sales, is growing at 9 per cent and has set the growth agenda forsales, is growing at 9 per cent and has set the growth agenda for
modern trade formats. Since nearly 60 per cent of the averagemodern trade formats. Since nearly 60 per cent of the average
Indian grocery basket comprises non-branded items, the brandedIndian grocery basket comprises non-branded items, the branded
food industry is homing in on converting Indian consumers tofood industry is homing in on converting Indian consumers to
branded food.branded food.
40
The mobile revolutionThe mobile revolution
The retail market for mobile phones -- handset, airtime andThe retail market for mobile phones -- handset, airtime and
accessories -- is already a US$ 16.7 billion business, growing ataccessories -- is already a US$ 16.7 billion business, growing at
over 20 per cent per year. In comparison, the consumer electronicsover 20 per cent per year. In comparison, the consumer electronics
and appliance market is worth US$ 5.6 billion, with a growth rateand appliance market is worth US$ 5.6 billion, with a growth rate
that is half of the mobile market.that is half of the mobile market.
Retail Industry StructureRetail Industry Structure
The most common types of retail establishments areThe most common types of retail establishments are
Department Store – a store organized into several individualDepartment Store – a store organized into several individual
‘departments’ and selling a variety of merchandise.‘departments’ and selling a variety of merchandise.
Discount/Mass Merchandiser – a self-service store displayingDiscount/Mass Merchandiser – a self-service store displaying
and selling different kinds of merchandise at lower profitand selling different kinds of merchandise at lower profit
margins than other retailers.margins than other retailers.
Specialty Store – a retail store concentrating on a limitedSpecialty Store – a retail store concentrating on a limited
range of merchandise.range of merchandise.
Warehouse Club/Superstore – a self-service retailer withWarehouse Club/Superstore – a self-service retailer with
cash-and-carry checkout operations. These retailers tend tocash-and-carry checkout operations. These retailers tend to
shun advertising, credit purchases, deliveries, and othershun advertising, credit purchases, deliveries, and other
41
amenities. The main attraction for consumers is nationalamenities. The main attraction for consumers is national
brands at low prices. Membership may be required.brands at low prices. Membership may be required.
Wholesale Club – a self-service retailer who offers nationallyWholesale Club – a self-service retailer who offers nationally
advertised brand name goods at wholesale prices toadvertised brand name goods at wholesale prices to
businesses and group members only. These stores usuallybusinesses and group members only. These stores usually
operate in a warehouse environment.operate in a warehouse environment.
Factory Outlet – these are outlet retailers that either sellFactory Outlet – these are outlet retailers that either sell
clearance merchandise from other retailers or manufacturesclearance merchandise from other retailers or manufactures
or sell their own excess stock, seconds, returns, etc, at vastlyor sell their own excess stock, seconds, returns, etc, at vastly
discounted prices.discounted prices.
Catalog – retailer selling merchandise that is advertised inCatalog – retailer selling merchandise that is advertised in
catalogs produced by the retailer’s main office and usedcatalogs produced by the retailer’s main office and used
universally in their retail establishments. universally in their retail establishments.
42
2.3 Indian Retail: An Overview
The Indian retail industry in valued at about $300 billion and isThe Indian retail industry in valued at about $300 billion and is
expected to grow to $427 billion in 2010 and $637 billion in 2015.expected to grow to $427 billion in 2010 and $637 billion in 2015.
Only three percent of Indian retail is organized. Retailers ofOnly three percent of Indian retail is organized. Retailers of
multiple brands can operate through a franchise or a cash-and-multiple brands can operate through a franchise or a cash-and-
carry wholesale model. carry wholesale model.
Retail is India’s largest industry, accounting for over 10 percent ofRetail is India’s largest industry, accounting for over 10 percent of
the country’s GDP and around eight percent of employment. Retailthe country’s GDP and around eight percent of employment. Retail
in India is at the crossroads. It has emerged as one of the mostin India is at the crossroads. It has emerged as one of the most
dynamic and fast paced industries with several players entering thedynamic and fast paced industries with several players entering the
market. That said, the heavy initial investments required makemarket. That said, the heavy initial investments required make
break even hard to achieve and many players have not tastedbreak even hard to achieve and many players have not tasted
success to date. However, the future is promising; the market issuccess to date. However, the future is promising; the market is
growing, government policies are becoming more favorable andgrowing, government policies are becoming more favorable and
emerging technologies are facilitating operations. emerging technologies are facilitating operations.
Retailing in India is gradually inching its way to becoming the nextRetailing in India is gradually inching its way to becoming the next
boom industry. The whole concept of shopping has altered in termsboom industry. The whole concept of shopping has altered in terms
43
of format and consumer buying behavior, ushering in a revolutionof format and consumer buying behavior, ushering in a revolution
in shopping. Modern retail has entered India as seen in sprawlingin shopping. Modern retail has entered India as seen in sprawling
shopping centers, multi-storied malls and huge complexes offershopping centers, multi-storied malls and huge complexes offer
shopping, entertainment and food all under one roof. shopping, entertainment and food all under one roof.
The Indian retailing sector is at an inflexion point where theThe Indian retailing sector is at an inflexion point where the
growth of organized retail and growth in the consumption bygrowth of organized retail and growth in the consumption by
Indians is going to adopt a higher growth trajectory. The IndianIndians is going to adopt a higher growth trajectory. The Indian
population is witnessing a significant change in its demographics.population is witnessing a significant change in its demographics.
A large young working population with median age of 24 years,A large young working population with median age of 24 years,
nuclear families in urban areas, along with increasing working-nuclear families in urban areas, along with increasing working-
women population and emerging opportunities in the serviceswomen population and emerging opportunities in the services
sector are going to be the key growth drivers of the organized retailsector are going to be the key growth drivers of the organized retail
sector.sector.
Initially, this was about Indian corporate houses rolling out mallsInitially, this was about Indian corporate houses rolling out malls
and supermarkets, but with Wal-Mart coming into the Indianand supermarkets, but with Wal-Mart coming into the Indian
market, the era of the superstore is dawning. Unlike the kiranamarket, the era of the superstore is dawning. Unlike the kirana
stores that served us for decades, this new breed of retail chains isstores that served us for decades, this new breed of retail chains is
heavily dependent on IT. heavily dependent on IT.
Wal-Mart, the world’s largest retailer, and Bharti Enterprises haveWal-Mart, the world’s largest retailer, and Bharti Enterprises have
signed a Memorandum of Understanding (MoU) to exploresigned a Memorandum of Understanding (MoU) to explore
business opportunities in the Indian retail industry. This jointbusiness opportunities in the Indian retail industry. This joint
44
venture will mark the entry of Wal-Mart into the Indian retailingventure will mark the entry of Wal-Mart into the Indian retailing
industry.industry.
The biggest competitor for Bharti-Wal-Mart is likely to beThe biggest competitor for Bharti-Wal-Mart is likely to be
Reliance Retail, the retail wing of Reliance, which had planned toReliance Retail, the retail wing of Reliance, which had planned to
establish 10,000 stores by 2010. It had already opened 11 pilotestablish 10,000 stores by 2010. It had already opened 11 pilot
stores under the “Reliance Fresh” format in Hyderabad.stores under the “Reliance Fresh” format in Hyderabad.
All these trends and developments present a great businessAll these trends and developments present a great business
opportunity for software and hardware vendors from across theopportunity for software and hardware vendors from across the
globe. Indian solution providers are targeting this segment haveglobe. Indian solution providers are targeting this segment have
reason to rejoice. For while organized retail occupies a minisculereason to rejoice. For while organized retail occupies a miniscule
two to three percent of the overall Indian retailing industry, that istwo to three percent of the overall Indian retailing industry, that is
poised to change.poised to change.
In spite of the prospects being good things aren’t quite as rosyIn spite of the prospects being good things aren’t quite as rosy
when it comes to awareness of IT systems. In most cases,when it comes to awareness of IT systems. In most cases,
organized retailers in India have installed solutions that help themorganized retailers in India have installed solutions that help them
automate transactional systems. automate transactional systems.
With the retail sector in India undergoing a transformation due toWith the retail sector in India undergoing a transformation due to
the entry of large corporate houses, IT managers and CIO’s arethe entry of large corporate houses, IT managers and CIO’s are
now looking forward to know how IT can help them achieve thenow looking forward to know how IT can help them achieve the
business goals of their organizations.business goals of their organizations.
45
Standards-based architecture and software support all kinds ofStandards-based architecture and software support all kinds of
mission-critical IT applications for enabling greater efficiency,mission-critical IT applications for enabling greater efficiency,
significant cost savings, and new business value. The criticalsignificant cost savings, and new business value. The critical
activities that can be handled by IT are finance and accounting,activities that can be handled by IT are finance and accounting,
business intelligence, vendor development and management,business intelligence, vendor development and management,
supply chain management, merchandising and inventorysupply chain management, merchandising and inventory
management, facilities management, stores management, customermanagement, facilities management, stores management, customer
relationship management, branding, marketing, sales promotionrelationship management, branding, marketing, sales promotion
and HR.and HR.
Like any other vertical, retail also stands to benefit from elaborateLike any other vertical, retail also stands to benefit from elaborate
IT set-ups. However, this is subject to the scale and size of theIT set-ups. However, this is subject to the scale and size of the
organization, as well as an objective assessment of itsorganization, as well as an objective assessment of its
requirements. Key common challenges that can be tackled throughrequirements. Key common challenges that can be tackled through
IT implementations include accurate merchandising, improvedIT implementations include accurate merchandising, improved
planning, and increasing profitability, enhancing customerplanning, and increasing profitability, enhancing customer
experience, strengthening store operations, improved workforceexperience, strengthening store operations, improved workforce
management, and improving the supply chain. This is in fact onemanagement, and improving the supply chain. This is in fact one
of the key imperatives facing retailers in India, to have a robustof the key imperatives facing retailers in India, to have a robust
and scalable supply chain that will facilitate rapid growth. and scalable supply chain that will facilitate rapid growth.
Since a basic objective is to make data available to users andSince a basic objective is to make data available to users and
customers, proper IT implementation and superior IT infrastructurecustomers, proper IT implementation and superior IT infrastructure
46
ensure that in spite of getting minimal details, the retailer capturesensure that in spite of getting minimal details, the retailer captures
the right information, which flows to everyone from the backthe right information, which flows to everyone from the back
office staff to the head office managers. The entire informationoffice staff to the head office managers. The entire information
flow must be seamless. A retail business works on a networkflow must be seamless. A retail business works on a network
environment because the stores connect to one another as well asenvironment because the stores connect to one another as well as
to supplier sites. This is because in the retail business quickto supplier sites. This is because in the retail business quick
response is the key to success. Proper IT implementation alsoresponse is the key to success. Proper IT implementation also
ensures that investment in retail reduces substantially.ensures that investment in retail reduces substantially.
Retail SizeRetail Size
India is one of the ten largest retail markets in the world.India is one of the ten largest retail markets in the world.
Retail sales were $206 billion in 2004, over 30% 0f GDP.Retail sales were $206 billion in 2004, over 30% 0f GDP.
‘Organized Retail’ contributes only 3% of total retail sales –‘Organized Retail’ contributes only 3% of total retail sales –
about $6.4 billion p.a.about $6.4 billion p.a.
Top Players in the Retail Industry
Players Revenues($ million)(2003-04)
Space (sq. ft.)Dec 2004
Format
Pantaloon Retail 150 1,000,000 F&G, Specialty
RPG Retail 135 590,000 F&G, Specialty
Shoppers’ Stop 100 740,000 Specialty Retail
Lifestyle International 53 325,000 Specialty Retail
Vivek’s Ltd. 46 150,000 Consumer Durables
Trent (Tata) 38 270,000 F&G, Specialty
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OutlookOutlook
The overall retail market is expected to grow three-fold in theThe overall retail market is expected to grow three-fold in the
next 10 years from $206 billion today to about $660 billion bynext 10 years from $206 billion today to about $660 billion by
2015.2015.
India is expected to be among the top 5 retail markets in theIndia is expected to be among the top 5 retail markets in the
world in 10 years.world in 10 years.
Organized retail is expected to grow rapidly to reach $ 100Organized retail is expected to grow rapidly to reach $ 100
billion by 2015.billion by 2015.
Likely to account for 12-15% of total retail sales by 2015.Likely to account for 12-15% of total retail sales by 2015.
PotentialPotential
The high growth projected in domestic retail demand will be The high growth projected in domestic retail demand will be
fuelled by:fuelled by:
i)i) The migration of population to higher income The migration of population to higher income
segments with increasing per capita incomes.segments with increasing per capita incomes.
ii)ii) An increase in urbanization.An increase in urbanization.
iii)iii) Changing consumer attitudes especially the increasingChanging consumer attitudes especially the increasing
use of credit cardsuse of credit cards
iv)iv) The growth of the population in the 20 to 49 years ageThe growth of the population in the 20 to 49 years age
bandband
48
There is retail opportunity in most product categories and for There is retail opportunity in most product categories and for
all types of formats.all types of formats.
Food and Grocery: The largest category; largely unorganized.Food and Grocery: The largest category; largely unorganized.
Opportunities for investment in supply chain infrastructure.Opportunities for investment in supply chain infrastructure.
India also has significant potential to emerge as a sourcing India also has significant potential to emerge as a sourcing
base for a wide variety of goods for international retail base for a wide variety of goods for international retail
companies.companies.
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2.4 Retail Sector in India
Retail and real estate are the two booming sectors of India in theRetail and real estate are the two booming sectors of India in the
present times. And if industry experts are to be believed, thepresent times. And if industry experts are to be believed, the
prospects of both the sectors are mutually dependent on each other.prospects of both the sectors are mutually dependent on each other.
Retail, one of India’s largest industries, has presently emerged asRetail, one of India’s largest industries, has presently emerged as
one of the most dynamic and fast paced industries of our timesone of the most dynamic and fast paced industries of our times
with several players entering the market. Accounting for over 10with several players entering the market. Accounting for over 10
per cent of the country’s GDP and around eight per cent of theper cent of the country’s GDP and around eight per cent of the
employment retailing in India is gradually inching its way towardemployment retailing in India is gradually inching its way toward
becoming the next boom industry. becoming the next boom industry.
As the contemporary retail sector in India is reflected in sprawlingAs the contemporary retail sector in India is reflected in sprawling
shopping centers, multiplex- malls and huge complexes offershopping centers, multiplex- malls and huge complexes offer
shopping, entertainment and food all under one roof, the concept ofshopping, entertainment and food all under one roof, the concept of
shopping has altered in terms of format and consumer buyingshopping has altered in terms of format and consumer buying
behavior, ushering in a revolution in shopping in India. This hasbehavior, ushering in a revolution in shopping in India. This has
also contributed to large scale investments in the also contributed to large scale investments in the real estate sectorreal estate sector
with major national and global players investing in developing thewith major national and global players investing in developing the
infrastructure and construction of the retailing business. The trendsinfrastructure and construction of the retailing business. The trends
that are driving the growth of the retail sector in India arethat are driving the growth of the retail sector in India are
Low share of organized retailing Low share of organized retailing
Falling real estate prices Falling real estate prices
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Increase in disposable income and customer aspiration Increase in disposable income and customer aspiration
Increase in expenditure for luxury items Increase in expenditure for luxury items
Another credible factor in the prospects of the retail sector in IndiaAnother credible factor in the prospects of the retail sector in India
is the increase in the young working population. In India, heftyis the increase in the young working population. In India, hefty
pay-packets, nuclear families in urban areas, along with increasingpay-packets, nuclear families in urban areas, along with increasing
working-women population and emerging opportunities in theworking-women population and emerging opportunities in the
services sector. These key factors have been the growth drivers ofservices sector. These key factors have been the growth drivers of
the the organized retail sector in Indiaorganized retail sector in India which now boast of retailing which now boast of retailing
almost all the preferences of life - Apparel & Accessories,almost all the preferences of life - Apparel & Accessories,
Appliances, Electronics, Cosmetics and Toiletries, Home & OfficeAppliances, Electronics, Cosmetics and Toiletries, Home & Office
Products, Travel and Leisure and many more. With this the retailProducts, Travel and Leisure and many more. With this the retail
sector in India is witnessing a rejuvenation as traditional marketssector in India is witnessing a rejuvenation as traditional markets
make way for new formats such as departmental stores,make way for new formats such as departmental stores,
hypermarkets, supermarkets and specialty stores. hypermarkets, supermarkets and specialty stores.
51
The retailing configuration in India is fast developing as shoppingThe retailing configuration in India is fast developing as shopping
malls are increasingly becoming familiar in large cities. When itmalls are increasingly becoming familiar in large cities. When it
comes to development of retail space specially the malls, the Tiercomes to development of retail space specially the malls, the Tier
II cities are no longer behind in the race. If development plans tillII cities are no longer behind in the race. If development plans till
2007 is studied it shows the projection of 220 shopping malls, with2007 is studied it shows the projection of 220 shopping malls, with
139 malls in metros and the remaining 81 in the Tier II cities. 139 malls in metros and the remaining 81 in the Tier II cities. TheThe
government of states like Delhi and National Capital Regiongovernment of states like Delhi and National Capital Region
(NCR) are very upbeat about permitting the use of land for(NCR) are very upbeat about permitting the use of land for
commercial development thus increasing the availability of landcommercial development thus increasing the availability of land
for retail space; thus making NCR render to 50% of the malls infor retail space; thus making NCR render to 50% of the malls in
India.India.
India is being seen as a potential goldmine for retail investors fromIndia is being seen as a potential goldmine for retail investors from
over the world and latest research has rated India as the topover the world and latest research has rated India as the top
destination for retailers for an attractive emerging retail market.destination for retailers for an attractive emerging retail market.
India’s vast middle class and its almost untapped retail industry areIndia’s vast middle class and its almost untapped retail industry are
key attractions for global retail giants wanting to enter newerkey attractions for global retail giants wanting to enter newer
52
markets. Even though India has well over 5 million retail outlets,markets. Even though India has well over 5 million retail outlets,
the country sorely lacks anything that can resemble a retailingthe country sorely lacks anything that can resemble a retailing
industry in the modern sense of the term. This presentsindustry in the modern sense of the term. This presents
international retailing specialists with a great opportunity. Theinternational retailing specialists with a great opportunity. The
organized retail sector is expected to grow stronger than GDPorganized retail sector is expected to grow stronger than GDP
growth in the next five years driven by changing lifestyles,growth in the next five years driven by changing lifestyles,
burgeoning income and favorable demographic outline. burgeoning income and favorable demographic outline.
53
3. Company Profile
Subhiksha started its journey in March 1997, from ThiruvanmiyurSubhiksha started its journey in March 1997, from Thiruvanmiyur
in Chennai, is the brain child of R. Subramanian, its Managingin Chennai, is the brain child of R. Subramanian, its Managing
Director. Subramanian, who has been inspired by Mahatma GandhiDirector. Subramanian, who has been inspired by Mahatma Gandhi
and Mother Teresa is a workaholic and believes in the philosophyand Mother Teresa is a workaholic and believes in the philosophy
of doing more business with less margin than less business withof doing more business with less margin than less business with
more margin. “When we do more volumes we get a better dealmore margin. “When we do more volumes we get a better deal
from the suppliers,” said Subramanian in an interview.from the suppliers,” said Subramanian in an interview.
Subhiksha is an Indian Subhiksha is an Indian retail chainretail chain with with
more than 760 outlets selling groceries, fruits, vegetables,more than 760 outlets selling groceries, fruits, vegetables,
medicines and mobile phones. It was started and is managed by medicines and mobile phones. It was started and is managed by RR
SubramanianSubramanian, an , an IIM AhmedabadIIM Ahmedabad alumni. He also plans to invest alumni. He also plans to invest
Rs.500 crore to increase the number of outlets to 2000 across theRs.500 crore to increase the number of outlets to 2000 across the
country by 2009.country by 2009.
The name "Subhiksha" means The name "Subhiksha" means
prosperity in prosperity in SanskritSanskrit. It opened its first store in . It opened its first store in ThiruvanmiyurThiruvanmiyur in in
ChennaiChennai in March, 1997 with an investment of about Rs. 5 lakhs. in March, 1997 with an investment of about Rs. 5 lakhs.
54
The retail chain has seen a considerable growth by offering goodsThe retail chain has seen a considerable growth by offering goods
at cheaper rates and there by increasing its customer base. It is alsoat cheaper rates and there by increasing its customer base. It is also
dubbed as India's largest retail chain. Subhiksha now has evendubbed as India's largest retail chain. Subhiksha now has even
opened Specialized Mobile shops called Subhiksha Mobile whereopened Specialized Mobile shops called Subhiksha Mobile where
mobiles are sold at a discounted price.mobiles are sold at a discounted price.
Subhiksha has created a niche for Subhiksha has created a niche for
itself as the leading discount retail store for grocery and pharmacy.itself as the leading discount retail store for grocery and pharmacy.
The retail chain is working at moving out of Tamil Nadu, where itThe retail chain is working at moving out of Tamil Nadu, where it
has 145 stores across 31 centres. has 145 stores across 31 centres.
Subhiksha, the Chennai based, Subhiksha, the Chennai based,
400 stores strong, India’s biggest grocery and pharmacy discount400 stores strong, India’s biggest grocery and pharmacy discount
retail chain, is growing at a scorching pace and is bracing up toretail chain, is growing at a scorching pace and is bracing up to
take its tally of retail stores to 750, by March 2007. During thetake its tally of retail stores to 750, by March 2007. During the
current financial year it is also confident of doubling its 2005-06current financial year it is also confident of doubling its 2005-06
turnover of Rs. 335 crore.turnover of Rs. 335 crore.
55
The fast growth of Subhiksha is The fast growth of Subhiksha is
an outcome of Rs. 300 crores it raised earlier to fund its networkan outcome of Rs. 300 crores it raised earlier to fund its network
expansion. While, Rs. 80 crore came in the form of equity, Rs 100expansion. While, Rs. 80 crore came in the form of equity, Rs 100
crore was raised as working capital and Rs 70 crore as long-termcrore was raised as working capital and Rs 70 crore as long-term
debt. ICICI Ventures holds 24% in the company.debt. ICICI Ventures holds 24% in the company.
With the economies of scale With the economies of scale
already in place, Subhiksha, which presently has a portfolio ofalready in place, Subhiksha, which presently has a portfolio of
private labels for staple products, is actively creating a portfolio ofprivate labels for staple products, is actively creating a portfolio of
private labels for a rage of other products including baby foods,private labels for a rage of other products including baby foods,
edible oils, etc. This will help Subhiksha raise its profit margins.edible oils, etc. This will help Subhiksha raise its profit margins.
By March 1999, Subhiksha started expanding rapidly. From 14By March 1999, Subhiksha started expanding rapidly. From 14
stores, it expanded to 50 stores by June 2000. In the next twostores, it expanded to 50 stores by June 2000. In the next two
years, it had 120-130 stores across Tamil Nadu. Another big thingyears, it had 120-130 stores across Tamil Nadu. Another big thing
was, in 2000, ICICI Venture invested in Subhiksha. was, in 2000, ICICI Venture invested in Subhiksha.
Subhiksha decided to look at every part of India which isSubhiksha decided to look at every part of India which is
significantly literate and is a significant consumption market.significantly literate and is a significant consumption market.
56
Subhiksha wanted to be everywhere. Subhiksha looked at theSubhiksha wanted to be everywhere. Subhiksha looked at the
telecom companies as their role model. They employed capabletelecom companies as their role model. They employed capable
regional managers and expanded.regional managers and expanded.
Subhiksha’s business is also extremely local. Subhiksha decided toSubhiksha’s business is also extremely local. Subhiksha decided to
have very good quality people to run the region, area, town and thehave very good quality people to run the region, area, town and the
store.store.
In 2004-05, Subhiksha decided to have 420 stores in places likeIn 2004-05, Subhiksha decided to have 420 stores in places like
Gujarat, Delhi, Mumbai, Andhra and Karnataka by 2006. In 2005,Gujarat, Delhi, Mumbai, Andhra and Karnataka by 2006. In 2005,
& started recruiting people in various regions. Today, it has 500& started recruiting people in various regions. Today, it has 500
plus stores in all the places that it had planned & will go up to 600-plus stores in all the places that it had planned & will go up to 600-
plus by the month end.plus by the month end.
Subhiksha is already India’s largest retail chain store with 500-plusSubhiksha is already India’s largest retail chain store with 500-plus
stores & plan’s to have 1,000-plus stores by the end of this year. stores & plan’s to have 1,000-plus stores by the end of this year.
The rapidly-growing retail chain has The rapidly-growing retail chain has
already crossed the 450-store mark across five states in the countryalready crossed the 450-store mark across five states in the country
57
and is currently occupying retail space of more than one millionand is currently occupying retail space of more than one million
square feet.square feet.
“Subhiksha is targeting a 1,000-strong retail network by end-2007“Subhiksha is targeting a 1,000-strong retail network by end-2007
& are looking at providing customers across the country with a& are looking at providing customers across the country with a
viable smart shopping option,” viable smart shopping option,”
“With the implementation of its “With the implementation of its
expansion in Maharashtra, Subhiksha will complete our 600-storeexpansion in Maharashtra, Subhiksha will complete our 600-store
target. Subhiksha will shortly activate Phase II of its expansiontarget. Subhiksha will shortly activate Phase II of its expansion
plans by foraying into the north and east including Chandigarh,plans by foraying into the north and east including Chandigarh,
Punjab, Madhya Pradesh, Uttar Pradesh, Haryana and WestPunjab, Madhya Pradesh, Uttar Pradesh, Haryana and West
Bengal”, Phase II involves Rs 200-crore investment in opening 400Bengal”, Phase II involves Rs 200-crore investment in opening 400
stores.stores.
The rapidly expanding chain, which The rapidly expanding chain, which
claims to be the biggest chain in the country, is following theclaims to be the biggest chain in the country, is following the
carpet bombing strategy for its expansion, wherein, to createcarpet bombing strategy for its expansion, wherein, to create
58
maximum impact, it simultaneously launched a cluster of stores inmaximum impact, it simultaneously launched a cluster of stores in
a given geography.a given geography.
It may be recalled that only a few It may be recalled that only a few
months back Subhiksha to finance its ambitious expansion drivemonths back Subhiksha to finance its ambitious expansion drive
had raised Rs. 300 crore. It has also recently raised Rs. 80 crorehad raised Rs. 300 crore. It has also recently raised Rs. 80 crore
through the rights issue. Currently, ICICI venture Capital holdsthrough the rights issue. Currently, ICICI venture Capital holds
24% in the equity capital of Subhiksha.24% in the equity capital of Subhiksha.
59
3.1 Vision
To be the largest retailer in all segments & all geographies.To be the largest retailer in all segments & all geographies.
3.2 Organization Structure
President
Vice-president Senior VP/VP
operationsAVP Pharmacy AVP Telecom
BDM Operations BDM PharmacyBDM Fruits &
Vegetables
60
4. Annexure
Questionnaire
Dear Sir/ MadamDear Sir/ Madam
I wish to conduct a project concerned with the “An I wish to conduct a project concerned with the “An
analytical Study on Customer Acquisition Strategies of Subhikshaanalytical Study on Customer Acquisition Strategies of Subhiksha
Trading Service in R.T.Nagar” for the fulfillment of my academicTrading Service in R.T.Nagar” for the fulfillment of my academic
curriculum.curriculum.
Hence I request you to spare few minutes.Hence I request you to spare few minutes.
Thanking You Name of the collegeThanking You Name of the college
Studen Studen
tt
Name: __________________Name: __________________
Address: _____________________Address: _____________________
61
__________________________________________________________________________
Profession: _________________Profession: _________________
Family members: ______________________Family members: ______________________
Education Level:Education Level:
a) Primary b) High school a) Primary b) High school
c) Graduate d) Any Other c) Graduate d) Any Other
Is Customer Acquisition the major role for any industry?Is Customer Acquisition the major role for any industry?
YES NO YES NO
If so, does Customer Acquisition & Customer Retention goIf so, does Customer Acquisition & Customer Retention go
hand in hand?hand in hand?
YES NO s YES NO s
62
On what factors acquisition can be made effectiveOn what factors acquisition can be made effective
Quality Reliability Quality Reliability
Convenience Convenience
Is acquisition helpful in acquiring new customers?Is acquisition helpful in acquiring new customers?
YES NO YES NO
Should acquisition be targeted on the basis of? Should acquisition be targeted on the basis of?
Lifestyle Income Lifestyle Income
Habits Preferences Habits Preferences
Needs Needs
Should Acquisition be made through? Should Acquisition be made through?
Advertisements Mailing Advertisements Mailing
63
Phone Calls Organizing fares Phone Calls Organizing fares
Is word-of-mouth the strongest medium for retaining theIs word-of-mouth the strongest medium for retaining the
customer?customer?
YES NO YES NO
Place: Place:
Date:Date:
SignatureSignature
Thanking You,Thanking You,
Name of the student.Name of the student.
sorry was bit busy so couldnt send u
industry profile
emergence
64
future trends
market potential
company profile
3c's
executive summary
objectives
1)purpose of study
2)scope of study
3)limitations of study
4)research methodology
finding & analysis
annexure
65
conclusionThis is the html version of the file
http://utextension.tennessee.edu/publications/Documents/PB1719.pdf.
Google automatically generates html versions of documents as we crawl the web.
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The University of Tennessee
Agricultural Extension Service
PB1719
Analysis of Grocery Store Market Access Opportunities
for Small-farm and Value-added Products
66
This project was funded in part under an agreement with the Tennessee
Department
of Agriculture and the USDA Federal-State Market Improvement Program.
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Foreword
his publication is an important part of the Center for Profitable Agriculture’s
ongoing educational programs with individual farm families, value-added
entrepreneurs and agricultural leaders across the state. A study was
conducted to determine
67
the requirements, criteria and grocers’ preferences for the selection of food
products sold in
their stores. The results presented in this publication represent one of five
objectives of the
2001 – 2003 Federal-State Marketing Improvement Program (FSMIP)
project titled
“Developing Target Markets for Value-Added Niche Products.” Insights for
value-added
agri-entrepreneurs planning to market products through grocery stores are
presented.
Specific information that is helpful in the development of efficient
marketing plans and in
the development of applicable teaching resources for those seeking a better
understanding of
marketing value-added products are described. These results can assist agri-
entrepreneurs
68
and small farm agribusinesses in the development of new market
opportunities for value-
added products and enterprises, and can contribute to an improved overall
understanding of
the critical success factors and characteristics of market demand needed for
successful
value-added agribusinesses.
We are particularly appreciative of the cooperation and support of Dan
Gutzman and
nine retail sales counselors of the CB Ragland Company with this project.
Their
participation in the survey development and implementation phases of this
project was
valuable to the overall success. In addition, appreciation is expressed to
Anne Dalton and
69
Shasta Hubbs for their contributions in implementing the entire project; to
Richard Maxey
for publication layout and design; Joe Gaines and Dan McLemore for their
assistance and
leadership in the project’s administration; David Eastwood, Stanley Trout
and John Brooker
for serving on the survey development team; and Charles Hall, David
Eastwood, Wanda
Russell and Stanley Trout for their participation in the peer review.
Additional information regarding this project may be obtained by contacting
the Center
for Profitable Agriculture at 931-486-2777 or <http://cpa.utk.edu>.
Rob Holland
Project Principal Investigator and Lead Author
Center for Profitable Agriculture
70
T
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Table of Contents
Project Background
4
FSMIP Grant
4
The Project Teams
71
4
Results of the Survey
6
The Respondents
6
How Products Are Acquired
7
Deciding Which Products to Carry
9
Selecting New Products to Carry
11
Products Grocers Would Like to Feature
11
72
How to Get Products to Grocers
11
Identifying Tennessee Products and the “Pick Tennessee Products” Logo 13
Conclusions
14
Implications for Future Studies
16
Appendix
17
Anne Dalton
Extension Assistant
Center for Profitable Agriculture
Rob Holland
73
Extension Specialist
Center for Profitable Agriculture
Shasta Hubbs
Former Extension Specialist
Agricultural Development Center
Analysis of Grocery Store Market Access Opportunities
for Small-Farm and Value-Added Products
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74
Project Background
FSMIP Grant
In March 2001, the Agricultural Development Center (the Center’s
name changed to Center for Profitable Agriculture in July 2002) submitted a
proposal to the Federal-State Marketing Improvement Program (FSMIP) to
develop five market development resource tools that would allow users to
better evaluate market opportunities for value-added products and enter-
prises. One of the goals of the overall FSMIP project was to analyze market
access opportunities for small-farm and value-added products with local
grocery stores. Over the years, value-added entrepreneurs have found it very
challenging to get their products on the shelves of local grocery stores. The
Center often receives requests regarding the approach that should be taken
with grocery store personnel to achieve greater success in getting the
75
products on local grocery shelves.
The Project Teams
This publication presents the results of a survey conducted with manage-
ment personnel of grocery stores. The survey (see Appendix) was developed
to obtain information needed to evaluate how receptive local grocers are to
carrying value-added products produced in Tennessee and to identify the
primary steps/procedures/conditions that value-added agri-entrepreneurs
should consider to best target local grocers. The entire grocery store survey
project was accomplished through the cooperative efforts of several teams of
contributing partners. Participants in each of the cooperating teams are
presented below:
Survey Development Team
- John Brooker, Agricultural Economics, The University of Tennessee
76
- Anne Dalton, Center for Profitable Agriculture, The University of
Tennessee
- David Eastwood, Agricultural Economics, The University of Tennessee
- Rob Holland, Center for Profitable Agriculture, The University of
Tennessee
- Shasta Hubbs, Agricultural Development Center, The University of
Tennessee
- Cynthia Kent, The Tennessee Department of Agriculture,
Market Development Division
- Stanley Trout, The Tennessee Department of Agriculture,
Market Development Division
Survey Implementation Team
- Anne Dalton, Center for Profitable Agriculture, The University of
Tennessee
- Kevin Daugherty, CB Ragland Company
77
- Brian Fitzgerald, CB Ragland Company
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- Lynn Goring, CB Ragland Company
- Dan Gutzman, CB Ragland Company
- Joel Harris, CB Ragland Company
- Rob Holland, Center for Profitable Agriculture, The University of
Tennessee
- Shasta Hubbs, Agricultural Development Center, The University of
Tennessee
78
- Randy Kelly, CB Ragland Company
- Mike Mcquire, CB Ragland Company
- Jason Morris, CB Ragland Company
- Hugh Qualls, CB Ragland Company
- Keith Sullivan, Tennessee Grocers Association
- Kevin Whittaker, CB Ragland Company
Publication Team
- Anne Dalton, Center for Profitable Agriculture, The University of
Tennessee
- David Eastwood, Agricultural Economics, The University of Tennessee
- Charles Hall, Agricultural Economics, The University of Tennessee
- Rob Holland, Center for Profitable Agriculture, The University of
Tennessee
79
- Shasta Hubbs, Agricultural Development Center, The University of
Tennessee
- Richard Maxey, Marketing and Communications, The University of
Tennessee
- Dan McLemore, Agricultural Development Center, The University of
Tennessee
- Wanda Russell, Marketing and Communications, The University of
Tennessee
- Stanley Trout, Chief of Marketing Services, The Tennessee Department
of Agriculture
The survey development team identified grocers in Tennessee and gave
ideas and suggestions on administering the survey. The team also
brainstormed potential survey questions, formats and methods and identified
the target audience of the survey. Due to the expected low response rate of a
mailed questionnaire, the team suggested and arranged for the delivery of
80
the survey questionnaires to grocery stores by retail sales counselors of the
CB Ragland Company.
CB Ragland Company is a food wholesaler that supplies approximately
200 independently owned and operated retailers, no chain stores, in the
southeast region of Tennessee, Georgia, Alabama, Kentucky and North
Carolina with a full line of groceries, produce, meat, deli and non-food
items. Relationships already existed between the sales counselors and the
grocery store personnel, and the counselors could assist with interpreting the
questionnaire as needed. The survey participants were, therefore, limited to
those served by the CB Ragland Company, and this potential bias has been
considered in the analysis of the survey results, primarily in the section titled
“how products are acquired.”
81
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The survey implementation team cooperated in the preparation, distribu-
tion, completion and return of the questionnaires. Retail sales counselors
with the CB Ragland Company were provided survey implementation
packets containing questionnaires, return envelopes and a check-list of
implementation procedures. The counselors were given 96 questionnaires
and asked to duplicate or request additional forms as needed. Postage-paid
addressed envelopes were prepared and accompanied the questionnaires for
easy return to the Agricultural Development Center for analysis.
82
Results of Survey
The Respondents
A total of 47 questionnaires were returned from 47 management person-
nel of 47 individual grocery stores within CB Ragland’s Tennessee and
Kentucky territory. At the time of the survey, CB Ragland was serving196
stores; therefore, the 47 returned questionnaires represent a 24 percent
response rate. The stores represented in the survey are located in 23
Tennessee counties, reaching from Polk County in the east to Carroll County
in the west, and two counties in Central Kentucky. The largest geographic
concentration of responses was from Middle Tennessee, with 87 percent of
the participants located within 70 miles of Nashville. The location of
Tennessee grocery stores represented in the survey is provided in the
following map.
83
Location of Grocery Store Participants in Survey
Key:
1 Survey = Orange
2 Surveys = Light Orange
3 Surveys = Gray
9 Surveys = Light Gray
Note: 2 additional surveys from Kentucky
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84
A majority (79 percent) of the grocery store personnel completing the
questionnaires was male, while 21 percent was female. Almost three-fourths
(74 percent) of the personnel were between the ages of 31 and 50. A
distribution of the respondents by age category is presented in Table 1.
Table 1: Percentage of Survey Responses by Age Category
Age Category
Responses
20 to 30
4%
31 to 40
38%
41 to 50
36%
85
51 to 60
18%
61 to 70
2%
70 and older
2%
Half (50 percent) of the respondents described their roles/positions in the
grocery stores as “store owner,” while 16 percent were described as
“manager,” 13 percent as “department manager” and 2 percent as “other.”
How Products Are Acquired
Almost all of the personnel indicated that food items are acquired for
their grocery store from a food wholesaler. This was not surprising, because
the participating stores were identified and selected by a wholesale supplier.
86
While more than 97 percent of the stores acquire products from a wholesale
supplier, this is not their only supplier of food products. Seventy-seven
percent of the stores also acquire food products from direct-store-delivery
vendors, 38 percent of stores acquire food products directly from small food
producers (including farmers and entrepreneurs) and 4.3 percent of the stores
acquire products from large national manufacturing companies. Only 21
percent of the stores indicated that they acquire food products for their store
from only one supplier.
Although 97 percent of the stores acquire food products from
wholesalers, only 76 percent of the food items in their store are acquired
from wholesalers. A comparison of the percent of stores that use specific
sources of food products and the percent of food acquired through each
source is presented in Table 2.
87
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It is interesting that 38 percent of the grocery stores indicated that they
acquire products directly from small food producers, farmers and food
entrepreneurs; however, the amount of food products in the stores from this
group is relatively small (less than 2 percent).
The characteristics of the grocery stores that do acquire food products
from small food producers are not significantly different from the character-
istics of the entire sample. When the stores that acquire food products from
88
small food producers were asked to describe their preferred way for small
food producers to pitch products to them, the majority (88 percent) indicated
that a visit to the store was the best way to introduce the product. In
addition,
70 percent of the stores indicated that a sample of the product is also an
important part of getting a new product considered. Three respondents
indicated that an introductory letter and a sample of the product should be
sent to the store rather than a personal visit. While some stores indicated
that
a phone call to discuss the product was preferred, one respondent specifi-
cally said “no phone calls.” Additional sales promotion tools for small food
producers to consider when pitching their product to a grocery store
included
providing a free case of the product, providing free point-of-purchase
89
displays or shelf-talkers for the products and guaranteeing a minium level of
sales.
Table 2: The Percent of Stores That Use Specific Sources of Food
Products and the Percent of Food Acquired through Each Source
97.8
Wholesalers
76.0
4.3
Large, National
0.2
Manufacturers
77.0
Direct-Store-
90
22.0
Delivery Vendors
38.0
Direct from a Small
1.8
Food Producers
(includingfarmers and
food entrepreneurs)
Percent of Stores
That Acquire Food
Products from
Certain Sources
Source of
91
Food
Products
Percent of Food
Items in the Store
Acquired from a
Certain Source
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Sixty-two percent of the stores indicated that they do not acquire food
92
products directly from small food producers. However, 81 percent of them
indicated that they would consider this option.
Deciding Which Products to Carry
Among a list of 12 criteria, survey participants indicated that “shelf
space,” “customer recommendations/requests” and “proven sales history”
are the most important criteria they use to decide whether or not to place a
new food product in their store. In addition, “promotion help,” “new prod-
ucts,” “ability to restock” and “product category” were also considered
important criteria. Sixty-two percent of the stores indicated that “shelf-
space” is one of the most critical criteria to product placement. However, as
shown in Table 3, when asked for the single most important criteria, “shelf
space” ranked fourth, falling behind “customer recommendations/ requests,”
“sales history” and “promotion help.”
93
62
Shelf Space
15
50
Sales History
26
30
Promotion Help
18
26
New Product
19
Ability to Restock
94
15
Product Category
11
Option to Consign
11
Price
6
Supplier Recommendation
2
Label in Spanish & English
Table 3: Percent of Stores Indicating a Specific Criteria as One of
Their Top Three Most Important or the Single Most Important Criteria
Percent of Stores
95
Indicating a Specific
Criteria as the Single
Most Important
Criteria Used to
Decide Which Food
Products Will Be
Placed in the Store
Percent of Stores
Indicating a Specific
Criteria as One of
Their Top Three
Most Important
57
96
Customer
41
Recommendations/
Requests
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Among a list of 11 possible requirements that all food products must
meet to be eligible to be sold in a grocery store, respondents most often
indicated the following minimum product requirements:
97
• “evidence that a product meets all government standards”
• “amount of gross profit”
• “product must have a bar code”
• “evidence of the product’s previous sales”
The percent of stores indicating a specific requirement as the single
most important are presented in Table 4.
evidence that a product meets all
72
government standards
amount of gross profit
62
product must have a bar code
57
98
evidence of the product’s previous sales
53
promotional help
45
supplier must guarantee a specific
40
delivery schedule
supplier must be responsible for restocking
23
must have liability insurance
17
evidence of delivery volume capabilities or a
17
99
minimum amount of inventory
supplier must agree to furnish a display
15
other1
11
Table 4: Percent of Stores Indicating a Specific Requirement
as the Single Most Important
Requirements of Food Products
Eligible to be Sold in Grocery Stores
Percent of Stores
Indicating a Specific
Requirement as the
Single Most Important
100
1 Other requirements include “my determination of whether it will sell,”
“quality,”
“if my supplier carries it” and “guarantee that the product will be fresh and
good quality.”
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Selecting New Products to Carry
Each store in the survey added an average of just under 100 new food
products each year, ranging from 2 to 420. However, of the 96 new products
added, only 44 are still on the shelves in one year. That is, only 46 percent of
101
new food products placed in grocery stores are still in the store one year
later. Survey participants indicated that “price,” “image” and “taste” were
the primary reasons that new products generated enough sales during their
first year to remain on the shelf. Similarly, respondents indicated that
“price,” “image” and “taste” were the primary reasons that new products did
not achieve a level of sales high enough for them to remain on the shelf after
one year.
Products Grocers Would Like to Feature
When asked to identify “specific” products that are not currently
available to the grocery stores but that they would like to be featured in the
store, four products were mentioned in multiple instances and eight products
were mentioned once. Of the products mentioned more than once, “more
local products in general” was mentioned 37 percent, “bakery items” 27
102
percent and “molasses/sorghum” and “pies” were each mentioned 18 percent
of the time. The following products were mentioned once:
• jams and jellies
• specialty hams
• bread
• candles
• fresh donuts
• more sugar-free items
• flowers (seasonal)
• locally produced dairy products
How to Get Products to Grocers
The following responses were given when store personnel were asked to
describe the process a small food producer should expect once the grocery
103
store had decided to carry his/her product.*
• Pricing must be consistent with similar items; producer must be able to
back the item.
• Set up a delivery schedule and the process for reorders, cost and retails
would be determined and guidelines for shelf placement, point-of-sale
materials, price changes, etc. would be set up.
• As long as the price is right, the producer would have to handle
every aspect of this process – from shipping to stocking on shelves.
* In some cases, comments have been paraphrased for clarity.
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• An in-store demonstration/sampling day of some sort is helpful.
• Continued available inventory, stable pricing and good acceptance
from consumers are necessities.
• We contact our wholesale supplier and ask them to try to carry it.
• The product must be advertised to the customers.
• Delivery to the store will have to be by the producer, a delivery
truck or from our wholesaler.
• Either get the product from my wholesale supplier or the producer
should have a delivery schedule to bring product directly to the store.
• Vendor must approve credit and provide evidence they can deliver
sufficient quantities on schedule.
105
• Run an advertisement with a good price.
The following comments were provided when the survey participants
were asked what specific advice they would give an entrepreneur who was
trying to get a value-added agricultural product in the grocery store.*
• Start small; don’t try to make a million dollars on the first go-round.
• Be diligent but not pushy, understand that even a little shelf space is
better than nothing; always be prepared to take care of damaged
merchandise.
• Make sure pricing is always right and be on a regular delivery
schedule.
• Call the store for an appointment, bring product sample to the store
manager, explain the type of business and how you will promote the
product.
106
• Plan to make store visits and guarantee the product.
• Convince store personnel that the product is needed, that you will
deliver on a schedule to meet the store’s needs, that the product will
always be fresh and sanitary and that the product meets the required
inspections.
• The product should have the “Pick Tennessee Products” label, and
the product should not be overpriced.
• The product label should be attractive, should catch the buyer’s
attention and should have a UPC code.
• Make product samples available.
• Be honest; do what you say you will do.
• Tell the grocery store “Let’s try it. If it doesn’t work, I’ll credit you
for it and we’ll try something else.”
107
• Success will come from long-established working relationships/
partnerships with the grocery store.
* In some cases, comments have been paraphrased for clarity.
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• Always use a friendly approach and be willing to demonstrate the
product.
• Make a good presentation, have product samples and then guarantee
the product.
108
• Most of the best-selling products are carried by our wholesaler, so
there is not a problem for us to get it; their product must be in the
warehouse book.
• Look neat and clean and present good, fresh, clean merchandise.
• Be flexible and willing to work with store.
• Get an understanding of the products, make sure the price is competi-
tive with other name-brand products and plan to cater to the needs of
customers.
• Prepare to provide samples and display fixtures.
• Make a good guarantee on the product and make the first case free to
the store.
Identifying Tennessee Products and the
“Pick Tennessee Products” Logo
109
The Tennessee Department of Agriculture (TDA) has operated a promo-
tion program for Tennessee products since 1985. The logo associated with
the promotion program has evolved over the years, and the current logo has
been used since 1998.
The logo was developed to help consumers identify and select Tennes-
see-produced and/or processed products and has become the emblem of the
state’s overall “Pick Tennessee Products” (PTP) Market Development
Program. Although there is no fee for joining the PTP program, the TDA
Market Development division oversees and authorizes the use of the logo
through an application-approval process. When a Tennessee firm or product
is approved for the PTP program, it will be included in the TDA Website
directory and in numerous related consumer and
buyer directories. Also included in the program is
110
the right to use the “PTP” logo in promotions and
on product labels. Products bearing the PTP logo
must be high-quality agricultural products pro-
duced or processed in Tennessee. Changes in logo
composition or colors must be approved by the
market development division. All products bearing
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the logo must meet or exceed U.S. government and/or state of Tennessee
111
standards where applicable.
Just over three-fourths (76 percent) of the survey respondents indicated
that Tennessee products are identified in their stores with 84 percent of the
identification made, in some way, for individual products. This individual
identification could be from shelf stickers or signs identifying products or
from individual products that bear the PTP logo. Sixteen percent of the
identification of Tennessee products is from a combination of individual
product identification and from a specific section or display in the store
identifying the products. Of the stores that do not currently identify Tennes-
see products, 95 percent indicated they would consider doing so.
Grocery store personnel appear to be very familiar with the PTP logo,
with 98 percent of the Tennessee respondents and 94 percent of all respon-
dents (including those from Kentucky) indicating that they are familiar with
112
the logo. Seventy-eight percent of the respondents indicated that the PTP
logo contributes to increased sales of Tennessee products. However, there
appears to be a direct relation between the state in which the grocery store is
located and a grocer’s perception of whether or not having the PTP logo on a
product results in increased sales of the product. One hundred percent of the
Kentucky grocers said that the PTP logo does not contribute to increased
sales, while only 18 percent of Tennessee grocers said that the PTP logo
does not contribute to increased sales. Fifty-seven percent of the survey
participants indicated that the inclusion of the PTP logo on a product makes
them more willing to carry the product in their store, while 40 percent said
the logo does not affect their decision to carry the product.
Conclusions
To improve the economic viability of agricultural operations, farmers
113
and agri-enterprises are processing, packaging and marketing farm com-
modities in different ways than has been done historically. End-products that
result from value-added enterprises often require the implementation of non-
traditional marketing techniques. The results presented in this publication
provide information that will be helpful for farmers and agri-entrepreneurs
planning to market value-added products through local grocery stores.
According to the results of the study, which are summarized in this
publication, wholesalers are the most frequently used suppliers of products
to grocers, and small food producers (including farmers and entrepreneurs)
supply the smallest percent of products to grocery stores. Therefore, value-
added entrepreneurs should consider working with/through wholesalers to
get products to local grocery stores.
114
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“Shelf-space,” “customer recommendations/requests” and “a proven
sales record” were indicated as the most important criteria used by grocers to
decide whether or not to accept a new product. Because there are so many
products that compete for limited shelf space in grocery stores, small food
producers should consider ways for their product to compete for this limited
space. For example, the size, shape, amount and type of packaging and use
of shelf space options such as hanging racks should be considered. In
addition, customer comments should be solicited during sampling opportuni-
115
ties or through alternate marketing opportunities that substantiate positive
customer reaction. The comments should be summarized and communicated
to the grocer. Small food producers should also document and communicate
to the grocer evidence of a strong sales history, including number of units
and/or gross sales over a specific time period. This might be accomplished
through the use of effective brochures and charts.
Survey participants indicated that “price,” “image” and “taste” were the
primary reasons for products remaining on the shelf after the first year. In
addition to developing products that are price-competitive, appealing to the
eye and pleasing to the palate, small food producers should make sure their
products’ attributes are effectively communicated to potential consumers
and
grocers through consistent promotional activities, free sampling, effective
packaging and labeling and educational materials.
116
Survey participants also indicated that their decision to carry a product
is influenced by the entrepreneur’s ability and willingness to assist with or
carry out such tasks as delivery, stocking, inventory, promotion and advertis-
ing. Therefore, in addition to producing value-added products, the entrepre-
neur should consider taking an active role in various marketing tasks. For
example, the value-added entrepreneur might assist grocers with advertising
expenses, do demonstration/in-store product sampling and/or provide the
grocer the first five cases of the product free. The entrepreneur might also
take the responsibility of maintaining an inventory of the shelves and/or
stockroom product level and even agree to a next-day delivery when product
levels are low.
More than three-fourths of the survey participants indicated that the Pick
Tennessee Products (PTP) logo contributes to increased sales of Tennessee
117
products, and more than half indicated that the inclusion of the PTP logo on
products makes them more willing to carry the product in their store.
Therefore, small food producers should carefully consider including the PTP
logo on the labels on products sold in Tennessee stores. However, because
of
the response of the grocers in Kentucky, the use of the logo outside the state
of Tennessee should be carefully evaluated.
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118
Implications for Future Studies
The results of this study set the stage for a variety of future studies
that would further the understanding of and opportunities for marketing
value-added products through grocery stores. Some specific
opportunities for future studies include:
• Investigating and evaluating the requirements, criteria and
preferences of wholesale food suppliers used for the selection of
food products carried.
• Real-product evaluation screenings with grocery store managers and
wholesale food suppliers to evaluate the use of specific selection
criteria with actual products.
• Evaluating the effectiveness of actual product advertising and
promotion activities such as point-of-purchase displays, samples/
119
demonstrations, price discounts and shelf-space allocation/location.
• Determining characteristics of grocery stores that acquire a larger
portion of their food products from small food producers (including
farmers and entrepreneurs) than the participants in this study.
• Evaluating requirements, criteria and preferences of grocery store
managers who acquire a larger portion of their food products from
small food producers (including farmers and entrepreneurs) than the
participants in this study.
• Determining the time frame of the initial product evaluation period.
• Investigating the difference in grocers’ willingness to consider and
their likelihood to carry food products supplied by small food
producers.
• Investigating how demographic variables affect a grocery store
120
manager’s willingness to consider carrying food products from small
food producers.
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DEVELOPING MARKETS FOR TENNESSEE AGRICULTURAL
PRODUCTS
A Survey Conducted by
The University of Tennessee Agricultural Extension Service Agricultural
Development Center
121
Your voluntary participation in this survey is greatly appreciated. The
purpose of this study is 1) to
evaluate how receptive local grocery stores are to carry value-added
products made in Tennessee and 2)
to identify the primary steps/procedures/conditions that the farmer/producer
must consider to best target
local grocers. Your answers to the questions in this survey will not be
disclosed; only aggregated
responses will be used in summarizing the study. As the person who makes
the purchasing decisions for
your store, please answer each question according to your knowledge and
understanding of the situation
presented.
1. Excluding meat and produce, which of the following sources do you
currently use to acquire
food items/products for your store? (Please check all that apply.)
122
_____ a food wholesaler
_____ a large, national manufacturing company
_____ a direct store delivery vendor (DSD)
_____ decision made at headquarters
_____ directly from a small food producer (including farmers and small food
entrepreneur
businesses)
2.a. Excluding meat and produce, what percentage of the food
items/products in your store is
supplied by the sources you marked in question 1 above?
% supplied by a food wholesaler
% supplied by a large, national manufacturing company
% supplied by a direct store delivery vendor (DSD)
% decision made at headquarters
123
% supplied directly by a small food producer (including farmers and small
food
entrepreneur businesses)
b. If you obtain any food products direct from a small food producer, please
describe the most
preferred way for them to pitch a product to you (such as a store visit, phone
call, direct letter,
product sample).
c. If you do not obtain any food products directly from small food producers,
would you consider
doing so in the future? Yes: _____ No: _____
3.a. Which of the following are the three most important criteria used to
decide which food products
will be placed on the shelves in your store? (Select only three.)
_____ available shelf space
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_____ label printed in English and Spanish
_____ product category
_____ customer recommendation/request
_____ sales history
_____ supplier recommendation
_____ new product
_____ packaging
_____ ability to re-stock
_____ option of consignment sales
_____ promotional help
_____ other (please list)_______________
b. Go back to the three criteria selected in #3a and circle the one that you
consider to be the single
most important? (Circle only one.)
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4. Which of the following are requirements that all food products must meet
to be eligible to be sold
in your store? (Only check things that are required and check all that
apply.)
_____ evidence of product’s previous sales
_____ evidence that the product meets all government standards
_____ supplier must guarantee that a specific delivery schedule can be met
_____ evidence of delivery volume capabilities or a minimum amount of
inventory
Appendix
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VALUE
_____ supplier must be responsible for restocking
_____ product must have a bar code
_____ must have liability insurance
_____ amount of gross profit
_____ supplier must agree to furnish a display
_____ promotional help
_____ other (list)_________________________________
5.a. Approximately how many new food products are placed on the shelves
in your store in a given
year? ____________
b. Approximately how many of these new food products are still available in
your store 12 months
127
after being added? _____________
c. Assume for a moment that the reason products remain on the shelf for a
year is due to high sales.
What is the one characteristic that these products have in common that
contributes to their high
sales? (Check the one that applies.)
_______ price
_______ taste
_______ packaging
_______ brand image
_______ location in store
_______ other (please list) __________
d. Assume that the products not remaining on the shelf after a year is due to
a low volume of sales.
128
What do you think is the one characteristic that these products have in
common that most
prevented higher sales? (Check the one that applies.)
_______ price
_______ taste
_______ packaging
_______ brand image
_______ location in store
_______ other (please list)___________
6. Now, assume that a small food producer has pitched a product to you and
you are interested in
carrying it in your store. Describe the process of getting the product on your
shelves that the small
food producer should expect.
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7. What are some food products that currently are not available to you that
you would like to feature
in your store? (Ex. fresh apple cider, bakery items, local farm products, etc.)
8.a. Do you identify Tennessee grown or processed products in your store in
some way?
Yes:______ No: ______
b. If yes, what method do you use to identify the products?
_______ a specific section in the store ______ individual
identification_______both
c. If no, would you consider identifying Tennessee products? Yes:______
No: ______
9.a. Are you familiar with the “Pick Tennessee Products” logo (seen at
right)?
Yes: _____
No:_____
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b. Do you feel the use of this logo increases the sale of Tennessee products?
Yes: _____
No:______
c. How does the inclusion of the “Pick Tennessee Products” logo on a
product label affect your
willingness to carry the product?
_______ more willing _______ no change _______ less willing
10. If you were counseling an entrepreneur on how to get a product in your
store, what advice would
you give him/her?
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ADDED
VALUE
Please provide the following demographic information.
1. What is the city and ZIP Code for your store? City:_______________
ZIP Code:_________
2. Which of the following best describes your position/role in the store?
_____ store owner_____ store manager_____ dept. manager _____ other
(describe) __________
3. Which of the following best describes your age? (optional)
___ under 20___ 20 to 30 ___ 31 to 40 ___ 41 to 50 ___ 51 to 60 ___ 61 to
70
___ over 70
4. What is your gender? (optional)Female:________ Male: _________
5. How long have you been employed in your present position at the store?
___________________
132
Funding for this project is provided in part by the United States Department
of Agriculture, the
Tennessee Department of Agriculture and The University of Tennessee.
This study is being conducted by Rob Holland and Anne Dalton with The
University of Tennessee
Center for Profitable Agriculture. If you have questions, contact them at
865-974-3824 or by e-mail
through the CPA Web site at <www.utextension.cpa.utk.edu>. The mailing
address for the CPA is
307 Morgan Hall, Knoxville, Tennessee, 37996-4521.
The Agricultural Extension Service offers its programs to all eligible persons
regardless of race,
religion, color, national origin, sex, age, disability or veteran status and is an
Equal Opportunity Employer.
COOPERATIVE EXTENSION WORK IN AGRICULTURE AND HOME
ECONOMICS The University of
133
Tennessee Institute of Agriculture, U.S. Department of Agriculture,
and county governments cooperating in furtherance of Acts of May 8 and
June 30, 1914.
Agricultural Extension Service, Charles L. Norman, Dean
Page 20
20
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ADDED
VALUE
The Agricultural Extension Service offers its programs to all eligible persons
regardless of race,
religion, color, national origin, sex, age, disability or veteran status and is an
Equal Opportunity
134
Employer. COOPERATIVE EXTENSION WORK IN AGRICULTURE
AND HOME ECONOMICS The
University of Tennessee Institute of Agriculture, U.S. Department of
Agriculture,
and county governments cooperating in furtherance of Acts of May 8 and
June 30, 1914.
Agricultural Extension Service, Charles L. Norman, Dean
PB1719-800-11/02
R12-4010-005-001-03
Table 2: The Percent of Stores That Use Specific Sources of FoodProducts and the Percent of Food Acquired through Each Source97.8Wholesalers76.04.3Large, National0.2Manufacturers77.0Direct-Store-22.0Delivery Vendors38.0
135
Direct from a Small 1.8Food Producers(includingfarmers andfood entrepreneurs)Percent of StoresThat Acquire F
136