It covers the typical business model of a small sized informally organized (unorganized) Fruits & Vegetables Vendors.

1. Strategy of the
Informally
Organized Sectors
Focus Area:
Small-Scale Fruits &
Vegetable Retailers
Group 6 | HRM A
H14019 | Atin Aggarwal
H14030 | Maulik Gandhi
H14052 | Pratik Sai
H14055 | Tejesvi Dhankhar
H14058 | Vasudevan L
H14059 | Vinith Dwarkanath
H14060 | Vivekananda Reddy
H14061 | Varun Kumar Yanamadala
HRM 2014-2016 Batch
XLRI Jamshedpur

2. 1
Objectives and Approach
Objective
Approach
Analyse the strategy of entities operating in an informally organized sector in India; Special focus on small-scale fruit
and vegetable retailers (FVR) operating either on handcarts or through tiny shops
A mix of primary and secondary research was followed with multiple stakeholders being met for inputs. While a
significant part of the primary interactions were in Jamshedpur, a few interviews were conducted outside as well
Primary Interactions:
• 20 Vendors met – 16 in Jamshedpur across Sakchi (5), Sonari (3) & Bistupur (8); 1 in Delhi and 3 in Hyderabad
• 8 customer interviews In-person and 29 respondents to an Online Survey
• Market Sizing
• Business Model
• Strategy Map
• CSFs
• Business
Operations
• Challenges Faced
• Voice of Customer
• Kirana Stores Vs
Organized Retail
Deliverable
Primary &
Secondary
Research
Transcription
& Collation
Analysis
Secondary
Research:
• NSSO 68th
Round
• Indicus
Analytics
• EY & IBEF
Reports

3. 2
The Fruits & Vegetables Retail (FVR) Industry
Source: IBEF Report (2008), EY Report (2006)
12 Million
Traditional Indian Retail
Outlets
40%
selling vegetables and
grocery
97%
Informally organized
FVR market
Highly localized and
fragmented structure
Model supply chain observed in the sector:
Producer
Wholesalers
Vendors
Traditional
Retailers
Agents Auctioneers
Consumers
Number and Variety of Intermediaries Involved:
Mom & Pop Stores Pushcart Sellers
Temporary Shops Wholesale Traders
Pavement Vendors Commission Agents
Roadside Vendors Auctioneers
Source: Primary Interviews

4. 3
Expenditure on Food in India
Source: Indicus Analytics ‘Market Skyline of India’ (2013) Source: Indicus Analytics ‘Market Skyline of India’ (2013), NSSO 68th Round, Team Analysis
~INR 18 Trillion
Total Household Spend
~263 Million
Households in India
~INR 68,745
Annual per Household spend
All India Urban India Rural India
Total HH
Spend INR 18.07 Tn. INR 6.73 Tn. INR 11.34 Tn.
Total HH
262.86 Mn. 87.09 Mn. 175.77 Mn.
Annual Per
HH Spend INR 68,745.19 INR 77,224.24 INR 64,544.01
Monthly Per
HH Spend INR 5,728.77 INR 6,435.35 INR 5,378.67
Daily Per HH
Spend INR 188.34 INR 211.57 INR 176.83
Average HH
Size 4.30 4.00 4.50
Daily Per
Capita
Spend
INR 43.80 INR 52.89 INR 39.30
NOTE: This is the expenditure on Food items and not limited to Fruits and Vegetable items only

5. 4
Strategy Map
Customer Satisfaction
PROFITABILITY
VOLUME MARGIN
Marketing Demand
Items on Shelf
Line of Credit
Prices of Products Revenue
Competition
Seasonality
Trend Analysis
Situational Factors
Stock Management
Wholesaler / Supply Chain Logistics
Exotic Varieties
Reduce Wastage
Quality
Availability of Substitutes
Location
CSFs

6. 5
Critical Success Factors
• Reduced Wastage (or Spoilage)
• Effective Inventory Management
• Demand Forecasting
KPIs – Loss/day because of wastage,
Inventory turnover
• Location
• Proximity to customers (e.g. near a
hospital/ residential area)
• Location within a market – near
competition or away from competition
KPIs – Sales/day, Number of
Customers/day
• Availability
• Of seasonal/ exotic varieties
• Providing enough choices to the
customer
KPIs – % of Exotic fruits/vegetables
sold/day, Number of different
Fruits/vegetables available in shop
• Quality
• Closely linked with pricing strategy
• Supplier/ wholesaler relationship for
better prices and quality
KPIs – Repeat customers

7. 6
Typical Business Model
KEY PARTNERS
 Farmers
 Wholesalers
 Supplier
 Other Retailers
KEY ACTIVITIES
 Procurement
 Organizing in the
store
 Pricing decisions
 Direct Marketing
VALUE
PROPOSITION
 Satisfying the
staple food needs
for consumers
 Fulfilling the
nutritional needs
 Exotic fruits –
Upper class
 Basic fruits and
vegetables –
Middle class
CUSTOMER
RELATIONSHIPS
 New Customers
through proximity
 Regular customers
through lucrative
pricing offers
CUSTOMER
SEGMENTS
 Socio Economic
Classes - A, B,C,D,E
 Very few customer
segments that are
not served
KEY RESOURCES
 Location
 Working Capital
 Manpower
 Stock
 Time
CHANNELS
 Handcarts
 Standalone stores
 Market
COST STRUCTURE
 Cost of the stock
 Transportation
 Labour cost
 Real estate rent / Cost of handcart; and maintenance
REVENUE STREAMS
 B2C sales

8. 7
Typical Business Model
KEY PARTNERS
 Farmers
 Wholesalers
 Supplier
 Other Retailers
KEY ACTIVITIES
 Procurement
 Organizing in the
store
 Pricing decisions
 Direct Marketing
VALUE
PROPOSITION
 Satisfying the staple
food needs for
consumers
 Fulfilling the
nutritional needs
 Exotic fruits – Upper
class
 Basic fruits and
vegetables – Middle
class
CUSTOMER
RELATIONSHIPS
 New Customers
through proximity
 Regular customers
through lucrative
pricing offers
CUSTOMER
SEGMENTS
 Socio Economic
Classes - A, B,C,D,E
 Very few customer
segments that are not
served
KEY RESOURCES
 Location
 Working Capital
 Manpower
 Stock
 Time
CHANNELS
 Handcarts
 Standalone stores
 Market
COST STRUCTURE
 Cost of the stock
 Transportation
 Labour cost
 Real estate rent / Cost of handcart; and maintenance
REVENUE STREAMS
 B2C sales
Some Observations on the business model during our interaction with Retailers:
1. Handcarts / Push Carts
1. Price over quality
2. Leveraging proximity
2. Standalone stores
1. Quality focus
2. Location plays a key role
3. Customer relationship is important
3. Market
1. Cooperation among vendors
2. Bargaining power with wholesalers (or suppliers)

9. 8
Business Operations - Procurement
Characteristics Stock Management
• Bulk Buy
• Better service by Supplier to vendors who place
large orders
• Buying decisions are “Straight Re-purchase”
• Routine ordering
• Order the same items from the same suppliers
at the wholesaler market
1. Vegetable Vendors:
1. Stock procured on that day or a day in advance.
2. A few vendors keep track of the stock through
the day (either through assigning a specific
person or through periodic inspections).
3. Few vendors maintain as much variety as
possible, to push the product quickly, maintain
low quantities.
2. Fruit Vendors:
1. Display the better looking stock, so that
customers are interested in the stock.
2. Proper protection from sunlight/rain to protect
easily perishable fruits.
3. Wholesalers:
1. Some wholesalers procure stock weekly while
some procure daily.
2. A notebook is used to keep track of the stock
(opening stock – closing stock)
Process
How it works:
Demand from
Market
Place order
if Demand
> Stock
Vendor
checks his
stock
position
Whom to procure from:
Check
availability in
nearby market
Delivery
takes
between 1-
2 hours to
2-4 days
Supplier
choice
function
of price &
quality

10. 9
Business Operations - Pricing
Characteristics Pricing Model
• Dependent on three factors
• Demand
• Direct correlation
• Season
• Summer season sees higher prices vis-à-
vis winter season
• Quality
• Direct correlation
• Due to perishable nature of products, cost-plus
model is followed
• Final Price is a sum of the following
• Purchase Price
• Overhead expenses
• Profit margin
• Prices marked up by 20-30% and profits are ~20%
of total sales. However, profits are not fixed
Pricing Process
Vendors assemble at Wholesale
market everyday
Highest bid becomes
wholesale market price
for that day
Bidding starts at 5
am following
reverse auction
process
• Price changes daily
• Some vendors may yet charge a higher price provided the produce they are selling is of a superior quality

11. 10
Business Operations - Selling
Characteristics Observations
• Offer and price should be precise
• Offer shouldn’t be too complicated for the
consumer to assess
• Keep communication channel absolutely
simple and easy
• Customize their marketing pitch
• Display of merchandize in a manner so as to
attract consumers
• Fruit/Vegetable vendors and street hawkers
are the best marketers.
• Low priced products – Creativity in their
salesmanship for success.
• Vegetable sellers – Readymade bundles of
certain products to save time during rush hour
• Crowded Marketplace – Quarrels over
bargaining & cheating in measuring quantities.
• Decreased sales – Wastage of time.
Revenue Figures
• Revenues around INR 3,000-4,000 for small vendors to INR 12,000 for comparatively large vendors
• Profitability typically ranges between INR 500 – 3,000 per day

12. 11
Business Operations - Competition
Who From Why
Cart Vendor
Shops and
Markets
• Reasons of quality and customer preference
FVR Other FVRs
• Usually collaborate when required and carry out their
business
• In a market setting, they compete not on price but on quality
FVR Organized Retail
• Personal service and experience that is a hallmark of the
friendly neighborhood “sabziwala”
Wholesaler Wholesaler
• In the Jamshedpur region, new wholesale markets at Sakchi
and Kadma have added to the competition for the Bistupur
market
Vegetable
Vendors
Substitutes
• Soya Chunks, Cottage Cheese, Instant Meals, Sprouts and
other healthy options such as organic foods
• Increased Professionalization and dual income – Families
opting for instant meals or dining-in options
Fruit Vendors Substitutes • Artificial fruit beverages and other soft drinks/ eatables

13. 12
Challenges Faced
Challenge About Potential Remedy
Lack of Cold
Storage
• Low Shelf life of fruits
• The shop keepers spray water on the
fruits to make them look fresh
Wastage
(Spoilage)
• Unpredictable nature of sales
• Unforeseen circumstances - like bad
climate, bandh in the locality
• 20 - 30% stock goes waste
• Some big shops sell it to Restaurants,
Hand Cart vendors
• Some items are sold to feed cattle and
rest thrown off
Space Constraint
• Limited space especially for small
road side shops
• Maximize space by arranging products
vertically
Uncertainty in
Demand &
Delivery form
Supplier
• Majority of customers are not repeat
customers
• Few items are directly procured from
farmers
• Additional quantity of longer shelf life
vegetables procured.
• In case of shortfall, borrowed from
neighboring shop
Wholesaler faces
vendor collusion
• Retailers Collude on price doesn’t give
autonomy in price
• Timely delivery & Maintaining good
quality get Control in the market
Contingency Action
• Mutual Co-operation for stock lending amongst nearby FVRs in case of shortage of stock.
• Sometimes to drive down demand in peak periods, prices are jointly increased, until stocks are delivered

14. 13
Customer Inputs
Profile
• Varied classes of customers.
• Lower & Middle – Cheaper vegetables and basic
fruits.
• Middle & Upper – Bigger basket and varied tastes.
• Demand for special fruits and seasonal
fruits(Eg.. Litchi, good variety
Availability
• Most Common: Apple, Banana, Grapes & Oranges
• Buying Time: 50% – Evening | Free Time
• Seasonal Fruits: Watermelon, Pineapple, Litchi,
Strawberry and Peaches
Choice of Vendor
• Major Criteria: Proximity to Shop
• Preference: Mixed – Roadside & Super Markets
• Loyalty: Yes, after Multiple Transactions
Mode of Purchase
• Cash and Carry preferred by most of the
Customers. Rarely Credit
Quantity of Purchase
• Period: Purchase for Daily Consumption a
common phenomenon (>75%)
• Proximity of fruit shop is key.
• Basket size: Varies location to location
• Bistupur (Rs.100-120), Sonari (Rs.50-80).
Price Vs. Quality
• Clear Winner: Quality Win – 72% of Customers
• Taste Prevails over Nutritional Value
• Taste preferred by over 60% of customers
Miscellaneous
• Some customers prefer Cut Fruits & Juices
• Bargaining: Common Phenomenon
• At least 76% of cases – Vendors Overcharge

15. 14
Kirana Store – Our Understanding
Customer
Company
Distributor
Wholesaler
or APMC
(Mandi)
Retailer 1 Retailer 2 Retailer 3
• Refill Stock @
Retailer in 2-3 Days
1
• Varied Choices of
Kirana Stores
1
• Purchases in
Credit
• Home Delivery
Option
2
• Bulk Order –
Loyal Shop
• Else Purchase:
Distance of Shop
Items Availability
3
• Customer Base:
Middle & Lower
Middle Class
1
• Avg. margin – 10 to
15%
• Tax Evasion
2
• Credit to Customers
• Receives only 7 days
3
• Long Shelf Life F&V
• Impulse Buy Items
4
• Internal Adjustment
if stock runs out
5
• Threat – Supermarket
• Loyalty Cards, Bulk
Deals
6

16. 15
FVR / Kirana Vs. Super Markets
CRITERIA
INFORMALLY ORGANIZED
RETAIL
ORGANIZED RETAIL
Ownership Household Business Corporate Business
Size of Operation Small Medium-Large
Nature of
Employment
Family members etc. Hired employees
Product Availability
Selective Brands and
unbranded(loose items)
Wide variety of branded as well as
company branded products
Selling Price Usually at MRP Discounted if bulk purchase/MRP
Store Ambience Poor/dim-lit Excellent/Well-lit
Promotions
Company Promotion(Kirana)
Minimal in FVR(Shouting etc.)
Joint Promotions
Tax Payment Evasion is common Stronger enforcement
Market Experience High Low
Proximity to
Customer
Close(Round the corner) Far/Shopping Malls

17. Thank You
H14019 | Atin Aggarwal
H14030 | Maulik Gandhi
H14052 | Pratik Sai
H14055 | Tejesvi Dhankhar
H14058 | Vasudevan L
H14059 | Vinith Dwarkanath
H14060 | Vivekananda Reddy
H14061 | Varun Kumar
Yanamadala
HRM 2014-2016 Batch
XLRI Jamshedpur