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Rem term project

  1. 1. Praxis Business School Retail Business Plan: JooTaz... Get what you desire A report submitted to Prof. K. Dasaratharaman In partial fulfilment of the requirements of the course Retail Management On 15/09/2013 By Ankan Jyoti Bhattacharyya (B12010) Lakshman Singh (B12021) Subhra Dutta (B12050) REM Business Plan (JooTaz) Page 1
  2. 2. Sunil Manchandia (B12051) S_No Content Page No 1 Retail Scenario in India 3-5 2 Key Drivers 5-8 3 Key Challenges 8-11 4 Choice of Retail 11-13 5 Global Scenario (Footwear) 13-14 6 Indian Scenario (Footwear) 14-20 7 Market Size 20-21 8 CAGR (Present + Future) 21 9 Key Drivers (footwear) 21 10 Key Challenges (footwear) 22 11 Positioning platform • Global brands • Indian brands 22-28 12 Chosen Positioning & Key Aspects of Positioning 29-32 14 Model Store EBITDA 32-33 15 Capex Assumptions & Inventory Policy 33-35 16 Store Rollout strategy 36 17 People Strategy 36-37 18 Financials of the Store 37-40 19 Bibliography 41 REM Business Plan (JooTaz) Page 2
  3. 3. RETAIL SCENARIO IN INDIA India is one of the largest emerging retail markets, with a population of over one billion. It is one of the largest economies in the world in terms of purchasing power. Retailing in India is at a nascent stage of its evolution, but within a small period of time certain trends are clearly emerging which are in line with the global experiences. The Indian retail market is estimated to exceed US$ 750 billion by 2015, according to the India Retail Report 2013 (IRIS Research), presenting a strong potential for foreign retailers planning to enter India. India's strong growth fundamentals along with increased urbanisation and consumerism opened immense scope for retail expansion. Further, easy availability of credit and use of 'plastic money' have contributed to a strong and growing consumer culture in India. The untapped rural market also has high growth potential. Until 2011, the Indian Central Government denied Foreign Direct Investment (FDI) in multi- brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or other retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process. In late 2012, the Government of India passed a Foreign Direct Investment policy which allows foreign retailers to own up to 51 per cent in multi-brand retail and 100% in single brand retail and for cash and carry (wholesale) trading and exports. It is expected that these stores will now have full access to over 200 million urban consumers in India, approximately 47% of which are below the age of 30 with high levels of consumption According to A T Kearney’s Global Retail Development Index (GRDI) 2012, India is the 5th most favourable destination for international retailers. Of the total Indian retail market, 8% constitutes the organised retail segment which is estimated to grow at a rate of almost 30% by 2015, and hence at a much faster pace than the overall retail market which is forecast to grow by 16% in the same period. Clothing & Apparel make up almost a third of the REM Business Plan (JooTaz) Page 3
  4. 4. organized retail segment, followed by Food & Grocery and Consumer Electronics. India currently has a small penetration within the organized retail segment as compared to other emerging markets such as China, which has a penetration of more than 20% within organised retail according to the Global Retail Index report by the World Retail Conference. The Retail sector in India can be analyzed as per a SWOT analysis as: Using Porter’s Five Forces framework we can analyze the retail sector as: 1. Bargaining Power of Buyer: a. Low to Medium REM Business Plan (JooTaz) Page 4
  5. 5. b. Even though retailing is pretty old, but when it comes to modern retailing and the organized sector, the number of options for the consumer becomes limited c. Quality of products offered by modern retail in comparison to traditional retail also makes this factor low 2. Bargaining Power of Seller: a. Low to medium b. Even though the suppliers for a firm are more or less fixed and the number of suppliers for certain items is less, but even then the volume of buying made by a retailer makes up for the low number, thus making this factor low c. Also certain retailers (like Reliance, Wal Mart) who have strong cash backing can go for vertical integration thus reducing this power altogether 3. Threat from New entrants: a. Unorganized retail is a segment wherein this threat is very high, but when it comes to modern organized format of retail stores, this threat reduces significantly owing to the amount to capital expenditure required in setting up a store b. Hence this threat can be labelled as medium 4. Threat from Existing Competition: a. Existing firms in this sector are always a potential threat because they have the setup in place and this makes their job a lot easier REM Business Plan (JooTaz) Page 5
  6. 6. b. Among existing firms, the established ones exert more pressure on suppliers and buyers thus making the competition fierce (in a market dominated by margins) c. Unorganized sector and the traditional format is also seen as a threat d. This threat can be labelled as medium to high 5. Threat from Substitutes: a. Retail being a standalone sector doesn’t suffer from this threat b. Hence this threat can be labelled as low to negligible KEY DRIVERS Retailing is seen as an important sector of an economy, both in terms of contribution to GDP and share in the total employment. Retail sector accounts for around 10% of GDP of India. The following factors have been identified as being responsible for the growth of the overall retail industry in India. Demographic Dividend India has the lowest median age of 24 as compared to developed countries. The composition of the Indian population is shifting towards the age group of 20-49 i.e. the working population with purchasing power. Thus, India has the largest ‘young‘ population in terms of sheer size and this young segment is the major driver of consumption as they have the ability and willingness to spend. REM Business Plan (JooTaz) Page 6
  7. 7. Growth in Private Final Consumption Expenditure Studies have shown that Private Final Consumption Expenditure (PFCE) which accounts for close to 60% of GDP has seen an average growth of over 8.5% compared with an 8% average GDP growth in the same period. As Indians continue to climb the economic ladder, the composition of their spending will change considerably. In a pattern witnessed in many other developing countries, discretionary expenditures, such as mobile phones and personal-care products, will take up more room in the nation‘s shopping basket. This shift from necessities, defined as food and clothing, is already under way—and taking place at lower income levels than seen in other countries (Mc Kinsey 2007). It is expected that discretionary spending in India will rise from 52 percent of total private spending today to 70 percent in 2025. South Korea went through a similar transformation in the 1980s, when its per capita income levels were about twice those of India now. Steady saving rates In India, the household savings rate has traditionally been very high at about 69% as against 44% in China and 16% in the US, leading to slower consumption growth in the economy, as seen in the past. A primary cause of high saving rate in the country is the absence of any form of social security scheme. At a country level, the savings rate in India stands at 32.4% and household savings account for approximately 70% of this amount (McKinsey 2007). With increased accessibility of organized credit forms and their penetration into the remote areas of the country, the household savings rate is however expected to stabilize at the current levels. REM Business Plan (JooTaz) Page 7
  8. 8. This implies that the incremental income will comprise lower savings, and hence, drive consumption and further aid the retail growth. Increasing number of dual income nuclear families In India, hefty pay packets, nuclear family along with increasing working women population and dual income in family is increasing and contributing to prosperous retail sector. Changing lifestyle and consumer behaviour Due to increasing working population, comfortable life, travel and leisure are given importance. These key factors are growth drivers of retail sector in India which now boast of retailing almost all the preferences of life – apparel and accessories, Appliances, Electronics, cosmetics & Toilets cries etc. Availability of Credit There has been a radical change in the Indian consumer’s mindset regarding credit. With the easy availability of credit and declining interest rates, personal credit has witnessed growth. The boom in financing has resulted in an increase in spends on housing and consumer durables such as two-wheelers and cars. The use of plastic money has increased significantly total spending on shopping and eating out. REM Business Plan (JooTaz) Page 8
  9. 9. Supply Chain The consumer goods sector has been transformed by increased liberalization, continuous reduction in customs duty, a shift from quota to tariff- based systems for imports and sophistication in manufacturing over the past few years. Entry restrictions for multinationals have been removed in nearly all sectors. All this has enabled chain retailers to enjoy better range depth and sourcing options as well as improved average margins. There has been a proliferation in the range across all categories, with a simultaneous increase in the supply of products and quality retail space. Government norms On 14 September 2012, the government of India announced the opening of FDI in multi brand retail subject to approvals by individual states. On 20 September 2012, the government of India formally notified the FDI reforms for single and multi brand retail, thereby making it effective under Indian Law. Recent developments on FDI (Foreign Direct Investment) in retail are also being seen as a boost to the retail sector, esp. the organized format. The Government of India allowed 51% FDI in multi brand retail wherein up to 49% can come through automatic route. In single brand, Government has allowed 100% FDI where 49% is via automatic route and rest via FIPB (Foreign Investments Promotion Board). REM Business Plan (JooTaz) Page 9
  10. 10. KEY CHALLENGES FOR RETAIL (IN INDIA) The organized retail sector in India has been witnessing various issues and challenges which are proving to be a hurdle for its fast-paced growth. Even though the organized retail sector is in a very nascent stage in India, it provides ample opportunities for retailers, and mitigation of a few challenges will help the sector attain higher economies of scale and growth. Elucidated below are the challenges and risks that the sector faces: • Reduction in consumption • Competition from the unorganized sector • Retail sector has no recognition as an industry • High real-estate costs • Lack of basic infrastructure • Supply-chain inefficiencies • Challenges with respect to human resources • Margin Pressure REM Business Plan (JooTaz) Page 10
  11. 11. Consumption declines Private consumption expenditure is an important indicator of overall economic growth. In the last couple of quarters, the decline in consumption has further affected the global economic downturn. Moreover, widespread financial crisis severely hit credit availability and household disposable income, even after the general increase in disposable income. Competition from the unorganized sector Organized retailers face immense competition from the unorganized retailers or Kirana stores (mom-and-pop stores) that generally cater to the customers within their neighborhood. The unorganized retail sector constitutes over 94% of India’s total retail sector and thus, poses a serious hurdle for organized retailers. If put numerically, the organized retailers are facing stiff competition from over 13 million Kirana stores that offer personalized services such as direct credit to customers, free home delivery services, apart from the loyalty benefits. During the current economic slowdown, the traditional Kirana stores adopted various measures to retain their customers, which directly affected organized retailers. Generally, it has been observed that customers shop impulsively and end up spending more than what they need at organized retail outlets; however, in Kirana stores, they stick to their needs because of the limited variety. During a downturn, many customers may not like to spend more as is evident from the past few months’ trend that shoppers are increasingly switching from organized retail stores to Kirana. Retail sector yet to be recognized as an industry REM Business Plan (JooTaz) Page 11
  12. 12. The retail sector is not recognized as an industry by the government even though it is the second-largest employer after agriculture. Lack of recognition as an industry affects the retail sector in the following ways: • Due to the lack of established lending norms and consequent delay in financing activity, the existing and new players have lesser access to credit, which affects their growth and expansion plans • The absence of a single nodal agency leads to chaos, as retailers have to oblige to multiple authorities to get clearances and for regular operations High real estate costs Even though the real estate prices have subsided recently due to the slowdown in economies and the financial crises, these prices are expected to go up again in the near future. Presently the sector faces high stamp duties, pro-tenancy acts, the rigid Urban Land Ceiling Act and the Rent Control Act and time-consuming legal processes, which causes delays in opening stores. Earlier on the lease or rents on properties were very high (among the highest in the world) at some prominent locations in major cities. The profitability of retail companies were affected severely because real estate costs constituted a major part of their operating expenses. Now companies are moving out from prominent malls of tier I cities and are re-negotiating the rental agreements with landlords to reduce costs. Some are even focusing on setting up shops in tier II and tier III cities. Lack of basic infrastructure Poor roads and lack of cold chain infrastructure hampers the development of food retail in India. The existing players have to invest substantial amounts of money and time in building a cold-chain network. REM Business Plan (JooTaz) Page 12
  13. 13. Supply-chain inefficiencies Supply chain needs to be efficiently-managed because it has a direct impact on the company’s bottom-line. Presently the Indian organized retail has an efficient supply chain but it appears efficient only when compared with the unorganized sector. On an international level the Indian organized retailers fall short of international retailers like Wal- Mart and Carrefour in terms of efficiencies in supply chain.  Inventory management is the first challenge that retailers face at the local store level as well as at the warehouse level. Excess inventory often leads to an increase in inventory costs, and then to lower profits, so retailers like Pantaloons and Shoppers Stop have IT systems in place for inventory management. SCM-IT has helped retailers to plan their stock outs, replenish their stock on time, move stock from warehouse to stores, maintain adequate stock at a store to match consumer preferences etc. However, the retailer may still face a big challenge in terms of efficiently implementing the supply-chain software across stores and integrating it with the central warehouse, which can be a time-consuming process, requiring trained personnel.  Logistics is another challenge related to the supply chain. It is imperative for any organized food and grocery retailer to establish a robust cold chain. Amul is the best example of this scenario, as it has developed a cold storage chain across India. Until and unless organized retailers like Reliance and Food Bazaar fully develop integrated-cold chains, they would continue to incur loss of considerable amount of money through wastages of perishable items while moving huge quantities from one place to another. REM Business Plan (JooTaz) Page 13
  14. 14.  The third challenge related to the supply chain is procurement. Big organized retailers enjoy economies of scale based on their size and expansion plans. The economical benefits of scale in procurement are achieved when procurement is made in thousands or millions of units; however, the main challenge here is to procure adequate amount of stock according to customer requirements, failing which the resultant rise in inventory can affect bottom-line. Challenges with respect to human resources The Indian organized retail players shell out more than 7% of sales towards personnel costs. The high HR costs are essentially the costs incurred on training employees as there is a severe scarcity for skilled labour in India. The retail industry faces attrition rates as high as 50%, which is high when compared to other sectors also. Changes in career path, employee benefits offered by competitors of similar industries, flexible and better working hours and conditions contribute to the high attrition. Shrinkage Retail shrinkage is the difference between the book value of stock and the actual stock or the unaccounted loss of retail goods. These losses include theft by employees, administrative errors, shoplifting by customers or vendor fraud. According to industry estimates, nearly 3-4% of the Indian chain’s turnover is lost on account of shrinkage. The organized industry players have invested IT, CCTV and antennas to overcome the problem of shrinkage. REM Business Plan (JooTaz) Page 14
  15. 15. CHOICE OF RETAIL BUSINESS We had initially zeroed in on three retail segments: 1. Footwear 2. Apparel 3. Jewellery The reasons for rejecting the apparel and jewellery business are: Apparel Business: Indian apparel market is expected to grow annually at 13-15% by 2020. The industry would mainly grow because of the changing fashion trend, growing consumer class and urbanization. The domestic apparel industry constitutes of five segments – menswear, women’s wear, Kids wear, unisex and uniforms. Menswear is the largest segment whereas uniforms and women’s wear are the fastest growing segments Reasons for dropping the business: • Productivity levels for manufacturing various apparel items are far lower in India in comparison with its competitors. • Less availability of raw materials and inconsistent raw material prices • Absence of research and development • Lack of standardization and quality control • Though there is huge dependency on cotton, it’s per hectare yield is very less. REM Business Plan (JooTaz) Page 15
  16. 16. • Wool, silk and jute textiles have shown negative growth during the first quarter of the current fiscal year 2011-12 (-6.7%). • Huge slowdown in the industry in the coming years. Compared to the 50% growth in the industry two years, this time the industry is expecting a 30% growth only. • Labour force giving low productivity as compared to other competing countries. • Low bargaining power in a customer-ruled market. • India seriously lacks in trade pact memberships, which leads to restricted access to the other major markets. • Indian labour laws are relatively unfavourable to the trades and there is an urgent need for labour reforms in India. Jewellery Business The gems and jewellery industry occupies an important position in the Indian economy. It is a leading foreign exchange earner, as well as one of the fastest growing industries in the country. The two major segments of the sector in India are gold jewellery and diamonds. Gold jewellery forms around 80 per cent of the Indian jewellery market, with the balance comprising fabricated studded jewellery that includes diamond and gemstone studded jewellery. Besides, India is world's largest cutting and polishing Industry for diamonds. Gold jewellery market is growing at 15 per cent per annum and the diamond jewellery market at 27 per cent per annum. Reasons for dropping the business: REM Business Plan (JooTaz) Page 16
  17. 17. • Most of it is unorganized • Need huge capital to start off • It is expected to grow at a CAGR of around 13% during 2011-2013, which is very low compared to the footwear industry. • Gold being the most used jewellery in India, Indian gold production has shown a decline over the years. • Prices of stones have gone up by about ten times in the last four years. • Several small enterprises are finding it hard to exist with severe competition, margin squeeze, high cost of capital and high investment. • Increase in diamond prices by approximately 35-40% on average primarily due to a supply shortfall. • Increase in competition from China which is expected to become the biggest manufacturer of jewellery in a few years • Synthetic diamonds and other artificial jewellery sales may reduce the popularity of real diamonds amongst consumers as diamond prices continue to rise and consumers become more price conscious Footwear Business Growing at a compound annual growth rate (CAGR) of about 20 per cent on an average the Indian footwear industry is likely to reach about Rs 38,700 crores by 2015 from the current level of about Rs 22,000 crores. India produces nearly 300 crores pairs of footwear annually, exports over 10 per cent and accounts for about 15 per cent of annual global footwear production which is over 2,000 crores, according to a study titled ‘Indian Footwear Industry: An Analysis’ released REM Business Plan (JooTaz) Page 17
  18. 18. by The Associated Chambers of Commerce and Industry of India ( ASSOCHAM). The footwear is divided into various segments – formal, semi-formal, casual and sports. The domestic footwear market is driven by growing fashion consciousness together with increased disposable income among India’s urban middle class which contributes about 45 per cent of overall footwear market making India the second largest global producer of footwear across varied segments after China. Hence, we have finally chosen to start a retail business involving footwear under a multi brand outlet format (along with private label) named “JOOTAZ” using the Hindi name for shoes as our brand name. GLOBAL SCENARIO OF FOOTWEAR According to a new market report published by Transparency Market Research ”Footwear Market – Global Industry Size, Market Share, Trends, Analysis, and Forecast, 2012 - 2018,” the global footwear market was worth USD 185.2 billion in 2011 and is expected to reach USD 211.5 billion in 2018, growing at a CAGR of 1.9% from 2011 to 2018. In the overall global market, Asia Pacific is expected to maintain its lead position in terms of revenue till 2018. Asia Pacific is expected to enjoy 30.1% of the global footwear market revenue share in 2018 followed by Europe. The global footwear market is experiencing a stable growth rate due to changing fashion trends. This market has exhibited sustainable development owing to driving factors REM Business Plan (JooTaz) Page 18
  19. 19. such as rising demand for innovative designs, growing awareness about healthy and active lifestyle, rising population and disposable income levels, and rise in retail culture. The athletic footwear market is expected to grow at a CAGR of 1.8% from 2011 to 2018 to reach USD 84.4 billion by 2018. Non-athletic footwear is the largest market segment and is expected to grow at a faster CAGR as compared to the athletic footwear segment. Various fashion trends in the market such as demand for innovative designs and styles, and celebrity endorsement is driving the non-athletic footwear market. The global footwear market is segmented into Men, Women and Kids footwear. Men’s footwear market is a leading segment with 52% market share of the overall footwear market. Kid’s footwear market is expected to grow at a CAGR of 3.7% due to the high demand of comfortable and designer footwear for kids. Based on type of distribution, footwear retailing is sub-divided into store-based and non-store retailing. Store-based footwear retailing accounted for most of the footwear market revenue and is valued at USD 173.6 billion in 2011. Non-store footwear retailing is expected to gain pace in future and is expected to grow at a CAGR of 6.9% from 2011 to 2018 to reach USD 18,588 million by 2018.The Asia Pacific region holds the largest share at 42% of the overall footwear market and is expected to grow at a CAGR of 2.1% from 2011 to 2018 followed by Europe with 21% of market share. The Asia Pacific region remains the point of focus for footwear manufacturers due to the cheaper cost of manufacturing and faster growth in population and disposable income of consumer groups. Nike is the world leader in athletic and non-athletic footwear segment and comprehensively leads the overall global footwear market. The footwear market is largely consolidated with top five players including Nike, Adidas, Reebok, Puma and New Balance holding around 70% market share. Other major players in the footwear market are Asics, REM Business Plan (JooTaz) Page 19
  20. 20. Converse, Sketchers and K-Swiss. The popularity of local manufacturers and growing piracy in developing countries remains the major challenge for global footwear manufacturers. INDIAN SCENARIO With a direct employment of 2, 50,000 (with 50% of them being Women) and an export earnings of $14 billion, leather industry is a significant driver of economic growth. The Indian leather industry enjoys abundant availability of raw materials, availability of low cost skilled labour, and availability of supporting institutions. More than 4000 units are engaged in manufacturing, of which 95% are SME. India’s share in the global footwear imports is around 1.4% and future growth is expected from the SME’s venturing into value added products. Major competitors in the export markets for leather footwear are China (14%), Spain (6%), and Italy (21%). 55% of India’s leather export comes from US and UK, and Dubai in recent years had emerged as a trading destination to Africa and other markets. Global recession had a major impact on the industry, in terms of revenue fall and markets. Some saw a dip over 30% in their revenue. SME focusing on exports and producing only semi-finished leather witnessed low demand, increasing margin pressures and high inventories. With the collapse of traditional North American, Eastern Europe market, SME were expecting Dubai to bail them out. However, that did not happen. Cheaper alternate markets such as Russia, Eastern Europe emerged to fill in the coffers. A major challenge faced by the SME’s, especially in Vaniyambadi, Tamil Nadu is the cost of effluent treatment. Some SME’s tanneries that could not meet the cost of CETP norms were closed. The recession and the hardening of Indian Rupee against US Dollar is propelling leather companies the need to diversify and de-risk their business. Eyeing the sizeable REM Business Plan (JooTaz) Page 20
  21. 21. mall-hopping consuming class, manufacturers are turning retailers, either going ahead on their own or forging alliances with international partners. Foresight, Chennai based company is partnering with Pavers, of UK to introduce European fashion footwear brand Staccato in India. Reliance Brands has entered into an agreement with The Timberland Company, a major manufacturer of outdoor footwear and apparel. Future Group and the UK shoe retailer, Clarks, have formed a JV to bring high quality shoes to India. Domestic footwear retail business is witnessing a shift in channels too. With large volume brands sales remaining at high streets, and mid segment customers preferring to purchase shoe and other accessories in tandem with clothes, some of the retailers are reworking their presence. Footwear retailers prefer to use Malls to de-risk their channels and product lines. Domestic brands are moving beyond regional markets and embarking pan-India presence. From a primarily NCR player, Mahtani Fashion, an aggressive shoe retailer who owns Vi-Ga has plans to build a national presence. Domestic market offers tremendous opportunity and hope for diversification, de-risking the export heavy business. However, it does pose challenges and issues for new entrants. Customer Segments Retail footwear segment in Indian is very price sensitive and has been steadily growing over the year. Major part of the demand is met by the unorganized sector and still there is a shortfall of 300 million pairs. Branded shoe market only account for 20% of the entire market. While international brands largely dominate the higher end of the spectrum, the lower end of the market is dominated by home-grown players as well as unorganized players. While men's footwear is the biggest target category (contributing almost 48%), children's (11%) and women's lifestyle footwear (41%) is not behind in the race. REM Business Plan (JooTaz) Page 21
  22. 22. Segment wise classification of price ranges in the men’s footwear segments: Segments Price Ranges (in Rs) % of growth Mass market 185 – 700 60% (Liberty Bata) Economy market 700- 1000 30% (Bata Liberty) Sports market 1000 – 3000 7% (Nike Adidas) Premium leathers 3000- 5000 5% (Charles and Keith) Luxury 10000- 50000 1% (Gucci Louis Vuitton) Segment wise classification of women footwear segment: Segments Price Ranges (in Rs) % of growth Traditional footwear 699 – 999 5% Designer Footwear 599 – 799 10% Formals 299 – 699 40% Casual Wear 499 – 799 25% Sports Shoes 500- 699 20% The kid’s footwear segment is one of the fastest growing segments in India. The Indian kid’s footwear segment is highly fragmented and dominated by the unorganized sector. The branded kid’s footwear segment has a big card to play as India has the world’s largest child population. The overall kid’s retail segment has a robust margin of 20 – 25 % which is huge potential opportunities for organized branded retail footwear players. S&M is one of the players who have ventured into kids wear segment which has 27 exclusive outlets through franchise model. S&M sees a huge potential with age group of 3 – 16 years kids segment in the domestic market after the economic slowdown in the international market that hit the company’s revenues has now been targeting the growing consumers market of India. It has set up store in store format for optimized revenue flow. The store in REM Business Plan (JooTaz) Page 22
  23. 23. store format of business model has been the trend among many retail footwear players in India. Disney kid’s is another international brand which has forayed into exclusive kids shoes in India and has targeted kids within the age group of 5-10 years. Disney shoes have a tie-up with Sierra Industrial Enterprises to manufacture and market Disney shoes for kids in India. Disney aims to become the market leader in the kid’s footwear segment in India. The Disney shoe collection will include boots, sandals, slippers and sports shoes for boys and girls. The footwear’s has a price range from Rs 150 – Rs 850. Disney has targeted malls across the country and in prominent chain stores such as Lifestyle, Loft, Shopper’s Stop, Pantaloon and Central. Bata is one of the oldest brands which have a more than 50% share in the executive segment. As the young Indian executive class matures in terms of quality, design and brand, the preference will be more towards branded footwear and the growth is expected to be high in this segment with the migration of people from villages to cities for better career and profession. The footwear retail segment is currently one of the most organized sectors within the retail domain. However, this is purely due to the highly organized nature of the men’s footwear segment. The women’s category is largely unorganized, in fact close to 95% of the category is unorganized. With respect to the rest of the world, this is an anomaly as the women’s category is majorly organized and forms a big chunk of the market. Thus for us as retailers in the women’s footwear category, the market is still largely untapped and hence a big opportunity for growth. At present, almost all of the organized retailers in the women’s footwear category are located in the metros and Tier I cities and towns. The Tier II and Tier III towns have over the last few years seen a spurt in income driven by the service industry boom. Hence these towns definitely are a potential target. REM Business Plan (JooTaz) Page 23
  24. 24. Organized footwear market Vs Unorganized footwear market The average growth in the industry has been estimated at 12% and is estimated to touch Rs 47000 crore by 2025. Presently the Indian organized foot wear market is dominated by men’s footwear segment that contributes for nearly 60% of the market where the casual footwear has been better off with two thirds of the share in the men’s segment. The unorganized players have the lions share in the ladies and kids segment with 80 percent share. The organized footwear brands have less penetration in the ladies footwear segment mainly due to the complex buying behaviour of Indian women. The ladies and kids segment is one of the fastest growing segments in the branded footwear market and many foreign brands like Catwalk have ceased the opportunity and have set their footprints in this segment which has been untapped by major traditional Indian footwear brands. Considering this many of the Indian footwear brands have seen growing opportunities in the segment to widen their product portfolio, widen their risk appetite and increase their market share in the footwear segment by contributing to newer growing consumer segment which will boost the bottom lines of the retail players. The business models of the footwear retail players have been different with a wide popularity of stores in high streets, malls and new formats such as store in store has been catching up even with international brands having gone the store in store model which has been the most cost effective model in terms of testing the markets. Major challenges in running domestic retail a) Retail presence: Till recently, most companies invested in own stores as the means to grow and expand. With commercial rents increasing in last few years, capital required for expansions was a bottleneck. REM Business Plan (JooTaz) Page 24
  25. 25. b) Credit Management: Brands that had no local presence, but preferred the third-party retail route had to face the challenge of receivables, often the credit period as high as 120 days. c) Brand: Many of the leather firms are SME’s, have great experience in trading and vendor management, but completely lack brand building experience. Even when attempts were made, they lacked focus and consistent efforts, thereby diluting the impact. d) Low IT investment: Except the major leather manufacturers, none of the companies had an ERP connecting POS data so as to effectively manage inventories. It was not common to have rounded the year’s discount offerings to get over the inventories. The SWOT analysis of Indian footwear industry can be given as: STRENGTHS: -  Existence of more than sufficient productive capacity in tanning.  Easy availability of low cost of labour.  Exposure to export markets.  Presence of qualified leather technologists in the field.  Easy availability of raw materials and other inputs.  Massive institutional support for technical services, designing, manpower development and marketing.  Exporter-friendly government policies.  Tax incentives on machinery by Government. REM Business Plan (JooTaz) Page 25
  26. 26.  Well-established linkages with buyers in EU and USA. WEAKNESSES: -  Low level of modernization and upgradation of technology  Less number of organized product manufacturers.  Lack of modern finishing facilities for leather.  Highly unhygienic environment.  Awareness of international standards by many players is low as the segment is mostly comprised of SME’s  Difficulties in access to testing, designing and technical services.  Environmental problems.  Non availability of quality footwear components  Lack of fresh investment in the sector.  Uneconomical size of manufacturing units.  Competition among units vying for export orders leading to undercutting.  Little or no brand image.  Low machine, material & labour productivity.  Delayed deliveries  Weak support infrastructure for exports OPPORTUNITIES: -  Abundant scope to supply finished leather to multinationals setting up shop in India. REM Business Plan (JooTaz) Page 26
  27. 27.  Growing fashion consciousness globally.  Use of information technology and decision support software to help eliminate the length of the production cycle for different products  Product diversification: there is lot of scope for diversification into other products, namely, leather garments, goods etc.  Growing international and domestic markets.  Exposure to newer markets through Fairs/ BSMs  Aim to present the customer with new designs, infrastructure, country & company profiles.  Use of modern technology  Exhibit strengths in manufacturing, for example, strengths in classic shoe manufacturing, hand crafting etc.  De-reservation of the footwear sector. THREATS: -  Entry of multinationals in domestic market.  Stiff competition from other countries (The performance of global competitors in leather and leather products indicates that there are at least 5 countries viz. China, Indonesia, Thailand, Vietnam and Brazil, which are more competitive than India.)  Improving quality to adapt to the stricter international standards.  Fast changing fashion trends are making it difficult to adapt for the Indian leather industries. REM Business Plan (JooTaz) Page 27
  28. 28.  Limited scope for mobilizing funds through private placements and public issues, as many businesses are family-owned. The SWOT analysis for our retail store “JooTaz” can be given as: STRENGTHS: -  The presence of a strong IT backbone to support our sourcing and day to day activities is a strength for us when compared to traditional footwear outlets  The proposed assortment of our store is another strength as we plan to cater to a wide base of customers (by keeping brands like Action, Liberty to Adidas, Nike etc and our in-house brand too) WEAKNESSES: -  Being a new store, our capacity (in terms of finances and space acquirement) would be low  Due to cost of real estate in prominent locations of Kolkata, we are not able to start our store in the areas like Park Street, Maidan, Alipore etc. where our primary TG resides OPPORTUNITIES: -  Growth of the footwear market in India at a rate of 12% provides great opportunities for our store  The location of our store is also an advantage as there are not many footwear outlets like ours in that area (Rash Behari)  The growing affluence in Kolkata is also a positive for our store REM Business Plan (JooTaz) Page 28
  29. 29. THREATS: -  Entry of multinationals in domestic market  Presence of a strong unorganized footwear market and existing traditional format stores  Stiff competition from online brands like Myntra, Jabong etc who also provide footwear along with apparel CURRENT PLAYERS For this research we have taken the following global and local players respectively: Global Players: • Puma • Wolverine World Wide Inc. Local Players: • SreeLeathers • Liberty The data on revenues and EBITDA for each of the players is given as: Global Players: Global Players Puma Wolverine World Wide Inc. 2011 (in million) 2012 (in million) 2011 (in million) 2012 (in million) Revenue 2288 2466 1,409,068 1,640,838 Cost of goods sold 1131 1246 852,316 1,008,197 REM Business Plan (JooTaz) Page 29
  30. 30. EBITDA 285 168 170,218 113,724 Local Players: Local Players SreeLeathers Limited Liberty Shoes 2011(in lacs) 2012(in lacs) 2011(in lacs) 2012(in lacs) Revenue 4032.31 4427.8 29694.02 33228.52 Cost of goods sold - - - - EBITDA 612.25 774.52 2516.29 2958.25 MARKET SIZE IN INDIA • Current Scenario: The current market size of footwear retail in India is around $35 billion (which comes up to about Rs. 22,000 crores). • CAGR (present & future): The current CAGR is 15% and is expected to touch 25% in next 10 years, bringing the average CAGR to about 20%. REM Business Plan (JooTaz) Page 30
  31. 31. KEY DRIVERS FOR FOOTWEAR INDUSTRY The drivers for the footwear industry in India can be stated as: • Increasing disposable income and growing number of middle-class households leading to increase in aspiration levels • Growing fashion-consciousness • Increasing number of working women • Increasing penetration in Tier II and Tier III cities • Online availability • Low-cost production • Abundance of raw material • Skilled manpower • Government initiatives boosting the industry • High export potential KEY CHALLENGES FOR FOOTWEAR INDUSTRY The challenges for the footwear industry in India can be stated as: • Entry of large players to stiffen competition • High rate of turnover REM Business Plan (JooTaz) Page 31
  32. 32. • Stiff competition from other countries leading to cheaper products being made available • Fast changing fashion trends make it difficult for local players to compete • Environment related issues POSITIONING MAP OF CURRENT COMPETITORS: Our competitors can be categorized as: GLOBAL BRANDS: Puma, Wolverine INDIAN BRANDS: Liberty, SreeLeathers We start off describing the Indian brands followed by the Foreign brands: Liberty- Liberty as a brand name came into existence in 1954. Their first task was to create awareness of the liberty brand name in the Indian market. Their advertising and promotion strategy over the years has consistently aimed at positioning Liberty as a complete family footwear brand. They initially targeted the upper segment as their core market. Then later on they also shifted to middle and lower segment as the premium segment doesn’t offer proper volume. As market conditions changed with changing fashion liberty tried to change its positioning to a brand which is not only comfortable, durable and great value for money but also a more vibrant and contemporary brand too. REM Business Plan (JooTaz) Page 32
  33. 33. Positioning of different brands under liberty- Positioned as fashionable sports shoes Special men’s formal shoes Positioned as an executive range especially for people who are always on the move A sandal for both men and women which can be used anywhere and for any purpose For women who are more fashion conscious REM Business Plan (JooTaz) Page 33
  34. 34. For married women who look for comfort more than fashion. A brand which would cater the needs of all starting from 4 years to 50 plus. It is positioned as a young brand. A brand especially for school going kids. A special brand which is a shoe for industrial application with safety benefits used in factories and for army. SreeLeathers- It’s a 35 store nationwide chain which stared at Jamshedpur who sells durable and affordable shoes to the common man, positioned mainly as a value for money brand. Its price range starts from Rs 100 and the highest priced shoe cost Rs 799. They sell all their products under one brand name “SreeLeathers” helping them to keep their prices low. REM Business Plan (JooTaz) Page 34
  35. 35. Puma The PUMA group owns 2 brands that manufacture shoes- PUMA and Tretorn. Both the brands are positioned as sport and adventure shoes used for playing different games or for any kind of adventures sport. Positioning of different brands under puma- This brand has positioned itself both as a sports and fashion brand. They say “PUMA starts in sports and end in the fashion”. Its sports performance and lifestyle labels include categories such as football, running etc. Initially PUMA was positioned only as a sport brand but later on it also moved to fashion and now they position themselves to be a brand which is two in one. This brand is positioned as casually and stylish understated brand. It mainly specializes in boots used for different purpose. They target the group of people who largely enjoy outside. They specialize in rubber made product, positioning themselves as a brand which is consistently committed towards quality. REM Business Plan (JooTaz) Page 35
  36. 36. Wolverine world Wide Inc- This footwear brand has positioned itself as a brand that cater to the needs of its countless customers be it someone who look for fashion or someone who would look for safety. Wolverine always emphasizes that its products deliver both comfort and value. They produce all kind of footwear used for work, sports and rugged casual which delivering comfort, style and value to all variety of customers. Positioning of its different brands under Wolverine- A brand positioned as casual footwear with an individual style that makes it cool to be comfortable A brand positioned as a heavyweight lifestyle brand with a heavy equipment heritage producing performance work boots and lifestyle footwear for men, women and children A brand producing boots and shoes under it and positioning itself as one which is specially made for those in uniform. Their tagline “Bates commitment is heartfelt and hard-earned” which they believe is visible in the quality footwear and their design REM Business Plan (JooTaz) Page 36
  37. 37. Initially positioned as a brand which is a river guide seasonal shoes fit for water and also for all kinds of adventure water sports. Today Chaco is positioned as a brand which follows the “healthy feet, healthy body” mantra inspiring a pure connection to the product Positioned as a brand which is loyal, tough and fearless. Harley Davidson footwear embodies the spirit of the open road as well as the men and women who proudly wear the name. They market functional riding and fashion footwear delivering value and quality Positioned as an industrial wear which gives comfort and safety. They offer the most complete line of safety products available also being the first to market athletic safety footwear. Initially positioned as champion sneaker with a simple and chic design which captured the heart of girls everywhere from fashion icon to a girl next door. Today it is positioned as a head-to- toe fashion lifestyle brand fueled by passion for imagination, imagination, inspiring a new generation of girls to remain authentic, optimistic and brave. Positioned as footwear mainly to inspire the outdoor athlete in everyone with products at the horizon of performance and style. REM Business Plan (JooTaz) Page 37
  38. 38. Positioned as a brand that is committed to the environment and committed to their customers. It is a conscientious outdoor brand which believes that its success would be able to inspire others. It justifies its mantra by developing product that causes least amount of harm to the nature. A Brand positioned as one which is specially designed for runners that fuses performance and innovation along with style to produce award winning footwear. Positioned as a brand which offers some of the world’s finest hand sewn and performance marine footwear for both men and women. They boost their footwear to be one that is similar to the cobblers who make footwear with great loyalty and have the best hand craftsmanship. REM Business Plan (JooTaz) Page 38
  39. 39. A footwear that is positioned as the first boat shoe for sailors which deliver both quality and design for an enduring sense of style, justifying their tagline which says “for people drawn to the surf, sun and soul of the ocean”. A footwear brand specially made for children that moms trust and kids love. They positioned themselves as footwear that not only delivers safety but also style quality and health that help to enrich the journey of childhood one step at a time. Putting all competitors in a positioning map, we can see: REM Business Plan (JooTaz) Page 39
  40. 40. CHOSEN POSITIONING: We have positioned our self as a brand that offers good quality products at reasonable prices. Our target is the Upper-Middle class of Kolkata, who crave for branded products but at the same time are still a bit price-conscious. We are a multi brand outlet selling brands like Liberty, Nike, Adidas, and also our own brand, “JooTaz” which is a semi-premium to premium brand catering to this class of people. We have placed our store keeping this positioning in mind and chosen Rash Behari as our location. This location attracts a lot of people from different backgrounds esp. our chosen TG. REM Business Plan (JooTaz) Page 40
  41. 41. POSITIONING PLATFORM: The positioning of our store can be defined in terms of the marketing mix (4p’s) as follows: • PLACE: The store is located in Rash Behari with a catchment of the following areas:  Hazra  Hindustan Park  Gariahat  Ballygunge  Alipore  Lake Gardens  Jodhpur Park  Deshapriyo Park  Bhowanipore The catchment map can be shown as: REM Business Plan (JooTaz) Page 41
  42. 42. • PRODUCT Our store focuses on selling quality products from reputed brands and concentrates on semi premium, premium and luxury products • PRICE The average price of our shoes ranges between 500-1500 rupees, with highest prices going up to Rs. 3000-3500 and lowest up to Rs. 450-500 • PROMOTION For promotion of our store we would use pamphlets sent out via regional and English language newspapers. We would also use social media like Facebook to generate a buzz amongst the customers. At the initial phase of launch, we would also put out print advertisements in newspapers and magazines. In newspapers we would use TOI and The Telegraph (English language) and ABP (Regional). For magazines we would use regional magazines like Sananda, Desh etc. which are preferred by the localites. REM Business Plan (JooTaz) Page 42
  43. 43. PENTAGON-TRIANGLE MODEL PENTAGON ELEMENTS: • Place: The store would be of 2200 sq ft, located in Ras Behari Avenue, Kolkata. The store would have a trading area of 1400 sq ft approximately (after excluding the back office of 200 sq ft and a warehouse of 600 sq ft). The store layout is as shown: REM Business Plan (JooTaz) Page 43
  44. 44. • Product: The store would have two major styles: Indian and Western. This would further be subdivided into Indian brands, foreign brands and our In-House brand, "JootaZ". The styles included would be broadly classified into MEN (Formal/Casual & Sportswear/Flip-flop/Canvas), FEMALE (Sandal/Flip- flop/Shoe), KIDSWEAR (Shoe/Flip-flop/Canvas) • People: Since the store is located in Kolkata, the majority of the employees would be local people, who would be trained in handling the kind of customers who would frequent our store (typically upper middle class people). The stacking in the store would be done as per the SOP’s defined • Value: REM Business Plan (JooTaz) Page 44
  45. 45. The products would typically be priced between Rs. 500 and Rs. 1500, taking an average of all brands in consideration. The customers would also be provided discounts if they refer other customers to our store. There would also be End-Of- Season discounts at times • Communication: The external communication for our store would be “JooTaz: Get what you Desire”. We don’t have any internal communication as such TRIANGLE ELEMENTS: • System Since we are a start-up, hence we make use of a basic ERP system which would be Open-Source and Free-to-Use (or Pay-per-Use) like OpenBravo ERP. This would help us store and analyze data and at the same time save costs. • Logistic Since we are only bringing in inventory from suppliers (other brands and our in- house brand) and selling it at our store, hence we have implemented another open-source SCM system to streamline our process (Apache OFBiz) • Supplier We have primarily two types of suppliers: o Suppliers of other brands: we sell other brands like Liberty, Nike, Adidas etc. and distributors of these brands are one section of our suppliers REM Business Plan (JooTaz) Page 45
  46. 46. o Suppliers of our in-house brand: we also sell JooTaz, our in-house brand that we have outsourced to other entities, and they form the second section of our suppliers MODEL STORE EBITDA: Industry Benchmark (in Rs.) Annual in % Sales 586104593 100% Purchase 409797696 70% GM% 176306897 30% Operating and Other Expenses 204238150 35% EBITDA -27931253 -5% Above is the data of Reliance Footprint. We have considered this as a benchmark and created the EBITDA model for our store. Store EBITDA Model of JooTaz (1 st year) Year 2014 No. of Store 1 Average Area (in sq ft) 2200 (in Rs.) Rs. per sq.ft in % REM Business Plan (JooTaz) Page 46
  47. 47. Annual Net Revenue 29294640 13316 100% GM % 22.00% 22.00% 22.00% RGM 6444820.8 2929 22.00% Opex:- Rent 1800000 818 6.14% People 1560000 709 5.33% Power 240000 109 0.82% others 2286000 1039 7.80% Total Opex 5886000 2675 20.09% Store EBITDA 558820.8 254 1.91% Assumptions- • Net revenue - We have assumed that the initial sales of the store would be 40 units in weekdays and 60 units in weekends of all the segments i.e. male , female and kids for all the brands (Foreign , Indian and In-house ) • Rent - As per our research on the target audience we shortlisted Rash Behari Avenue , Kolkata as the prime location of our store and found out a store available with a suitable size 2200 sq ft with a monthly rent of Rs 1,50,000. • People - For the daily operations we would employee one store manager, one supervisor, one cashier, eight Customer Care Associates , two sweepers and one watch man . REM Business Plan (JooTaz) Page 47
  48. 48. • Others - These include Power, Water, Telephone, Insurance, Office supplies and Sales Receipt CAPEX AND INVENTORY POLICY: Capex Assumption: Capex Assumptions S# Descriptions Qty Amount Total Amount A. Store Construction and Design: 1 Store Remodeling (flooring, painting, carpentry, etc.) 1000000 2 Interior design and decorating costs 500000 3 Air Conditioning 4 30000 120000 4 Fire Alarms (Wireless smoke detector + fire alarm system) 4 2600 10400 5 Installation costs (lighting, etc) 500000 6 Displays, showcases, shelves/racks, sales counters and sales registers 20 15000 300000 7 Back-office furniture, shelving and fixtures 100000 Total 2530400 B. Equipment: 1 Computers 2 30000 60000 2 Point of sales systems (Credit card and check processing machines, bar code reader, cash drawer, cash register, POS software, etc.) 1 200000 200000 3 Fire extinguishers (gross weight 14. 6 kg) 2 2500 5000 Total 265000 C. Miscellaneous Miscellaneous 150000 Total 150000 Total Fixed Capital (A+B+C) 2945400 REM Business Plan (JooTaz) Page 48
  49. 49. Inventory Policy: The inventory policy can be categorized into four categories namely: • Stocking norms • Credit Period • Turns • Working Capital tie-up Stocking Norms: At the start of the business, we shall acquire three months' worth of stock and then we shall continue with one and half months' worth of stock. Credit Period: As a new entrant into the market we shall start off with a credit period of 30 days with our suppliers and then after building a rapport, we shall negotiate terms to have a 60 day credit period. Turns: Our inventory shall be replenished every 1.5 months with excess stock from previous months adjusted. Working Capital Tie-up: Sales Value (total) in a year 3 crs REM Business Plan (JooTaz) Page 49
  50. 50. Inventory Value (reducing gross margin of 22%) 2.34 crs Replenishment period 1.5 months Turns (in a year) (12/1.5=) 8 WC locked up (2.34crs/8=) 29.25 lakhs The EOQ model of our store can be seen below: EOQ Model of our Store ROLL OUT STRATEGY: Product & Brand The first store shall be launched in Rash Behari area of Kolkata. The store shall initially be a multi-brand footwear outlet which shall also feature our own in-house brand “JooTaz”. REM Business Plan (JooTaz) Page 50
  51. 51. Our store shall feature prominent brands like Adidas, Reebok, Nike etc and Indian brands like Action, Liberty etc. Our in-house brand would be a brand targeted at the middle and upper-middle class of Kolkata and shall provide wide range of options for both the youth of Kolkata and the middle aged population. Vision & Mission Our vision is in-line with our tagline (positional communication) “GET WHAT YOU DESIRE”. We strive to provide quality footwear solutions to all design and quality conscious consumers. Our mission is based on only one goal: Customer Satisfaction. For us customer satisfaction is paramount and we have taken special measures to ensure this facet. Store Format & Type Our store shall be a modern retail outlet in a MBO format spread over an area of 2200 sq ft. the store shape would be the conventional rectangular format. It would be started off as a standalone store in the location. Number of Stores (Speed of Rollout) Our store shall start off with one location, and at present, we have no expansion plan in the near future (up to 6years). We plan to scale up our assortment in the existing store from the second year (based on profits). We also have a plan to expand into newer areas after the 6 year hiatus and the locations we have in mind are New Town, Garia, (in Kolkata) and to Shillong, Guwahati (in other states). This is dependent upon the reception we receive for our first store and the profits we earn. PEOPLE STRATEGY REM Business Plan (JooTaz) Page 51
  52. 52. We plan to employ a total of 14 employees who shall be recruited based on relevant experience in the retail sector. For the store manager, we shall recruit a person with experience in the footwear sector (at least 4-5 years in footwear). The customer care associates and the supervisor shall be recruited based on their experience (at least 3-4 years) in the organized retail sector. S_No . Employees Number Employed 1 Store Manager 1 2 Supervisor 1 3 Cashier 1 4 Customer Care Associates (Operators) 8 5 Watchmen 1 6 Sweepers 2 Total 14 FINANCIAL ANALYSIS OF JooTaz The summarized financials of our store are as follows: Store EBITDA Model (for the years 2014-2019) Year 2014 to 2019 No. of Store 1 Average Area (in sq ft) 2200 Annual (in Rs.) 2014 2015 2016 2017 2018 2019 Net Revenue 17849210 24252990 30656770 41182320 44384210 49868110 REM Business Plan (JooTaz) Page 52
  53. 53. GM % 22% 22% 22% 22% 22% 22% RGM 3926826. 2 5408416.77 6836459.71 9183657.36 9897678.83 11120588.5 Opex:- Rent 1800000 1800000 1890000 1984500 2083725 2187911.25 People 1560000 1653600 1752816 1857984.96 1969464.06 2087631.9 Power 240000 247200 254616 262254.48 270122.114 278225.778 others 726000 798600 878460 966306 1062936.6 1169230.26 Total Opex 4326000 4499400 4775892 5071045.44 5386247.77 5722999.19 Store EBITDA -399173.8 909016.77 2060567.71 4112611.92 4511431.06 5397589.34 Converting this model into the PSFT (Per Square Foot) model we have: Rs. per sq ft 2014 2015 2016 2017 2018 2019 Net Revenue 8113.28 11024.09 13934.90 18719.24 20174.64 22667.32 GM % 22% 22% 22% 22% 22% 22% RGM 1784.92 2458.37 3107.48 4174.39 4498.94 5054.81 Opex:- Rent 818.18 818.18 859.09 902.05 947.15 994.51 People 709.09 751.64 796.73 844.54 895.21 948.92 Power 109.09 112.36 115.73 119.21 122.78 126.47 Others 330.00 363.00 399.30 439.23 483.15 531.47 Total Opex 1966.36 2045.18 2170.86 2305.02 2448.29 2601.36 Store EBITDA -181.44 413.19 936.62 1869.37 2050.65 2453.45 Profit & Loss Statement (for the years 2014-2019) Based on our store EBITDA model, the projected statement of Profit & Loss (P&L) is as follows: Particulars 2014 2015 2016 2017 2018 2019 REM Business Plan (JooTaz) Page 53
  54. 54. Income: Total income from operations 17849210 24252990 30656770 41182320 44384210 49868110 Expenditure: Cost of Goods Sold 13922383.8 18844573.23 23820310.29 31998662.64 34486531.17 38747521.47 Selling and Operating Expenses 2766000 2845800 3023076 3213060.48 3416783.714 3635367.288 Staff Costs 1560000 1653600 1752816 1857984.96 1969464.058 2087631.901 Depreciation/Amortization 283702.5 283702.5 283702.5 283702.5 283702.5 283702.5 Interest 1031938.5 1031938.5 1031938.5 1031938.5 1031938.5 1031938.5 Total Expenditure 19564024.81 24659614.24 29911843.3 38385349.09 41188419.95 45786161.67 Net Profit Before Tax -1714814.808 -406624.2378 744926.7022 2796970.912 3195790.05 4081948.333 Tax (33.99%) -582865.5532 -138211.5784 253200.5861 950690.4131 1086249.038 1387454.238 Net Profit After Tax (1131949.255) (268412.6594) 491726.1161 1846280.499 2109541.012 2694494.095 Balance Sheet (for the years 2014-2019) The projected balance sheet of our store is also shown below: Particulars 2014 2015 2016 2017 2018 2019 Liabilities Capital 2589141.9 2589141.9 2589141.9 2589141.9 2589141.9 2589141.9 Reserves & Surplus -1131949.3 -268412.7 491726.1 1846280.5 2109541.0 2694494.1 Debt 4923981 4630640 4293297 3905353 3459218 2946162 Total Liabilities 6381173.8 6951369.1 7374165.341 8340775.81 6 8157900.8 8229798.1 Assets Fixed Assets 2945400 2661697.5 2377995 2094292.5 1810590 1526887.5 Less: Depreciation 283702.5 283702.5 283702.5 283702.5 283702.5 283702.5 Total Fixed Assets 2661697.5 2377995 2094292.5 1810590 1526887.5 1243185 Inventories 2231151.25 3031623.75 3832096.25 5147790 5548026.25 6233513.75 Cash and Bank Balances 1488325.1 1541750.3 1447776.6 1382395.8 1082987.1 753099.3 REM Business Plan (JooTaz) Page 54
  55. 55. Total Assets 6381173.8 6951369.095 7374165.341 8340775.81 6 8157900.835 8229798.099 Funds Flow Statement (for the years 2014-2019) The projected fund flow statement of our store is as shown: Particulars 2014 2015 2016 2017 2018 2019 Sources Promoter's Funds Equity 2589142 2589142 2589142 2589142 2589142 2589141.893 Long term loans 4923981 4630640 4293297 3905353 3459218 2946162 Funds from operations -399173.8 909016.8 2060568 4112612 4511431 5397589.341 Total Sources 7113949 8128799 8943007 10607107 10559791 10932893.35 Application Fixed Assets 2661698 2377995 2094293 1810590 1526888 1243185 Current Assets 2231151 3031624 3832096 5147790 5548026 6233513.75 Repayment of loan 1031938.5 1031938.5 1031938.5 1031938.5 1031938.5 1031938.5 Total Application 5924787 6441557 6958327 7990319 8106852 8508637.258 Increase/Decrease in cash during the year 1189162 1687241 1984680 2616789 2452939 2424256.088 Opening Balance 0 1189162 2876403 4861083 7477872 9930810.322 Closing Balance 1189162 2876403 4861083 7477872 9930810 12355066.41 Based on the projected earnings of our store the estimated IRR for our store (using DCF method) is: Year 0 1 2 3 4 5 6 Cash Flow (2945400) (399174) 909017 2060568 411261 2 4511431 539758 9 DCF (2945400) (362885) 751254 1548135 280896 9 2801244 304679 8 REM Business Plan (JooTaz) Page 55
  56. 56. Discount Rate 10% NPV 7648115 IRR 46% We have taken a discount rate of 10% to arrive at an IRR of 46% for the store. REM Business Plan (JooTaz) Page 56
  57. 57. BIBLIOGRAPHY f %20Assets/Documents/Thoughtware/Indian_Retail_Report_Opening_more_doors.pdf REM Business Plan (JooTaz) Page 57
  58. 58. foothold-in-international-market-Study/articleshow/21529684.cms reports/WWW_2012_oar/assets/WWW2012AR_with_10K_119pg.pdf REM Business Plan (JooTaz) Page 58