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

Objectives and Approach

Objective
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

Approach
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

Secondary
Research:
NSSO 68th
Round
Indicus
Analytics
EY & IBEF
Reports

Primary &
Secondary
Research

Deliverable
Transcription
& Collation

Analysis

Market Sizing
Business Model
Strategy Map
CSFs
Business
Operations
Challenges Faced
Voice of Customer
Kirana Stores Vs
Organized Retail

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
1

The Fruits & Vegetables Retail (FVR) Industry

Model supply chain observed in the sector:
Producer

12 Million
Traditional Indian Retail
Outlets

Agents

Wholesalers

40%
selling vegetables and
grocery

Consumers

Number and Variety of Intermediaries Involved:

Highly localized and

fragmented structure

Source:

IBEF Report (2008), EY Report (2006)

Traditional
Retailers

Vendors

97%
Informally organized
FVR market

Auctioneers

Source:

Mom & Pop Stores

Pushcart Sellers

Temporary Shops

Wholesale Traders

Pavement Vendors

Commission Agents

Roadside Vendors

Auctioneers

Primary Interviews

Expenditure on Food in India

All India

Urban India

Rural India

INR 18.07 Tn.

INR 6.73 Tn.

INR 11.34 Tn.

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

4.30

4.00

4.50

INR 43.80

INR 52.89

INR 39.30

Total HH
Spend

~INR 18 Trillion
Total Household Spend

~263 Million
Households in India

~INR 68,745
Annual per Household spend

Total HH

Average HH
Size
Daily Per
Capita
Spend

Source:

Indicus Analytics Market Skyline of India (2013)

Source:

Indicus Analytics Market Skyline of India (2013), NSSO 68th Round, Team Analysis

NOTE: This is the expenditure on Food items and not limited to Fruits and Vegetable items only

Strategy Map
Stock Management
Customer Satisfaction
PROFITABILITY
Quality

MARGIN

VOLUME

Wholesaler / Supply Chain Logistics

Reduce Wastage

Exotic Varieties
Marketing

Seasonality

Demand

Trend Analysis

Location
Items on Shelf

Situational Factors
Line of Credit

Prices of Products

Competition
Availability of Substitutes

Revenue

CSFs
4

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

Quality
Closely linked with pricing strategy
Supplier/ wholesaler relationship for

better prices and quality

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

KPIs Repeat customers

5

Typical Business Model

KEY PARTNERS

KEY ACTIVITIES

Farmers

Procurement
Organizing in the
store
Pricing decisions
Direct Marketing

Wholesalers
Supplier

VALUE
PROPOSITION

CUSTOMER
RELATIONSHIPS

CUSTOMER
SEGMENTS

Satisfying the
staple food needs
for consumers

New Customers
through proximity
Regular customers
through lucrative
pricing offers

Socio Economic
Classes - A, B,C,D,E

Fulfilling the
nutritional needs

Other Retailers

KEY RESOURCES
Location
Working Capital
Manpower
Stock
Time

Exotic fruits
Upper class
Basic fruits and
vegetables
Middle class

Very few customer

segments that are
not served

CHANNELS
Handcarts
Standalone stores
Market

COST STRUCTURE

REVENUE STREAMS

Cost of the stock

Transportation
Labour cost
Real estate rent / Cost of handcart; and maintenance

B2C sales

Typical Business Model

KEY PARTNERS

KEY ACTIVITIES

VALUE
CUSTOMER
CUSTOMER
PROPOSITION
RELATIONSHIPS
SEGMENTS
Some
Observations
on
the
business
model
during
our
interaction
with
Retailers:
Farmers
Procurement
Wholesalers
Organizing in the
1.
Handcarts
/
Push
Carts
Supplier
store
Other Retailers
Pricing
decisions
1. Price over
quality
Direct Marketing

2.
2.

Standalone stores
KEY RESOURCES

1.
2.
3.
3.

Leveraging proximity

Quality focus

Satisfying the staple

food needs for
consumers
Fulfilling the
nutritional needs
Exotic fruits Upper
class
Basic fruits and
vegetables Middle
class

Location
Working
Location
plays aCapital
key role
Manpower
Stock
Customer
relationship is important
Time

New Customers
through proximity
Regular customers
through lucrative
pricing offers

Socio Economic
Classes - A, B,C,D,E
Very few customer
segments that are not
served

CHANNELS
Handcarts
Standalone stores
Market

Market

1. Cooperation among vendors

COST STRUCTURE
2.

Bargaining power with wholesalers (or suppliers)

Cost of the stock

Transportation
Labour cost
Real estate rent / Cost of handcart; and maintenance

REVENUE STREAMS
B2C sales

Business Operations - Procurement

Characteristics

Stock Management

Bulk Buy

Better service by Supplier to vendors who place

large orders

1. Vegetable Vendors:

Buying decisions are Straight Re-purchase

Routine ordering

Order the same items from the same suppliers

at the wholesaler market

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.

Process
2. Fruit Vendors:
How it works:
Demand from
Market

Vendor
checks his
stock
position

Place order
if Demand
> Stock

Supplier
choice
function
of price &
quality

Delivery
takes
between 12 hours to
2-4 days

Whom to procure from:

Check
availability in
nearby market

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)
8

Business Operations - Pricing

Characteristics

Pricing Model

Dependent on three factors

Due to perishable nature of products, cost-plus

model is followed

Final Price is a sum of the following

Demand

Direct correlation

Season

Purchase Price

Overhead expenses

Profit margin

Summer season sees higher prices vis-vis winter season

Quality

Direct correlation

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

Bidding starts at 5
am following
reverse auction
process

Highest bid becomes

wholesale market price
for that day

Price changes daily

Some vendors may yet charge a higher price provided the produce they are selling is of a superior quality
9

Business Operations - Selling

Characteristics

Observations
Fruit/Vegetable vendors and street hawkers
are the best marketers.

Offer and price should be precise

Offer shouldnt be too complicated for the
consumer to assess
Keep communication channel absolutely
simple and easy

Low priced products Creativity in their

salesmanship for success.
Vegetable sellers Readymade bundles of
certain products to save time during rush hour

Customize their marketing pitch

Display of merchandize in a manner so as to
attract consumers

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
10

Business Operations - Competition

Who

From

Why

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

In the Jamshedpur region, new wholesale markets at Sakchi

and Kadma have added to the competition for the Bistupur
market

Cart Vendor

Wholesaler

Soya Chunks, Cottage Cheese, Instant Meals, Sprouts and

other healthy options such as organic foods

Vegetable
Vendors

Substitutes

Fruit Vendors

Substitutes

Increased Professionalization and dual income Families

opting for instant meals or dining-in options
Artificial fruit beverages and other soft drinks/ eatables

11

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 doesnt 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
12

Customer Inputs
Profile

Quantity of Purchase

Varied classes of customers.

Lower & Middle Cheaper vegetables and basic

fruits.

Period: Purchase for Daily Consumption a

common phenomenon (>75%)

Proximity of fruit shop is key.

Middle & Upper Bigger basket and varied tastes.

Basket size: Varies location to location

Bistupur (Rs.100-120), Sonari (Rs.50-80).

Demand for special fruits and seasonal

fruits(Eg.. Litchi, good variety

Availability

Price Vs. Quality

Most Common: Apple, Banana, Grapes & Oranges

Clear Winner: Quality Win 72% of Customers

Buying Time: 50% Evening | Free Time

Taste Prevails over Nutritional Value

Seasonal Fruits: Watermelon, Pineapple, Litchi,

Strawberry and Peaches

Taste preferred by over 60% of customers

Choice of Vendor

Miscellaneous

Major Criteria: Proximity to Shop

Some customers prefer Cut Fruits & Juices

Preference: Mixed Roadside & Super Markets

Bargaining: Common Phenomenon

Loyalty: Yes, after Multiple Transactions

At least 76% of cases Vendors Overcharge

Cash and Carry preferred by most of the

Customers. Rarely Credit

Mode of Purchase

13

Kirana Store Our Understanding

1

Customer Base:
Middle & Lower
Middle Class

Company

Avg. margin 10 to
15%
Tax Evasion

Distributor

Varied Choices of
Kirana Stores

Wholesaler
or APMC
(Mandi)

Long Shelf Life F&V

Impulse Buy Items

Retailer 1

Retailer 2

Purchases in
Credit
Home Delivery
Option

Retailer 3

Threat Supermarket
Loyalty Cards, Bulk
Deals

Refill Stock @
Retailer in 2-3 Days

Credit to Customers
Receives only 7 days

Internal Adjustment
if stock runs out

Customer

Bulk Order
Loyal Shop
Else Purchase:
Distance of Shop
Items Availability

14

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

15

Thank you

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