STMH14-3 Proj Rep Sec a GroupNo 6

8/19/2019 STMH14-3 Proj Rep Sec a GroupNo 6

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Submitted by

Atin Aggarwal H14019

Maulik Rajesh Gandhi H14030

Subramanya Sai Pratik Bontha H14052

Tejesvi Dhankhar H14055Vasudevan L H14058

Vinith Dwarakanath H15059

Vivekananda Reddy P H14060

Varun Kumar Yanamadala H14061

Strategy – Informally

Organized Sectors

FRUIT AND VEGETABLE VENDORS

GROUP 6-‘A’ Section

HRM 2014-16

STRATEGIC MANAGEMENT


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STRATEGY – INFORMALLY ORGANIZED SECTORS | March 2015 | XLRI Jamshedpur 1

Table of Contents

I. Executive Summary ......................................................................................3

II. Introduction ...................................................................................................4

About the Industry

Structure and Characteristics

III. Strategy Map ..................................................................................................7

Critical Success Factors

Business Model Canvas

IV. Business Operations – Ownership and

Purchase Decisions ..................................................................................... 10

Experiences

Insights

V. Business Operations – Pricing and Selling ................................................ 14

Insights:

Marketing

VI. Business Operations – Contingency and Stock

Management ................................................................................................ 18

Contingency

Stock Management

Additional Services

VII. Business Operations – Challenges Faced,

Competition, and Threat of Substitutes ..................................................... 19

Challenges Faced


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Competition

Threat of Substitutes

VIII. Customers Profile ........................................................................................ 24

IX.

FVRs vs. Kirana Stores ................................................................................ 27

Similarities

Differences

X. Comparison Informally Organized vs.

Organized Retail ......................................................................................... 29

Kirana and FVR vs. Super Markets

XI. References ................................................................................................... 30

XII. Appendix...................................................................................................... 31

Questions to Fruits / Vegetable Vendors

Questions to Customers

Few Glimpses from Our Visit

Experiences: Fruits / Vegetable Vendors

Experiences: Customer Interviews Offline

Experiences: Customer Interviews Online


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Executive Summary

This project was undertaken to study the strategy of the entities operating in the informally

organized sector, with the primary focus on small scale fruit and vegetable vendors. Themethodology undertaken to carry out this study included primary research of about 20 fruit and

vegetable vendors, predominantly in Jamshedpur, with a few interviews from Hyderabad and

Delhi. Some insights into customer mindset have been drawn from a separate set of customer

interviews. All of these are presented in the appendix.

The report highlights several dimensions of the current strategy of FVRs operating in the country.

Coupling the findings of primary research with the secondary data drawn from various sources, it

is clear that, as can be expected, the sector is highly fragmented, and primarily runs through

‘street-smart’ means of carrying out business – in most of the day-to-day workings. The

challenges faced by individual FVRs are primarily concerned with the lack of space and

technology, to make the business more efficient.

Though an effort has been made to spread the study across geography, one of the limitations of

the study is that it has been primarily confined to a single city. The limited number of studies and

sources for secondary research is another limitation.


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Introduction

About the Industry

Traditional Indian retailers account for 12 million retail outlets all over India and more than 40

percent of them sell vegetable and grocery (IBEF, 2008). Indian food retail consists of staple

commodities comprising grains, pulses, and vegetables. The Indian food retail business,

especially vegetable retailing is witnessing a rapid growth in India's organized retail sectors.

The traditional retailing of vegetables is not very much organized, amounts to 97% of the total

market (Ernst & Young, 2006), is extremely localized and highly fragmented with large number

of intermediaries. The intermediaries between the customers and farmers are traditional retailers

with different outlet formats-mom and pop shops, non-permanent shops in the market, pavement

vendors, roadside vendors and push cart vegetable sellers, wholesale traders, commission agents

and auctioneers.

Figure 1. Retail - Total vs. Organized Sectors


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Structure and Characteristics

Figure 2. Model Supply Chain observed in this sector

This is a general traditional model supply chain for fruit and vegetable vendors of the

unorganized sector in India. This model has persisted the test of time and competition from

supposedly better models such as the Value Chain model and the Hub and Spoke model, which

are being used in organized retail (like Food Bazaar and Spencers).

In our primary data collection, we have found evidence that the chain is not completely followed

and there have been attempts to reduce the levels by the retailers themselves. For example, for

particular vegetables and fruits, they prefer buying directly from the farmers or at the farmer’s

market primarily to reduce their costs and retain customers.

Figure 3. Variety of Intermediaries involved


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Indian households, across the rural and urban divide, were expected to spend approximately INR

18 trillion on food items (fruits, vegetables, nuts, grains, pulses, wheat, etc.) in 2013-14. With

almost 263 million households, in the country, this is tantamount to an expenditure of

approximately INR 68,745 per household in the given period.

Figure 4. Indian Household Expenditure

An analysis of the same across the two segments viz. urban and rural, reveals the following

figures:


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Critical Success Factors

1. Reduction in Wastage

Wastage contributes 20-30% of their losses. Hence efficient inventory management and

predictability of demand contributes to success of business.

2. Location

Locations like Hospitals, residential areas, etc. affects sales per day and as a result is oneof the critical success factor.

3. Availability of Substitutes

Variety of products including exotic/off season products can also drive sales as it offers

unique choice to customers. The choice to offer certain products over other is a key

decision and is a result of limited shelf space that a vendor can offer.

4. Quality

Quality is most critical success factor as customer shows preference to quality which

affects customer satisfaction. Customer satisfaction is key for our margins and volumes

of sales.

Business Model Canvas

Small Scale Fruits and Vegetable Vendor Business

Figure 6. Business Model Canvas


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Variations in Different Vendors

Handcarts / Push Carts

Price over quality

Handcarts preferred to sell to price sensitive customer compared to quality driven

customer.

Leveraging proximity

Handcarts position themselves near hospitals, parks or other crowded places to drive their

sales.

Standalone Stores

Quality focus

Standalone stores preferred to hold quality products even if they are costly over cheaper

products.

Customer relationship is important

They focus on repeat customers hence focus major part on relationship with customer.

Maintaining quality seems to be part of this strategy.

Market

Cooperation among vendors

In a market place, vendors often cooperate among themselves with respect to exchanging

goods if needed or sticking to pre-decided price.

Bargaining power with wholesalers (or suppliers)


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Business Operations – Ownership and Purchase

Decisions

Ownership:

Based on the data we collected, we found that the majority of the businesses were run by Father-

Son/Sons or by single owners. Many vendors were the third generation of vendors in the family

and their shops were 75-80 years old. However, some vendors also operate on commission basis

– ‘Mahajan owned shops’. These vendors get around 10% commission of total sales.

Purchase Decisions

Similar to customers, the fruit and vegetable vendors also face certain purchase situations. Theonly difference is that they buy in bulk/ place large offers and the supplier tries to lure the most

profitable buyers.

The three major decisions can be grouped as:

Figure 7. Purchase Decisions

The purchase decisions of most fruit and vegetable vendors (FVRs) are STRAIGHT

REPURCHASES.

New Task Purchase

The vendor has never made these purchases before or rarely has made them. Here

the vendor spends a lot of time in evaluating the new alternatives and chooses the best bargain.

Modified Re-Purchase

When the vendor decides to evaluate the re-ordered straight re-purchase the vendorhas moved to the status of a modified re-purchase. This can be because a certain

vendor at the wholesale market has stopped selling, or the hand-cart vendor faces anew demand.

Straight Re-Purchase

Its routine ordering and most vendors order the same items from the samesuppliers at the wholesale market. They simply reorder the same fruits and

vegetables that were bought previously.


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Experiences

Handcarts

Bistupur Sakchi C.H. Area New Delhi

Fruit

Shop

Based on themarket demand the

vendor procures

bananas from

Bhusaval, Andhra

Pradesh, Bengal,

Bihar.

Depends ondemand. Purchase

is done daily on 1

week’s credit from

the wholesale

market. As they are

not a big player in

the market, the

wholesale market

gives them lower

preference than

shop owners.

TheMahajan/Owner

takes decisions.

Seller (who works

on commission

basis) is consulted

about demand.

Fruits are

purchased from the

nearby wholesale

market.

Based on marketdemand the fruits

are procured from

two areas – Okhla

& Azadpur Mandi.

Stationary Stalls

Bistupur Sakchi Sonari

Vegetable

Shop

He purchases again based on demand.

E.g. When demand is low, stock iscleared and capacity is kept unutilized.

He purchases the following from the

mentioned regions. Potato – West

Bengal, Onion – Lalsalgaon, Garlic –

Uttar Pradesh & Green Chilli – Orissa,

Chattisgarh. Payment is done via net

banking on Credit purchases. Discount is

offered if payment is made in cash.

Purchase

depends ondemand from

retailers and

demand from

local customers.

Purchase is made

from Sakchiwholesale market

on credit.


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Bistupur Sakchi Sonari Hyderabad

Fruit

Shop

The vendor

purchases stock

from Parsudi

wholesale market

and can buy on 1

week credit.

He purchases fruits

from wholesalers

on credit – 1 day/1

week/1 month. This

depends on the

businessrelationship with

the wholesaler. For

him the quality of

fruits is paramount.

The Vendor

purchases fruits

from different

wholesalers.

Example: thewholesale market

in Sakchi and

another near

Tatanagar station.

Depending on the

person he allows

credit purchases.

Some wholesalers

sell on a 8-10 day

credit to him.

Solely based on

customer demand.

Purchases fruits

from the wholesale

market – Parsudi

and Sakchi market.

Stock is filled on

the basis of

available capacity.

“The shop must

look full”. Purchaseis also based on

demand and on the

sales made on the

previous day.

Stock keeping

depends on the

season. Seasonal

fruits are purchased

in bulk while otherfruits are procured

only on need basis

because there is a

high chance of their

wastage. Purchase

decisions depend

on demand and also

try to minimize

demand.

Purchase is made

from Sakchi

wholesale market

on credit.

The vendor

purchases fruits

from wholesalers in

Sakchi market on

credit (1 week/15

days). Quantity

purchased depends

on consumerdemand.

The Bananas are

from Reliance

suppliers usually

paid in cash,

because if taken on

credit the quality

supplied is

different. Due to

customer demand

the Apples are

imported. All the

other items are

from wholesalemarkets.

Early morning his

supply comes from

one of the bigger

markets in

Hyderabad. Some

specialty vegetables

are sourced from

farmers from far offdistricts which

arrive daily by

lunch time.


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Insights

Almost all vendors forecast demand based on the season. They estimate future sales on the basis

of previous day/week’s data. This demand forecast mainly drives their purchase decisions.

Seasonal Fruits are bought in bulk, whereas exotic fruits or imported fruits are purchased on the

basis of specific customer demand.

The vendor usually chooses multiple suppliers. Some stick to a near-by wholesale market and

purchase from different vendors there. Others diversify their suppliers by purchasing from

different wholesale markets as well as near-by farms and states.

The vendors both buy and supply on credit based on their relationship with the supplier or

customer. But paying in cash has certain benefits like discounts and better quality. Your

importance as a buyer in the wholesale market depends on the frequency and the size of your

purchases.

Figure 8. The Process


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Business Operations – Pricing and Selling

How much to price their fruits and vegetables is determined by the following variables.

Figure 9. Factors affecting price

Handcarts

Bistupur Sakchi C.H. Area New Delhi

Fruit

Shop

When the market is

down, margins are cut

and bananas are sold at

a lower price. During

peak seasons like

summer, prices are

high and margins are

high. Pricing also

depends on the price atwhich wholesaler made

his sale. Elaichi

bananas were priced at

Rs. 40/dozen and

bananas were priced at

Rs. 60/dozen.

Price depends on

quality and daily

sales. If sales are

down, margins are

cut and prices are

pulled down.

Prices are decided

on the basis of

demand. High

quality drives up

the prices.

During peak

seasons like

summer, prices

are high and

margins are high.

Winters are slow

and lower

margins. Litchis

sold at premiumas availability was

low.

Price and

availabiliy ofSubstitutes

Characteristicsrelative to

competitors

Income

Price/Strengthof Demand for

RelatedProducts

MarketEnvironment


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Stationary Stalls

Bistupur Sakchi Sonari Hyderabad

Fruit

Shop

Depends on purchase. “If

I purchase at Rs.10, I sell

at Rs.12 – 15”. Dependson demand. e.g. Chickoo

– Rs.100, Strawberry –

Rs.120

Based on the price

charged by the wholesale

market.

Pricing depends on

quality. As better quality

fruits are purchased at a

higher price from

wholesalers, the vendor

charges a premium price

to his customers with the

guarantee that the quality

will not be compromised.

Price = Purchase Price +

Other expenses + Profit

Price depends on quality.

If the adjacent vendor is

selling lower qualityapples at Rs. 100/kg, the

other vendor with better

quality apples will sell at

Rs. 110/kg.

Prices are decided on the

basis of demand and also

on the basis of

competition. Purchase

decisions are taken by the

principal owner.

Price depends on quality

Price depends

on quality

and demand.

Fixed prices,

since quality

is very highand prices are

mostly not

bargained.

With 20-30%

margin. And

if sales are

low sold at

loss to push

the stock.

Bistupur Sakchi Sonari

Vegetable

Shop

Prices are decided by the

market. Prices vary daily.


Better quality means

higher price.

Rates are decided daily in

the market at 5am. The

prices charged by all

vendors in the wholesale

market are uniform. Any

difference in price is

because of the difference

in quality.

Rates are decided on the

basis of price at which

goods were purchased

from the wholesalers.


Rates are decided on the

basis of price at which

goods were purchased

from the wholesalers.



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Insights:

Figure 10. Characteristics and the Pricing Model

Just like the purchasing decisions, majorly the pricing is determined based on the season or the

demand. Peak season or high demand means high price & high margin. Lean period or low sales

means low price & low margin or zero loss. As the products are perishable, the aim is to sell

them before they spoil. In case the sales for a particular day are low, the prices are slashed to

reduce inventory. The vendors want to avoid loss in all circumstances.

Scarcity and quality also majorly influence pricing. Fruits and vegetables that are scarce are sold

at a premium price. If the products are of higher quality their price is automatically higher.

Certain vendors engage in Cost-plus pricing. Their Price = Purchase Price + Other expenses +Profit. So based on the wholesaler’s price they mark -up their product and sell in the market.

Some vendors engage in Competitive pricing. If the adjacent vendor sells lower quality products

at a price, you charge higher for the same if your quality is better. The competition is not only

restricted to adjacent vendors but also to other retail stores. So the vendors sell Higher than the

wholesale market but lesser than departmental stores/super markets.

Other vendors choose to collude rather than compete. Rates are decided daily in the market at

5am. The prices charged by all vendors in the wholesale market are uniform. Any difference in

price is because of the difference in quality. Due to this collusion and based on various parameters like demand, quality and season the prices can vary daily.

Yet in some places the prices are fixed and do not vary. This is because the quality is very high

and prices are mostly not bargained.


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Figure 11. The Process

Marketing

Marketing Strategies followed by the vendors:

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

Some observations:

Fruit/Vegetable vendors and street hawkers are the best marketers. They sell very low priced

products, but they have to put all the creativity in their salesmanship for success. Vegetable

sellers keep already created bundles or a bunch of the quantity of vegetable they are going to sell

for the set price. This saves the time of both the customer and the vendor during even rush hour.

There is not any need of scales. This easy method double or triple the sales. A crowded big

marketplace generally turns noisy with quarrels over bargaining, change, and cheating in

measuring quantities. Such quarrels result in decreased sales due to wastage of time leaving

negative impression on customers. No bargaining means more sales in lesser time. What vendors

have to think is to give satisfactory quantity of the product in the given price. Fruit/Vegetable

vendors shout with their own style. They also create their own communication style with

customers. In addition, they organize their fruits/vegetables attractively; some charge more for

high quality vegetables and do not compromise with the price. They can do so confidently

because they know their target customers are going to buy only from them.


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Business Operations – Contingency and Stock

Management

Contingency

Usually co-operation from nearby FVRs in case of shortage of stock or any such contingency.All the FVRs present a united front so that everyone benefits in case of contingencies. If in peak

periods, stock moves quickly, orders are placed with wholesalers who typically deliver within a

couple of hours. Also, sometimes to drive down demand in such peak periods, retailers in a

particular area collude and the prices are increased, while the wholesaler delivers.

Stock Management

Vegetable vendors: Typically, the stock procured is on that day or sometimes a day in advance

depending on the sales patterns. A few vendors keep track of the stock through the day (either

through assigning a specific person or through periodic inspections), so that order can be placedimmediately. A few vendors try to maintain as much variety as possible (so that any customer

visiting the store will not leave empty handed for lack of his choice), and hence to push the

product quickly, maintain low quantities.

Fruit vendors: They display the better looking stock, so that customers are interested in the

stock. FVs ensure proper protection from sunlight/rain to protect easily perishable fruits. The

stock management can be done better, if more space is available, averred a few vendors.

Wholesalers: They make pricing changes depending on stock demand, look of the stock and

customer reactions.

Additional Services

Among the vegetable vendors, selling cut vegetables is prevalent in pockets of affluent areas in

some cities. When asked about the same in Hyderabad, one particular vendor explained that his

typical customer did not require such a service. For such a service to justify the time and effort

put to offer it, the customer profiles are very specific and are found in very few affluent areas in

the city. The vendor saw little scope for these services to enter his vicinity, and very little reason

for immediate competitors to start offering them.

Among fruit vendors, selling cut fruits has two perspectives to it. (i) To reduce customer

hesitation of buying fruits, which they feel have to be further processed before consumption. To

make this easier for immediate consumption, vendors present cut fruits. (ii) Some customers

hesitate to buy fruits which look damaged on the outside. To counter this, the vendors present cut

fruits that do not present any such obvious defects.


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Business Operations – Challenges Faced,

Competition, and Threat of Substitutes

Challenges Faced

Many vendors seemed to be unaware of the challenges they face when enquired about it directly

but we were able to identify a few based on their responses to other questions. Some vendors did

have a clear idea about their shortcomings. All in all, they could be summarized as follows:

Lack of Cold Storage

Problem: Since fruits have a very low shelf life, expensive fruits like apples, papayas etc. get

spoilt easily. Their expensive nature leading to lower movement off the shelf and hence cold

storage turns out to be of prime importance which they cannot afford.

Remedy: To make the fruits look fresh, the shop keepers spray water on the fruits.

Wastage

Problem: Due to unforeseen conditions (like bad climate, bandh in the locality) sales is easily

affected. As a result the demand forecast becomes tricky. According to our survey around 20% -

30 % of stock goes waste. This also include damages caused during transit.

Remedy: Some big shops sell it to Restaurants or to Hand Cart vendors depending the condition

and price offered. Some items are also sold to feed cattle and rest of them are thrown off.

Space Constrain ts

Problem: The market layout plays a pivotal role in the selling pattern of the vendors. In our

observation made in the fruit market of Jamshedpur, some markets (like Sakchi) have Vendors

lined up one after the other in a large marketplace (bazaar) and certain other markets (like

Bistupur, Sonari etc.) have individual vendors for a particular locality with a considerable

amount of distance from one vendor to another. In both cases, vendors express that space is a

major challenge as they have no choice but to display all their stock in a very small area.

Remedy: They can’t help much. Some vendors arrange fruits a particular order for say apple, in

order of their prices and that would give the customer a better idea and also give the vendor a

better sense of the demand.


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Demand Uncertainty

Problem: Open markets have many new customers adding to the regular ones. Also, some new

customers scout for the goods and end up buying from a vendor where the vegetables appear

good. Vendors express that it is extremely difficult to predict the demand with decent accuracy in

such situations.

Remedy: Additional quantity is procured for those fruits & vegetables which have longer shelf

life. In case of shortfall based on a mutual internal agreement fruits & vegetable are borrowed

from neighboring shops.

Low Quality of Handcart Goods

Problem: As per our survey, certain wholesalers confessed that handcart vendors purchase goods

that are of lower quality from them at a lower price and sell them at a lower price (maintaining

the same margin). But the lower quality eventually translates to low sales.

Remedy: This is how they operate. So not much can be done about this fact. If there is monopoly

for the handcart operator, he might be interested in investing more for high quality fruits. But

there is heavy competition for that too.

Delivery fr om Suppli er

Problem: The supply of certain speciality goods which are obtained directly from farmers have a

non-uniform delivery pattern and hence forecasting becomes a challenge.

Remedy: Cannot do much about this. They try to procure the items from the nearest farmer for

items which have lesser shelf life. But still this fact remains a disadvantage.

Wholesaler Unable to Monopolize

Problem: The retailers collude to take decisions regarding purchase from a particular wholesaler

in a locality. In case of a sour relationship between a retailer and the wholesaler, a large chunk

of retails shy away from procuring the goods from there. As a result the wholesaler loses control

in his own area.

Remedy: Can’t help much either. Timely delivery and maintaining good quality can help him

build some good will and get some say in the market.


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Summary:

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 notrepeat customers

Few items are directly procuredfrom farmers

Additional quantity of longershelf life vegetables procured.

In case of shortfall, borrowedfrom neighboring shop

Wholesalerfaces vendor

collusion

Retailers Collude on price doesn’t give

autonomy in price

Timely delivery & Maintaining good

quality get Control in the market

Competition

For a cart vendor: Shops and markets are competitors for reasons of quality and general

customer preference.

For an FVR from other FVRs: Almost all the FVRs that we interviewed opined that other

FVRs within their vicinity are not their competition. They usually collaborate when required and

carry out their business.

In a market setting, they compete not on price but on quality. For a non-market vendor,

competition occurs in the form of weekend market, where people can get lower prices.


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FVR v Organized Retail: Almost all the FVRs feel that the customer segments are different and

so organized retail is not going to be threat in the near future. Also organized retail stores can’t

offer the variety and personal service that some of the fruit vendors can offer.

But some vegetable vendors have expressed concern about the margins that OR can capture at

lower prices due to their scale, packaging savings.

From our customer survey, a significant portion favored OR over FVRs for fruits, since they

have more variety and quality. This might indicate disconnect between FVR’s estimation of

customer preferences. (Or Sampling bias)

Wholesaler: Changing times brought changes to market structure within Jamshedpur - new

markets at Sakchi and Kadma in addition to the traditional Bistupur market.

Summary

Who From Why

Cart Vendor Shops and

Markets Reasons of quality and customer preference

FVR Other FVRs

Usually collaborate when required and carryout their business

In a market setting, they compete not on

price but on quality

FVR Organized Retail Personal service and experience that is a hallmarkof the friendly neighborhood “sabziwala”

Wholesaler Wholesaler

In the Jamshedpur region, new wholesale markets

at Sakchi and Kadma have added to the competitionfor the Bistupur market

Vegetable

Vendors

Substitutes

Soya Chunks, Cottage Cheese, InstantMeals, Sprouts and other healthy options

such as organic foods

Increased Professionalization and dualincome – Families opting for instant meals

or dining-in options

Fruit Vendors Substitutes Artificial fruit beverages and other soft drinks/eatables


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Threat of Substitutes

Vegetable Vendors

Soya Chunks: In numerous places where food is prepared in large quantities (such as

hostel mess, charity organizations) they vegetables are replaced with soya chunks in

many of the preparations owing to the low cost, nutritional value and ease of preparation(no cutting / dicing required). But the vendors we interviewed did not express any

concern over this issue as it did not hit their revenues much currently, but might play a

part in the future.

Paneer (Cottage Cheese): Adding to the context in the above point, paneer or cottage

cheese is added in various preparations to enhance the taste. The vendors too admitted the

extensive usage of paneer in household and commercial preparations and have learnt to

live with this fact.

Sprouts and other healthy options: In recent years, the usage of sprouts and other

grams has increased. A few vendors have already started including such varieties in their

offering. In future the proportion might increase commensurate to the demand and

margins.

Instant meal (cup noodles, pasta etc.): Similar to artificial fruit drinks for fruit vendors,

this product is a substitute among the younger demographics. The vendors felt that the

nutrition value will not be sustainable in the long run, and so this product’s threat is not

something which affects them heavily.

Fruit Vendors

Fresh fruit Juices: All the Fruit retailers feel that juice parlours cannot compete with

fruits on quality. So a discerning customer will know the difference and prefer fruits over

juices. Hence the retailers feel that it isn’t really a credible threat

Artificial fruit beverages: The major consumers of these products lie in the younger

demographics. Owing to the ease of use and delicious taste, vendors feel that youth are

short-sighted in their choice. However, since the consumers are not the decision makers

(for the younger generation, as the purchase is made by the elders) the fruit retailers feelthat this threat can be mitigated


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Customers Profile

Initially, Customer profiles were obtained from random interviews with customers during and

after purchase from a fruit/vegetable vendor. After initial interviews, most of the responses were

redundant. So to get more diverse responses we floated a form. Our sampling depended on the

time we visited and the people who agreed to be part of the study. Some of the observationswere:

Profile

All kinds of customers buy fruits and vegetables. Customers who buy lower priced fruits and

vegetables belong to the lower middle class segment whereas health and quality conscious

customers belong to the upper middle class.

Customer profile also depends on the area: Upper middle class in Bistupur, Lower middle class

in Sonari, A combination of both in Sakchi.

In total we have taken inputs from 37 Customers. The sample size might look small but we have

focussed on a Qualitative data rather Quantitative. Each one of these members we have

interacted with through various means are regular fruit buyers.

Availability of F rui ts

Most common fruits preferred by the customers were Apple, Banana, Grapes and Orange.

Seasonal fruits like watermelon, pineapple, Litchi, strawberry and peaches were consumed

depending on availability. 50% of people prefer to buy in the evening, the reason being, they get

free time. Rest of them did not emphasize on any particular preference in time.

Choice of Vendor

Their choice of vendor is dependent on the distance to the vendor as per 69% of the surveyedcustomers, whereas price and quality did not seem to influence much of their decision. There

was mixed choice for Roadside stores and supermarkets to purchase fruits which covered more

than 80% of customers we surveyed. Loyalty to a particular vendor does exist, but primarily after

multiple transactions. Quality and Price secondary factors here. The size of loyal customers

varies and is dependent on the variety of fruits/vegetables, the service provided by the vendor,

prices charged, and quality.


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Pri ce vs. Qual ity

Price and quality might be hygiene factors which do not differentiate vendors. Among price and

quality, about 72% of the customers preferred quality over price. B2B sales were influenced by

both price and quality.

Amount of Pur chase

Over 75% of respondents preferred to buy for a particular day’s consumption which might be

reflection of distance factor.

In areas like Bistupur, average basket size (Rs. 100-120) is more than that in areas like Sonari

(Rs. 50-80)

Some fruits like Papaya which are priced at Rs.30-40/kg are sold at weights ranging from 2-3kgs

while Apples priced at Rs.100-120/kg are sold at weights ranging from 1-2kgs. For vegetables,

similar patterns are observed.

Knowledge of Business

45% of customers claimed to have ‘Good idea’ of the business but none were tested on their

understanding of their business.

Bargaining

40% of customers feel that the vendors always overcharge. So bargaining is to be done every

time. 35% of people decide on the spot whether to bargain or not based on their perception of the

fruit vendor. Only 25% of customers told they don’t indulge in bargaining.

Mode of Purchase

Cash and Carry is most preferred way of purchase among the respondents.


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Taste vs. Nutr iti on

66% of Customers showed preference for Taste over Nutritional value of the fruits.

Miscell aneous

Number of customers serviced is not fixed. Sometimes it is 50, sometimes 100 or 200. They

forecast demand based on present and previous day’s sales. Demand is at its peak in evenings for

fruits and in early mornings and evenings for vegetable vendors. For some fruit vendors, demand

is high in the morning as well as in the evening.

Demand is at its peak on weekends and is the lowest during mid-week. During low demand

cycles, vendors cut prices or put more efforts in marketing their products.

Some vendors clean and serve chopped fruits too, to customers who prefer to have it then and

there. Based on familiarity with the customer, additional pricing is decided on the spot.


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FVRs vs. Kirana Stores

Simple Illustration of our understanding of their Business Model

Figure 42. Business model of Kirana Stores

We find similarities and differences in the business models of a typical FVR and a relatively

more organized retail type i.e. Kirana stores.

Similarities

Customer Base: The customers are more or less the same for Kirana stores as well as fruit and

vegetable retailers i.e. middle and lower middle class.

Credit System: There is loyalty from the customers, which translates into credit being an

acceptable transaction, especially for people living in the vicinity as well as regular customers,

with a payback period of a week/month.


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Choice: A choice is available with the customers in most cases, when we talk of an urban

scenario. Usually proximity plays an important factor and depending on availability of the

product, the customer will go further to other stores.

Stock Replenishment: It happens on a regular basis. In an FVR it would range from daily to

weekly depending on the type of vegetable and demand. Similarly, Kirana stores which stock

vegetables .FMCG products done in sync with the distributor and replenishment takes 2-3 days.

Tax Evasion: It is a problem in Kirana stores, with most of them having handwritten billing or no

billing at all.

Differences

Credit Purchase: In Kirana stores, purchasing from distributors on credit is rare. Mostly cash

transactions take place. However, in FVRs we see that credit purchasing from wholesalers is a

common practice with detailed logs and a maximum repayment period of 1 month.

Stock(Vegetables and fruits in particular): The type of fruits and vegetables that are kept by a

Kirana store have a higher shelf life, typically wouldn’t need refrigeration and are likely to be

impulse buys from a customer who is already in the shop for a different purchase. Examples

would be coconuts, potatoes, onions, garlic, ginger, green chillies etc.

From our primary data and secondary sources we can draw a comparison between informally

organized retail (FVRs and Kirana stores) and organized retailers.


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References

In no particular order:

1. Rajkumar, P., & Jacob, F. (2010, January 1). Business Models of Vegetable Retailers In

India. Retrieved February 10, 2015, from

http://www.greatlakes.edu.in/uploads/pdf/Chapter3.pdf

2. Hegde, R., & Madhuri, N. (2013, January 1). A STUDY ON MARKETING

INFRASTRUCTURE FOR FRUITS AND VEGETABLES IN INDIA. Retrieved

February 19, 2015, from http://www.nird.org.in/NIRD_Docs/rs2013/RS 91.pdf

3. Singh, S., & Singla, N. (2010, September 24). Fresh Food Retail Chains in India:

Organisation and Impacts. Retrieved March 1, 2015, from

http://www.iimahd.ernet.in/users/webrequest/files/cmareports/9FreshFoodRetailChains.p

df

4. P, S. (2010, January 1). The future of unorganized retailing in Kanyakumari district.

Retrieved February 15, 2015, from

http://ipublishing.co.in/ajmrvol1no1//voltwo/EIJMRS2038.pdf

5. http://www.mohinipuranik.com/2015/01/marketing-strategies-vegetable-vendors.html

6. E.Y. (2006). The Great Indian Retail Story, Ernst &Young's report, April, 2006.

7. Tulani, V., & Hussain, H. (n.d.). Strategic Change in Model of Fruit and Vegetables

Supply Chain. Retrieved February 19, 2015.

a. http://www.ripublication.com/gjmbs_spl/gjmbsv3n9_06.pdf

8. Indicus Analytics, Market Skyline Report 2013-2014.

http://www.greatlakes.edu.in/uploads/pdf/Chapter3.pdfhttp://www.greatlakes.edu.in/uploads/pdf/Chapter3.pdfhttp://www.nird.org.in/NIRD_Docs/rs2013/RS%2091.pdfhttp://www.nird.org.in/NIRD_Docs/rs2013/RS%2091.pdfhttp://www.nird.org.in/NIRD_Docs/rs2013/RS%2091.pdfhttp://www.iimahd.ernet.in/users/webrequest/files/cmareports/9FreshFoodRetailChains.pdfhttp://www.iimahd.ernet.in/users/webrequest/files/cmareports/9FreshFoodRetailChains.pdfhttp://www.iimahd.ernet.in/users/webrequest/files/cmareports/9FreshFoodRetailChains.pdfhttp://ipublishing.co.in/ajmrvol1no1/voltwo/EIJMRS2038.pdfhttp://ipublishing.co.in/ajmrvol1no1/voltwo/EIJMRS2038.pdfhttp://www.mohinipuranik.com/2015/01/marketing-strategies-vegetable-vendors.htmlhttp://www.ripublication.com/gjmbs_spl/gjmbsv3n9_06.pdfhttp://www.ripublication.com/gjmbs_spl/gjmbsv3n9_06.pdfhttp://www.mohinipuranik.com/2015/01/marketing-strategies-vegetable-vendors.htmlhttp://ipublishing.co.in/ajmrvol1no1/voltwo/EIJMRS2038.pdfhttp://www.iimahd.ernet.in/users/webrequest/files/cmareports/9FreshFoodRetailChains.pdfhttp://www.iimahd.ernet.in/users/webrequest/files/cmareports/9FreshFoodRetailChains.pdfhttp://www.nird.org.in/NIRD_Docs/rs2013/RS%2091.pdfhttp://www.greatlakes.edu.in/uploads/pdf/Chapter3.pdf


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Questions to Customers

1. Which fruits/vegetables did you buy?

2. Why did you buy these fruits and no other fruits/vegetables?

3. Nutrition vs. taste. Which one would you choose?

4. Do you buy from the same vendor?

5.

What is the average quantity – price and weight - you buy per transaction?6. Does price matter?

7. Do higher prices mean better quality?

8. Who sells better quality fruits/vegetables? – supermarkets, stationary sellers, handcart

sellers

9. How much do you know about their business?

10. Do you bargain out of habit or do vendors overcharge?

11. How often do you buy fruits/vegetables?

12. Do you pay cash or purchase on credit?

13.

Have you ever faced the problem of lack of choice?

Few Glimpses from Our Visit


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Experiences: Fruits / Vegetable Vendors

Initially, they were apprehensive to share any information with us. They wanted to confirm

whether we really are students or are people from the media. We also had to explain the project

details to them and assure them that the recordings will only be used for project purposes. They

did not allow us to take a video. However, some of them allowed us to click pictures. Some fruit

and vegetable vendors gave detailed answers. Some wanted to finish the interview as soon as possible. The ones who gave detailed answers also shared details about their revenues and profits

and were honest enough to share the problems they faced in business.

Complete experiences are available in the tables.

Type of Vendor Fruit - Handcart

Location Bistupur Market

About him

Name – Joseph Kumar

Age – 49

Born and bought up in Jamshedpur.

Has been in this business since childhood.

Variety of fruits/vegetables Banana

Business

Ownership Sole owner

Purchase decisions

Bananas are procured from 3-4 areas – Bhusaval,

Andhra Pradesh, Bengal, Bihar.

Purchase decisions are based on market demand.

Pricing

When the market is down, margins are cut and

bananas are sold at a lower price. During peak seasons

like summer, prices are high and margins are high.Pricing also depends on the price at which wholesaler

made his sale.

Elaichi bananas were priced at Rs. 40/dozen and

bananas were priced at Rs. 60/dozen.

SalesCommission basis.

Did not provide any other details.

Contingency -

Management of StockBananas were arranged on the basis of size. Shop

space

Challenges faced

(He was answering questions openly initially. Then

suddenly, the responses reduced and it seemed as he

wanted us to finish the interview)

Did not answer about the challenges he faced in his

business.

Competition

Supermarkets – “Depends on people’s choices. Not a

competition. They use chemicals. I have all types of

bananas – artificially ripened and pure. I can provide


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them personal service, supermarkets cannot.”

Other vendors – “We are different vendors and do not

collaborate. Each has his own business and purchases

and sells independently”

Threat of substitutesArtificially ripened bananas – people would prefer to

buy bananas from roadside shops.

Changes that can be brought -

Customers

ProfileA middle aged man came and purchased bananas

worth Rs.50.

LoyaltyThere are a few loyal customers. Every shop has some

loyal customers.

Average Basket Size Rs.10 – Rs. 200

Bargaining

One customer did not bargain. Other one asked the

price and walked away.

Customers bargain when they want to buy in bulk

(>1.5 dozen)

Active periodsDepends on the market. During ‘Puja’ seasons, sales

are at their peak.

Preferences

Number of customers per day vary – 50 to 100.

In winters, sales are low because people do not prefer

to eat fruits.

Elaichi bananas are in high demand in ‘Puja’ seasons

while bananas are in high demand in summers.

Cash/Credit purchase Both

Type of Vendor Stationary stall

Location Main road in busy town close to residential area

About him

Variety of fruits/vegetables

All regular vegetables and some special ones from

Kerala (hometown) and have dedicated customers for

that.

Business

Ownership Self-Owned

Purchase decisions Self-made

Pricing Higher than wholesale market but lesser thandepartmental stores/super markets

SalesClose to 100 kgs on a daily basis ( cumulative sales of

all vegetables in that day)

ContingencySpeciality products from Kerala which aren’t available

with any other stores in the locality

Management of StockPurchases made on a daily basis / once in two days as

per the sales trend. Stock left is covered with wet cloth


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and left in the store . This would be good enough for

2-3 days and the left over stock (if any) are used as

cattle feed

Challenges faced

High class consumers , who previously were

customers turned to departmental stores for

convenience and store ambience. They are not price

sensitive but convenience factors like packaging, cold

storage, card payment etc matter to them

Competition

Weekend market – farmers sell the vegetables on a

weekend at a very low price ( almost wholesale price)

to reduce the closing stock

Threat of substitutes None

Changes that can be brought None

Customers

Profile Lower and Upper Middle Class

Loyalty

Fairly large pool of regular customers and also

frequent new customers due to location advantage( main road)

Average Basket Size 2-3 Kgs

BargainingYes, but not all do. Only regular customers get

marginal discounts

Active periods 5PM to 8 PM

Preferences

Cash/Credit purchase Mostly Cash purchases and rarely credit purchases

Type of Vendor Fruits

Location Pragathi Nagar, Hyderabad, A. P

About himOver 50, Family of 4, Son helps out in managing the

shop

Variety of fruits/vegetables Fruits, all varieties, some of them exotic

Business

Ownership Sole ownership, rented space near a Hospital

Purchase decisions

Bananas from Reliance suppliers, and if taken on

credit, the quality supplied is different. So mostly all

supply happens through cash basis.

Apples imported.Rest from markets

PricingFixed prices, since quality is very high and prices are

mostly not bargained

Sales Cash, daily revenue around 1500 INR

Contingency

Stock wasted due to low demand. Sold to cattle

holders, and juice stalls who then use such low quality

stuff in their


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Management of Stock

Not arranged by price differences/ sizes.

All fruits have a level of minimum demand throughout

the year, and during seasons

Challenges faced -

Competition

Not bothered about competition from other FVRs,

everyone dos their own business. Customer profile

that visit organised retail stores are different so not

really worried about it.

Threat of substitutes

Main substitute is juice shops, but a discerning

customer knows that the quality of fruits used in juices

and salads is less. Since the vendor is focussed on

quality, not really a factor

Changes that can be broughtWith more space, the fruits can be arranged by prices

and sizes. But that would cost more

Customers

Profile

Colony residents, housewives predominantly. During

medical camps, influx of patients to the hospitalincreases demand

Loyalty Since it is not a daily purchase, no real loyalty

Average Basket Size 2-3 kg

Bargaining Very less, since quality is shown

Active periodsThroughout the day, since housewives are main

purchasers after 11 am

PreferencesOutward appearance to people who are visiting,

regular buyers have their own preferences based on

Cash/Credit purchase Cash

Type of Vendor Vegetables

Location Nizampet Main Road, Hyderabad

About himSole owner, operates the store with his wife and two

helper boys

Variety of fruits/vegetables60 varieties of vegetables. No customer should leave

empty handed.

Business

Ownership Sole ownership.

Purchase decisions

Frome one of the bigger markets in Hyderabad, earlymorning. Some specialty vegetables are sourced from

farmers from far off districts which arrive daily by

lunch time

PricingWith 20-30% margin. And if sales are low sold at loss

to push the stock

Sales Credit based

Contingency During rainy season, sales are very low since


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customers cannot stop in the rain to buty goods

Management of Stock

Low quantities of each variety so as to push all

products by EOD. Any leftover stock is pushed first

the next day and if it is unusable is disposed of(~20-

30% stock wasted every day, because of damage and

defects)

Challenges faced -

Competition

Not bothered about other FVRs, co-operate with them

when needed. Threat is from organised grocers, since

they can get better margins at lower prices.


Changes that can be brought Optimising inventory, packaging

Customers

Profile Daily office goers

Loyalty Pretty high, since all varieties can be bought

Average Basket Size 2-3 kg

Bargaining Based on relationship and sales trends

Active periodsAfter 6pm when employees return home. Weekends

and Mondays

Preferences Low seasonality,

Cash/Credit purchaseCash mostly, with repeat customers some leeway

about payments is allowed

Type of Vendor Fruit- Handcart

Location Asian Games Village

About him

Name: Dilip Kumar

Age: 37

Born and brought up in Delhi

Been in business for 20 years

Variety of fruits/vegetables Citrus Fruits and seasonal

Business

Ownership Sole Owner

Purchase decisions

Fuits are procured from 2 areas – Okhla, Mandi in

Azadpur.

Purchase decisions are based on market demand.

Pricing

During peak seasons like summer, prices are high and

margins are high.

Winters are slow and lower margins

Litchis sold at premium as availability was low


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SalesRevenue around Rs.1200/ Profit about

Rs.250(January)

Contingency --

Management of StockBrighter/shinier fruits placed upfront

Washing done few times a day

Challenges faced

Wholesale point(Margins go lower)

Wastage(forecasting is a problem)

Competition

Keeps cart at wholesale point; shared gain/loss

strategy with competitors (collaborators).

Safal, Mother Dairy(on prices)

Threat of substitutesYounger population prefers cheaper snacks(chips,

biscuits)

Changes that can be broughtCan go to wholesaler/farmer’s market for lower and

competitive pricing.

Customers

Profile Middle-High Class( Locality )Loyalty Sometimes; Lose them to Safal(Mother Dairy)

Average Basket Size 1-2 Kilos on average; According to budget

Bargaining Yes

Active periods 7AM- 8PM

Preferences

Number of customers per day vary – 50 to 100.

In winters, sales are low because people do not prefer

to eat fruits.(profit is lower ~ 300/day)

Seasonal fruits preferred

Cash/Credit purchaseCash

Credit: Only for people living nearby

Type of Vendor Fruit- Stationary

Location XLRI Jamshedpur

About him

Name: Hashim

Age: 21

In XL since 3 years; earlier in Kadma

Variety of fruits/vegetables All Indian(seasonal);Imports(on demand eg.dates,strawberry)

Business

Ownership Owned by family: Father to sons run business

Purchase decisions

Demand estimation(mainly B2B driven);

B2C: eg. 50 kilos Papaya per week, 300 bananas a

day(estimate from previous weeks)

PricingDuring peak seasons like summer, prices are high and

margins are high.


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Winters are slow and lower margins

Sales

Revenue: 3000-4000( one batch)

5000-6000(both batches)

Daily Average profit: Rs.400

During SIPs: sitting at home.

Contingency Will put up shop elsewhere in summers

Management of Stock

Stock comes from Kolkata(Apples) , Wholesaler in

Barsodi(Near Tatanagar station)

On trucks, and places in Sakchi

(credit with weekly payments)

Challenges faced

Fridge (electricity unavailable) for Fuji/Washington

apples, papaya etc.

Space constraint(expansion not possible)

Wastage due to above reasons.

Competition Open Market(Bistupur); If rates perceived to behigher.

Threat of substitutes NA

Changes that can be brought Acquiring a fridge, some more space

Customers

ProfileStudents(all classes); Professors(well to do people);

B2B Customers(Mess, Sonnet and Alcor Hotels)

Loyalty Singular fruit vendor in campus;

Average Basket SizeStudents: Rs.80-100

Professors: Rs.150-250

Bargaining Yes; But doesn’t budge most of the time

Active periods 9AM-11PM

Preferences Cut fruits


Type of Vendor Fruit – Shop


About him

Name – Sultan

Age – 40-43

Been selling since the past 20 odd years inJamshedpur.

Also sells some fruits to XLRI fruit vendor.

Opens his shop at 7.30am and operates till 11pm.

7 people in his family. Daughter is preparing for CA.


Many (Indian and Imported)

Apple, Grapes, Banana, Orange, Mango, Muskmelon,

Watermelon, Dragon Fruit, Apricot, Guava,


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Strawberry, Papaya, Pears, etc.

Imported fruits are not better than Indian, they only

look better.

Chemically treated fruits have a longer shelf life.

Business

OwnershipSole owner

Has 3 people working under him (1 is a bodyguard)

Purchase decisions

Purchase fruits from different wholesalers. There is a

wholesale market in Sakchi. There is another near

Tatanagar station.

Monthly credit purchase. Depends on the person.

Some wholesalers sell on a 8-10 day credit.

Pricing

Depends on purchase. “If I purchase at Rs.10, I sell at

Rs.12 – 15”

Depends on demand

e.g. Chickoo – Rs.100

Strawberry – Rs.120

Sales

High Demand

Revenues - Rs.10000-12000/day

Profit – Rs.2000-3000/day

Low Demand

Revenues – Rs.6000-7000/day

Contingency

In case he is running out of fruits, he calls his

wholesaler who delivers a fresh stock within a few

hours.

Management of Stock

(Fruits were arranged very beautifully. Appearance of

the store was colourful. He sprayed water on the fruits

to make them look fresh)

Challenges faced

Wastage

Damaged fruits

Fruits have a very low shelf life

Competition

“Double-sided sword”

Competition has been there always and is bound to

stay.

Supermarkets are not a threat as they cannot keep sucha large variety of fruits and even if they keep, they will

be unable to maintain the same.


Changes that can be brought None.

Customers

Profile All kinds of people.

LoyaltyThere are a lot of loyal customers. His shop was one

of the best in the area.


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Average Basket Size Rs. 50-100

Bargaining

Customers bargain a lot. “But I am also very smart. By

looking at a customer, I can predict if he or she is

going to bargain. In such cases, instead of Rs.100, I

charge them Rs.120 so that after bargaining, they will

decide on a price of Rs.100”

Active periodsEvenings

Summer season contributed greatly to yearly revenue.

Preferences

According to him, people’s preferences are

independent of seasonal changes. “Kalyug zamaana

hai. Log thand mein bhi raat ko bhi icecream khaate

hai!”

Sales increase during the marriage season.

People do not buy much fruits for kids in winters.

Customers buy fruits on the basis of look, taste, and

nutrition.Cash/Credit purchase Both

Type of Vendor Fruit - Shop


About him

Name – Lakshman

Age – 51

Born and brought up in Jamshedpur.

Family has been into this business since the past 3

generations.

Elder brother operates another shop in the vicinity.

Studied in St. Mary’s high school till Std.VIII.

Had to drop out of school as family could not afford

fees.

Shop timings – 8.30am – 11pm






Business

Ownership

Sole owner. No staff.

Children are studying – B. Tech. Daughter was a

school teacher and is now married to an engineer from

HINDALCO.

He is the last generation of fruit sellers.

Purchase decisionsPurchases stock from Parsudi wholesale market.

1 week credit.


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Pricing Based on the price charged by the wholesale market.

SalesProfit – Rs.2000 to 3000

During mango season – Rs. 5000

Contingency

The vendor calls the wholesale market in case he is

running out of stock and delivery usually takes a

couple of hours.

Management of Stock

In summers, protecting mangoes from sunlight is very

important. Because of TATA Steel, temperatures

shoot up to 50 degree Celcius.

Need to take extra care of all fruits in summers.

Challenges faced

Wastage (7-10%)

Damaged fruits.

Low shelf life – e.g. Cold storage apples need to be

constantly sprayed with water else they will dry up.

Sell such fruits to ragpickers at throwaway prices or

for free.

Competition

Supermarkets do not provide personal service. Fruits

are of poor quality.

Exist as one player in a market of many players.

Threat of substitutes -


Customers

Profile All kinds of customers. Max. 100/day

LoyaltyThere are a lot of loyal customers. Around 20-30

regular customers come every Sunday.

Average Basket Size Rs.100

Bargaining

Customers always bargain. “Ultimately, I need to sell

my fruits. If a customer bargains a lot, I reduce prices

by Rs.8-10. On other fruits, I charge Rs.10 more”

Active periods11am-2pm

5pm-8pm

Preferences

Change as per seasons. In winters, they prefer to buy

from a shop which has a good collection of winter

fruits.

e.g. Grapes, Oranges, Papayas


Type of Vendor Fruit – Shop


About him

Name – Sunil

Age - 45

Did not want to answer our questions. The other


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owner asked him to answer.






The largest shop in the area.

Business

Ownership Father and two Sons

Purchase decisions

Purchase fruits from wholesalers on credit – 1 day/1

week/1 month

Depends on the business relationship with the

wholesaler.

Purchases best quality fruits from the market.

Pricing

Pricing depends on quality. As better quality fruits are

purchased at a higher price from wholesalers, the

vendor charges a premium price to his customers with

the guarantee that the quality will not becompromised.

Price = Purchase Price + Other expenses + Profit

SalesProfit – Rs.3000 to 4000

Depends on customer demand.

Contingency During ‘Pujas’ and ‘Marriage Seasons’, stock need

Management of Stock




Challenges faced

Loss because of wastage.

Sell such fruits to ragpickers at throwaway prices or

for free.

Competition

Competition is there. They not only face competition

from the local fruit sellers, but also from sellers in

Sonari, Sakchi, and Kadma.

Supermarkets operate at a different level and will

never be a competition to local vendors.



Customers

Profile All types of customers – Generally upper middle class

Loyalty

There are a lot of loyal customers. Local customers

generally prefer his shop.

The shop is around 90-100 years old.

Average Basket Size Rs.120-150

Bargaining Charge higher price to customers who bargain

Active periodsSummers contribute majorly to yearly sales.

Customers do not prefer to buy fruits in winters


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Preferences

Customer preferences are dependent on the season.

Winters – Apples and Grapes

Summers – Mangoes and Oranges


Type of Vendor Vegetable – Wholesale Shop

Location Bistupur

About him

Name – Mohammed

Age – 40

Shop is 40 years old.

Operates as a retailer as well as a wholesaler.

Shop timings – 7am to 10pm

Shop – A bed, TV, and chair

Variety of fruits/vegetables Potato, Onion, Garlic, Ginger, and Green Chilly

Business

Ownership Sole owner.Staff of 4 people.

Purchase decisions

Based on demand. E.g. When demand is low, stock is

cleared and capacity is kept unutilized.

Potato – West Bengal

Onion – Lalsalgaon

Garlic – Uttar Pradesh

Green Chilli – Orissa, Chattisgarh

(payment done via net banking – Credit purchase)

Discount offered if payment is made in cash.

Pricing

Rates

Potato – Rs.6/kg Wholesale

Rs. 8/kg Retail

Onion – Rs. 22/kg Wholesale

Rs. 26/kg Retail

Price charged depends on quantity bought.

Rates are decided in the market daily.

Sales Sold in bulk quantities. Revenues are generally fixed.

Contingency

In cases when there is shortage of vegetables with one

vendor, the nearby vendors help him by lending theirvegetables to him or by increasing prices to bring

down demand.

Management of Stock

Some Potatoes are misshapen but their intrinsic

properties are same. However, retail customers will

not buy such potatoes and therefore, they are sold at

wholesale prices to contractors.

The vendor had a huge godown filled with vegetable


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sacks.

Challenges faced No monopoly in business. Delivery of onions takes 4

days while potatoes are delivered in 8 hours.

Competition

No competition in this wholesale market.

Each vendor has fixed customers.

Nearby markets are their competitors but they cannot

bring retail customers from Sakchi to Bistupur.


Changes that can be brought No changes. As per the vendor, this model will

sustain.

Customers

Profile

Initially, they used to sell to caterers. Now they

purchase directly.

Customers include hotels, mess contractors, and also

retail customers.

Most transactions are made over mobile phones.

Loyalty

Loyal customers are generally charged lower prices.Because this is a wholesale market, 90% sales are

done to regular customers.

Each wholesaler has his own set of customers.

Average Basket Sizee.g. 50-100kg

Up to 500kgs

BargainingFixed customers. Prices charged are reasonable. Little

bargaining

Active periods Early morning to noon.

Preferences

Customers prefer to buy from a particular vendor as

they have developed business relations with the

vendor.


Type of Vendor Vegetable – Shop


About him

Refused to share his name.

One of the bigger shops in the area.

Father did not seem to be interested in answeringquestions.

Owners appeared frustrated may be because the

market has deteriorated in the last few years.

Store time – 8am – 10pm

Variety of fruits/vegetablesGreen leafy vegetables, and other vegetables except

potato, onion, and garlic.

Business Ownership Shop is run by father and his two sons.


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Has been running shop since 53 years.

Purchase decisions

Into the wholesale as well as retail business.

Purchase is directly made from farmers. In cases

where vegetables are not available with the farmers,

they purchase from other wholesalers.

For wholesale orders, stock is procured one day in

advance.

Pricing

Prices are decided by the market. Prices vary daily.

Price depends on quality. Better quality means higher

price.

SalesSales depend on the season.

Summers are poor for doing business.

Contingency All decisions depend on common sense.

Management of Stock Stock is procured one day in advance.

Challenges faced

Wastage

Disposed off /cattle feed/ sold to rag pickers atthrowaway prices

Competition

No competition. All vendors purchase their stock

together from same farmers. They all coordinate and

cooperate.

No comments on supermarkets. (They thought we are

from Big Bazaar)

There are bigger markets in Sakchi and Kadma.

Previously, there was only one market in Jamshedpur

in Bistupur, but now new markets have cropped up.

Threat of substitutes

No threat.

In winters, green vegetables are sold. In summers,

they are substituted by bitter gourd, lady finger,

radish, etc.

Changes that can be brought No comments

Customers

Profile All types of customers – 100 – 400/day

Loyalty 20-30% repeat customers


Bargaining

Customers bargain. Ultimately, they need to sell, so

they have to sell at lower prices to customers who bargain a lot.

Active periods Early morning

PreferencesWinters – Peas, Cauliflowers

Customer preferences change as per seasons.



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Bargaining

Yes. Customers bargain. Prices are raised by Rs. 5-10

and then customers bring down prices by the same

margin to make the Net Result = 0.

Active periodsEvenings

Sales pick up in March.

Preferences Customer preferences change as per season.


Type of Vendor Fruit - Handcart

Location Airport Road, CH Area

About himRefused to share his name.

Was hesitant to answer our queries.

Variety of fruits/vegetablesGrapes, Apple, Orange, Pomegranate, Papaya, and

Guava

Business

Ownership “Mahajan” basis – The seller gets commission basedon daily sales. The shop is owned by somebody else.

Purchase decisions

The Mahajan takes decisions. Seller is consulted about

demand. Fruits are purchased from the nearby

wholesale market.

PricingPrices are decided on the basis of demand. High

quality drives up the prices.

SalesDaily sales are in the range of Rs. 4000 to Rs. 5000.

Sales increase in the summer season.

Contingency -

Management of Stock

Stock is filled as it starts running out. The handcart

should always appear full of fruits and fruits should be

arranged in such a way that they pull the customers

towards them.

Challenges faced None

CompetitionHe is the only fruit seller on a 2km stretch of road. His

customers are locals and travellers. No competition.



Customers

Profile Locals, travellers.Loyalty Hardly any

Average Basket Size Rs. 50

Bargaining Yes. Higher prices are charged to such customers.

Active periods Early mornings and Evenings

Preferences Fruits are stocked as per the season.



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Type of Vendor Fruit – Handcart

Location Sakchi Market

About him

Did not allow us to record. We could record only 1.5

minutes of the conversation. Remaining conversation

was then transcribed.

Variety of fruits/vegetables Grapes and Guavas

Business

Ownership Dual ownership

Purchase decisions

Depends on demand. Purchase is done daily on 1

week’s credit from the wholesale market. As they are

not a big player in the market, the wholesale market

gives them lower preference than shop owners.

PricingPrice depends on quality and daily sales. If sales are

down, margins are cut and prices are pulled down.

Sales

Not much. Sells around 50kg grapes per day @ Rs.

90/kg.

Profits are low.Contingency -

Management of StockDifficult to manage stock as there is a problem of lack

of space.

Challenges faced

Lack of space.

No fixed location.

Customers prefer shops.

CompetitionShops are the biggest competitors. Handcart pullers do

not have much bargaining power with the wholesaler.



Customers

Profile All kinds of customers.

Loyalty Very few.


BargainingCustomers bargain and are therefore charged higher

prices so that the fruit vendor does not suffer a loss.

Active periods Evenings

Preferences Preferences change as per season.


Type of Vendor Fruit - Shop


About himHe was very forthcoming.

Young.

Variety of fruits/vegetablesAll kinds of fruits – Indian and Imported.

One of the bigger shops in the area.


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Business

Ownership Dual ownership

Purchase decisions Based on customer demand.

Pricing

Prices are decided on the basis of demand and also on

the basis of competition. Purchase decisions are taken

by the principal owner.

Sales

Sales fluctuate as per season. No fixed income. Daily

sales depend on the number of customers and their

basket size.

ContingencySupplies were replenished daily and also when an item

was on the verge of going out of stock.

Management of Stock

The shop was filled with all kinds of fruits. Supplies

were replenished daily and also when an item was on

the verge of going out of stock.

Challenges facedWastage

Low revenues in winters

Competition

As they are all operating in the same market, there issome competition but the competition is healthy. If

they are not competing on price, they compete on

quality.

Supermarkets were never a competition and according

to the vendor, they will never be.

All sellers will operate and they will all operate

independently.

Threat of substitutes“Not much. Customers are smarter now and talk about

nutrition too!”


Customers

Profile

All kinds of customer.

If you are an upper class customer, you will be sold a

higher priced, better quality product.

Loyalty There are a few loyal customers.


Bargaining

“Customers bargain. To operate in this market and sell

your fruits, it is important to manage such customers

tactfully”

Active periods Evenings

Preferences

Customer preferences depend on the season and also

on the willingness to pay.

In winters, grapes occupy a larger share of wallet

while in summers, mangoes occupy a larger share of

wallet.



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Type of Vendor Fruit – Retail + Wholesale


About him

There is a retail store in front of their godown and

three brothers operate the store as well as manage the

wholesale business.

Operating in this area since last 6 years.






Business

Ownership Three brothers.

Purchase decisions

Stock keeping depends on the season. Seasonal fruits

are purchased in bulk while other fruits are procured

only on need basis because there is a high chance of

their wastage.

Purchase decisions depend on demand and also try tominimize demand.

Pricing Price depends on quality

Sales

As three people are running the shop, revenue would

be high and so would be the profit. Because they are

one of the few sellers in the wholesale market, and do

not have to bear extra costs for retail sales, their

margins are high.

Contingency

If the fruit does not sell in two days, they try to

salvage their loss by selling it below its cost price.

In case of low stock, they call the farmers who deliver

fresh stock in one day.

Management of Stock




Challenges faced

As this is a business, if there is a profit of Rs. 200

today, there may also be a loss of Rs. 500 tomorrow.

Uncertainty is perpetual in this sort of business.

Perishability of fruits.

CompetitionCompetition always exists in the market but there areonly a few people who do both retail and wholesale

business simultaneously.

Threat of substitutes None.

Changes that can be brought None.

Customers Profile

“Today, customers are smarter than the seller”

All kinds of retail customers. Wholesale customers

include mess contractors, caterers, and institutions.


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Loyalty“Customer is never permanent. Customer wants low

prices and better quality.”

Average Basket SizeRs. 80-100 for retail.

No fixed size for wholesale.

Bargaining

Customers bargain.

E.g. Orange sells at Rs. 40/kg.

Customer asks for Rs. 35/kg.

Not only that, they choose the best looking oranges

from the lot.

Therefore, the retailer marks up the price to Rs. 45/kg

so that the customer settles at Rs. 40/kg

Active periodsEvening.

Summer season is best for business.

PreferencesCustomer preferences for vendors and fruits change on

the basis of season, price, and quality.


Type of Vendor Vegetable – Retailer + Wholesaler


About himAppeared to be in early 60s. He also owns a paper

shop adjacent to his vegetable shop.

Variety of fruits/vegetables All kinds of vegetables. Full stock.

Business

Ownership Father and sons.

Purchase decisions

Purchase depends on demand – demand from retailers

and demand from local customers.

Pricing

Rates are decided daily in the market at 5am. The

prices charged by all vendors in the wholesale market

are uniform. Any difference in price is because of the

difference in quality.

SalesMarket is growing and will continue growing. Family

members are also diversifying their business.

ContingencyIn case a part

Documents

STMH14-3 Proj Rep Sec a GroupNo 6