STREET CUSTOMSTM

SECTOR: RETAIL

Members:

Ketan Mehta (IIT Roorkee)

Tarun Gupta (MNIT Jaipur)

Ankur Gulati (IIT Roorkee)

Anubhav Gupta (IIT Delhi)

OUR INSPIRATION AND DRIVING FORCE

StC has a solution….

Executive Summary

Street Customs is a retail company, which will bring forward an entirely new force, which is still unseen and unnoticed. Street Customs aims at uplifting the 15 million small-shop owners and their families by following holistic policies and bringing them under one brand name. This will enable them to take the Retail-Biggies who are eating away their business Head-On.

StC will start its operations by conducting seminars for the hard hit shopkeepers of the city. The seminar aims to make them realize the reasons of success of organized retail. Interested shopkeepers will affiliate to our company and get registered. After that starts the makeover of their mom & pop stores to shops of the modern era. The new sleek looking shops with exuberant young employees will now be ready for the market.

Our USP for the shopkeepers will be that their shops sell the same items as before. StC will register shops selling products of various segments on its list viz. groceries, pharmaceuticals, apparels etc. All shops will follow a uniform code of conduct. Policies of Direct marketing, customer-oriented marketing, legalized billing system and product categorization for customer-aid will be followed. Customer loyalty will be ensured by various offers such as cash-back guarantee on all products if found faulty, claims of cheapest prices,

availability of all brand items, quick home delivery system from a next door StC-store. In short everyone will find an organized bazaar next to his or her home.

SIZE OF THE MARKET OPPORTUNITY

In the year 2005 Retailing Industry of India estimated at Rs. 8,00,000 crores which will increase to Rs. 12,00,000 crores by the year 2009 an annual increase of 20 per cent.

ORGANISED retail sector has acquired 6% of the retail business, 94% of the market is still in the hands of the unorganized sector. The %share of market under the organized sector is expected to increase considerably over the years.

Retailing in India is thoroughly unorganized because there is no supply chain management perspective among the shopkeepers.

StC: At a glance

Uplift the 15 million small-shop owners and their families by following holistic policies.

Bring them under one brand name.

Make them competent to take retail-biggies head-on.

All the shops will follow a uniform code of conduct.

Policies of direct marketing, consumer-oriented marketing and product categorization for costumer-aid will be followed.

In short everyone will find an organized bazaar next to his or her home.

Formation of StC

First two months has been taken as the preparatory time for StC. During these two months:

Objective of StC is to register 10,000sqft area (15 shops) under it.

FMCG and golden groceries will be the target product categories.

StC will be approaching the hard-hit shopkeepers by means of seminars organized for them. In the seminars they will be told the basic differences between them and the retail giants and how are they eating their business, and how can StC help.

The registered shops will undergo a make-over giving them a new sleek look, a touch of class and brand.

Training workshops will be held for the small shop owners, teaching them how to treat the costumers and computers!

Depending on the information given by the registered shops, stocks will be maintained by StC, in their godown which will be in the outskirts of the city.

Company Summary:

Street Customs P. Limited shall be formed with an authorized capital of say Rs. 20.00 lacks to start with. The equity shall be subscribed by the promoter. Then we, our friends, relatives shall subscribe to the shares in cash. The shares issued in this manner shall be your paid up Capital. You will calculate the cost of the project initially and then in the means of finance you will mention equity shares subscribed and paid for, short term loan from friends and relatives and bank finance but you will have to show against what the Bank should give you loan.

As StC progresses we will purchase shares of the Co. and improve the equity base (Paid up capital). On the basis of the projections we will impress the Venture Capitalist to have equity participation in our Company from the second year onwards and shall give the shares at par. For example we may need Rs. 15 lacs for working in the third year, you say that we shall give you shares for only 6 lacs and shall bring in the capital from your own resources. At no point of time we shall issue shares for more than 50 % till the Company is small. In the third year StC shall go public.Out of the profits we will give bonus shares to the venture capitalist. Since StC shall be doing well, the venture capitalist may off load the shares in the market and make a huge profit. We will continue to manage the affairs of the Co. The end of third year shall be fine. As such the gestation period of our venture is small and we’ll start making profits from 2nd. year. We’ll make the investments our Co. more lucrative and get back.

*EPS Analysis will be declared in front of investors

Points to consider before moving ahead:

Interpretation of the Graphs/Financial Statements:

1. The bar graph shows how sales/day/sq.ft is inversely proportional to the average area of a store(for different Retail Brands).2. Though our sales/day/sq.ft are projected to Rs.105 but while calculating sales and net profits it has been taken it to be Rs.22 (Clearly the least among all).3. Money spend in the makeover of shops, will be recovered from shopkeepers in EQI(equal quarterly instalments).4. Cash Credit is a function of the Current Assets we possess.

OPERATIONS OF STC

StC moves ahead in 3 phases which have been taken up in detail in the pages to come

Phase I

StC will be in phase I, till the area(A) under StC is 10,000<A<1,00,000. During this phase:

OBJECTIVES :-

Buying the products from the distributors thereby saving one level in the Supply Chain (Wholesaler).

Increasing the sales of the shopkeepers thereby increasing their net profit.

Maintaining the old good will and trust of the costumers, by providing better prices and services.

To make the maximum utilization of the space available and maximize our retail space.

Margin List :-

Name of product

Price offered to StC MRP

% Difference VAT %Difference

(by distributor)

(on billing amount in %) (after vat)

Colgate Cream 200 gm 42.02 52 19.19 12.5 9.07Tooth powder 50 gm 8.95 11 18.63 12.5 8.45Cibaca Paste 50 gm 8.88 11 19.27 12.5 9.17DEN Cream 20 gm 4.85 6 19.17 12.5 9.07Maggi 200 gm 16.16 20 19.2 4 15.9Red label tea 500gm 83.20 103 19.22 4 15.99

Calculating the % difference (on MRP) left for the company in case of the above products, the average comes out to be approx. 10.5% .

Dividing the profit margin among various beneficiaries.

Cash flow for PHASE I ending in 4th month

Source Of Fund Amount

By Sales 54100000By Shopkeepers 1035000

Total 55135000

Usage Of Fund Amount

For Purchasing Stock 44003400For Salary 2093134For Purchasing Assets 1303143For Rent 160000For Advertisement 550000For Miscellaneous Expenditure 648730For Renovation of shops 2319093Profit passed on to the shopkeeper 2434500Profit passed on to the consumer 1082000Company's Net Profit 541000

Total 55135000

10.5%

0.5% benefit on MRP to the customers

4.5% Margin for

the retailer

5.5% for the maintenance of StC

Method of advertising:

Mouth publicity by the shopowners. StC will make sure that the shopkeepers call the costumers in their locality , and make them aware of the changes their shops have undergone.

StC will be spending a substantial amount on advertisement through newspapers.

Banners of StC will be throughout the city.

StC will also be spending on advertisement through FM.

Benefits to the costumers :

During the PHASE I StC will be able to offer the following benefits to the costumers:-

Cheaper products

Home delivery

Cash back guarantee

Trained employees

Legalized billing system

Feedback forms

Credit point loyalty

Benefits to the shopkeeper :

During the PHASE I the shopkeeper will get the following benefits:-

The shopkeepers will enjoy greater sales and profit.

Networking: if the costumer asks for a particular product and it is not available at that particular retailer, then StC through its network will supply that product from the nearby shop.

Advertisement costs will be payed by StC, which will help the retailer in increasing his sales .

The stocks of the retailers will be regularly monitored by StC, and their replenishment will be the responsibility of StC , thus the retailers are made free from the tension of stock shortage.

Competition:

During PHASE I, StC will feel competition from retail giants and also those shopkeepers those who have not joined StC. Retail giants provide offers on certain occasions, in these offers the prices offered by them are very competitive.

StC will be able to overcome the competition by shopkeepers not under StC, by selling the products lower than MRP.

The impeccable locational advantage that StC enjoys over the super marts.

PHASE II

StC will be in PHASE II, till the area(A) under StC is 1,00,000<A<10,00,000 . During this phase:

Objectives:

To buy maximum possible number of products directly from the CnF (carry and forward) thereby saving the distributors margin.

To bring the distributors to the negotiation table for rest of the products.

To improve the monetary benefits being given to the costumers.

To increase the margin of the retailers.

To spread the network of StC to at least six cities by the end of this phase.

Margin List :

Name of ProductPrice offered to StC MRP

% Difference VAT %Difference

(by CnF)(on billing amount) (after VAT)

Colgate Crm 200 gm 39.94 52 23.24 12.5 13.6Tooth powder 50 gm 8.48 11 22.82 12.5 13.18Cibaca paste 50 gm 8.42 11 23.42 12.5 13.8DEN crm 20 gm 4.61 6 23.11 12.5 13.5Maggi 200 gm 15.34 20 23.3 4 20.2Red label tea 500 gm 79.15 103 23.15 4 20.1

Dividing the profit margin among various beneficiaries.

14%

2% benefit on MRP to the customers

1% Profit of StC

5.5% for the maintenance of StC

5.5% Margin for

the retailer

Cash flow for PHASE II starting after 4 months and ending after 9months :

Source Of Fund Amount

By Sales 440617000By Shopkeepers 10282500

Total 450899500

Usage Of Fund Amount

For Purchasing Stock 362974097.5For Salary 15244240For Purchasing Assets 12966522For Rent 640000For Advertisement 2080000For Miscellaneous Expenditure 5081485For Renovation of shops 1242200Profit passed on to the shopkeeper 24233935Profit passed on to the consumer 22030850Company's Net Profit 4406170

Total 450899499.5

Benefits to the consumer:

Cheaper prices: the costumer will draw more benefits on MRP than before.

Networking will get stronger. Since the shops under StC is increasing thus the distribution of products within the network gets stronger.

Home delivery system will also get stronger.

Benefits to the retailer:

Increase in sales: sales per sqft should increase because of the extra benefits given to the costumers and a better brand name .

Advertisement: StC will be spending a good deal of money in advertisement, which in the end will benefit the reatailers.

They will have a stronger hold over the market, because they now stand shoulder to shoulder with the retail giants.

Competition:

StC in this phase feels competition from the retail giants.

PHASE III

PHASE III starts when the area(A) under StC A>1,00,000 . During this phase:

StC will try to bring manufactures of products over the negotiation table, thereby ensuring more margins on some of the products.

StC will enter in two new product categories:

1. Apparels

2. Confectionary

StC will head on to TV commercials including with the methods of advertisement employed earlier.

StC will be able to pass on even more benefits to the costumer and retailer.

Month Projected AreaShopkeepers' Margin Before1 10000 2400002 15000 3600003 22500 5400004 33750 8100005 50625 12150006 75937.5 18225007 113906 27337448 170859 41006169 256289 6150936

Month Projected AreaShopkeeper's Margin After Joining StC1 10000 2970002 15000 4455003 22500 6682504 33750 12251255 50625 1837687.56 75937.5 2756531.257 113906 4134787.88 170859 6202181.79 256289 9303290.7

Glide Path:

The 5.5% taken for the maintenance of StC is spend as follows :

Shops(n) Salary Godown+office Seminar+ Advertisement Total Others 5.5% of Rent Training sales(lacs)

15 192000 32000 60000 100000 384000 3.6323 247500 32000 165000 100000 544500 5.44534 330750 32000 165000 150000 677750 139000 8.167551 531625 64000 247500 200000 1043125 182025 12.251576 711438 64000 556875 300000 1632313 205368 18.3768114 997250 96000 556875 300000 1950125 806405 27.5653171 1356374 128000 835313 400000 2719687 1415093 41.3478256 1940062 160000 1252968 480000 3833030 2369150 62.0218384 2701094 192000 1879453 600000 5372547 3930743 93.0329577 3723639 224000 2819179 750000 7516818 6438092 139.5491865 5217960 288000 4228769 1000000 10734729 10197661 209.32391297 7479940 384000 6343154 1200000 15407094 15991496 313.9859

3863 25429631 1696000 19110085 5580000 51815719 41581441 933.9716

No of employees appointed in sequence:

Month Emp(n) MBA Lawyer S.Keepers QC Peon Guards VM Designer O.bearers G.worker1 17 3 1 4 1 1 1 1 1 2 22 23 3 2 6 2 1 1 2 2 3 23 29 3 2 9 2 1 1 2 2 5 24 47 6 3 13 3 2 2 3 3 7 45 63 6 5 19 5 2 2 5 5 10 46 89 9 6 29 6 3 3 8 8 12 67 122 12 7 42 7 4 4 11 11 15 88 175 15 7 64 15 5 5 17 17 20 109 245 18 8 96 20 6 6 26 26 28 1210 341 21 8 145 22 7 7 38 38 40 1411 479 27 9 217 25 9 9 58 58 50 1812 688 36 10 325 36 12 12 86 86 60 24

Home Delivery Concept

We propose a very new concept both in terms of technology and service in home delivery. To improve the buying experience we will have a completely automatic system of shop selection considering various factors because fast response is what home delivery needs. The system will work both through telephone and internet so that non-penetration of internet in interiors is not a deterrent. The customer will need only to make a call or just log on to our site, place his order and he’s done …then we will select the best service for him. We cannot disclose much in terms of the techniques that will be used for all this because they will be first of their kind in the industry. Moreover there will be no extra charges for home delivery as far as possible. All possible options of payment will be exploited to make the process as fast as possible. As far as the workforce for home delivery is concerned we plan to hire some number initially for each area based on sales forecast and then keep it upgrading on need basis. The company will pay the cost of this workforce but we will charge shopkeepers on basis of the amount each one uses for his deliveries. This will ensure that we don’t incur huge expenses for home delivery and at the same time are able to start the service.

Scope of Growth in Retail

We are seeing a vast potential of growth in retail which is untapped at present. The following points reflect this huge potential:

In this busy life nobody really has time to go and shop for grocery and other items of daily use or items in which you don’t need to make a choice. They are doing this because they don’t have any option. Our first of its kind concept in home delivery will tap these customers who presently shop from any other place whether it’s a small shop or a supermarket. Nobody really wants to go to supermarket to shop for these things.

At present supermarkets lose their customers because they lack in variety. The person goes to a supermarket say of the name X, and doesn’t find the brand there then its almost sure that none of the supermarkets of the name X will have this brand, now this customer is lost for X. We will not let these customers go because even if one of the shops under our name doesn’t feature that brand there will always be other one where its available thus because of the company’s network , the person gets the brand that he/she was looking for , though it was not present at the shop he came. So we virtually don’t lose a customer just because of non-availability.

While we were surveying various retail chains we found that almost all of them are having huge losses due to thefts maximum of which are done by their employees. This reduces their effective profit drastically. In our model this will not be problem as the workers are the owners of the shop, we will just be managing and thereby increasing the sales for the shop owners.

FINANCIAL ANALYSIS:

Funding objectives and use of funds for the preparatory period of the company:

Particulars(Dr.) Amount Particulars(Cr.) Amount

To opening stock 5000000 By shopkeepers 112500

To Salary 241000 Net loss 6570000

To training Workshop 40000

To Advertisements 50000

To seminar 43500

To software solutions 500000

To Renovation of Shops 750000

To Office Rent 34000

To Petrol/Phone/Elec. 7000

To legal expenditure 7000

To Others 10000

Total 6682500 Total 6682500

BALANCE SHEET AS ON WHEN STC STARTS ITS OPERATION:

Liabilities Amount Assets Amount

Capital 80000 Fixed asset

Less net loss 6570000 2 Bikes 60000

Less drawings 80000 15 Computers 225000

Net loss -6570000 OFFICE INVENTORY 40000

Long term liabilities Fictitious assets

Cash credit from bank 2500000Expenditure to extent not written off 100000

Investors 5342500 Current Assets

Cash in hand 120000

Current liabilities Debtors(shp.kprs) 787500

Outstanding Expenses 60000

Total 1332500 Total 1332500

Exit Strategy:

Merging the firm with some big business house, which finds this venture lucrative enough.

Diversifying into various other fields after selling off a stake in the company.

Entering into JVs with other biggies.