The Process

UNIT 13 APPLICATION OF BUYING AND of Buying

MERCHANDISING IN A GROCERY
RETAIL STORE
Structure
13.0 Objectives
13.1 Introduction
13.2 Retail Scenario in India
13.2.1 Food and Grocery Scenario in the International Market
13.2.2 Big Bazaar – The Hyper Market Chain
13.3 Case Study: Savla Store
13.4 Guidelines for Finding Answers to the Questions
13.5 Let Us Sum Up
13.6 Key Words
13.7 Answers to Check Your Progress
13.8 Terminal Questions

13.0 OBJECTIVES
After studying this unit, you should be able to:
● describe the retail scenario in India;
● discuss food and grocery scenario in the international market;
● explain various characteristics of the hyper market chain such as Big Bazaar;
● analyse the case study of a retail store.

13.1 INTRODUCTION
In this age of globalization, it was unavoidable for India to follow the world trends in
the retail marketing, as in other sectors. During the last decade, India has witnessed
an unparallel development in the retail sector. Now many Indian hyper market chains
such as Big Bazaar, Reliance Fresh, etc. have become as famous as Wal-Mart and
Mark and Spencer used to be in the U.S. and Europe. In the year 2005, the total
turnover of the retail sector in India was approximately Rs. 10,000 billion accounting
for about 10% growth of the country’s GDP. Traditionally the retail industry in India
was unorganized and fragmented, but after realizing its potential, many corporate
companies have entered this sector in a big way. During the last few years, many
robust chains of supermarkets, hyper and grocery markets like in developed countries,
have started operating. In this unit, you will learn about the retail scenario in India
and will be familiarized with the food and grocery retailing in the international market.
You will further learn about doing the case study of a retail chain taking the examples
of Big Bazaar and Salva Store.

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Buying and
Merchandising-II 13.2 RETAIL SCENARIO IN INDIA
The Indian retail scenario is undergoing changes in the kind of product categories
being sold and the retail formats used for selling such product categories. In the past
one decade both the categories that are available on the retail counters as well as the
evolution of new retail formats have made major strides.
Currently the fashion sector in India commands a lion’s share in the country’s
organized retail sector. This is in line with the retail evolution in other part of the
world, where fashion led the retail development in the early stages of evolution. This
was followed by other categories like Food & Grocery, Durable etc.
Let us look at some important observations about apparel and textiles, which is the
most significant element of the fashion sector:
Consumer Spending on Clothing & Textiles
● The consumer spending on the clothing, textile & fashion was about Rs 18500
crores in the organised retail sector during the year 2006.
● This spending is about 34% of the total spending in the organised sector.
● The spending on clothing etc. has grown by about 30%.
● As per Mckinsey’s report the spending on clothing is estimated at Rs 2872 billion
by year 2025 with a CAGR of 6.4%.
13.2.1 Food and Grocery Scenario in the International Market
The international scenario in retail has evolved through series of developments on the
economic and political front over number of decades. It is like a torch bearer for the
Indian retail industry for leading its path through various evolutionary phases. It will
be interesting to study the share of food and grocery share in the total business of
leading retail chains operating in the US and European markets. Let us see the Table
13.1 given below showing the share of food and grocery in the overall sales of the
major retail chains.
Table 13.1: Share of food and grocery in total sales of major retail chains

Retailer Total Sales % of Food and

(USD Bn) Grocery Sales
Wal-Mart 220 40
Ahold 68 91
Carrefour 62 71
Kroger 49 91
Metro 45 48
Albertson’s 37 90
Rewe 35 73
Lecrec 34 52
Safeway 32 92
Tesco 32 87
Auchan 32 71
ITM 31 82
Aldi 30 84
Ito – Yokodo 29 46
Edeka / AVA 29 85
Tengelmam 29 65
Spar 28 90
Sainsbury 26 90
Jusco 25 49
204 Supervalu 23 75
From the above table we can observe that in all major chains in the US and European The Process
of Buying
markets food and grocery has a significant share of the total sales of these retail
chains. In fact, food and grocery forms the largest component of some of the leading
players in the world.
As far as Indian Market is concerned, Food and Grocery is the largest spending
category for Indian consumers (which form about 50% of the total expenditure by
Indian households). With all the fundamental drivers & successful pan- Indian retail
models in place, we expect that organized retail in Food and Grocery shall grow at an
exponential pace.
Successful development of value based concepts from the year 2001 onwards; such
as Big Bazaar, Giant, and Spencer as well as development of retail space in smaller
cities and towns shall drive the organized retail into the next levels of cities. Small
towns with a population of 5 to 10 lacs are witnessing a defined increase in disposable
income. This is coupled with high aspirational levels leading to enhanced spending on
consumer goods along with lesser aversion to credit. Thus, one can observe, increase
in the usage of credit cards for purchases at retail stores.

13.2.2 Big Bazaar - The Hyper Market Chain

The chain was introduced in India by Pantaloons Retail (India) Limited (PRIL) in the
year 2001. The first store was opened in Kolkata and was followed by stores in
Hyderabad and Bangalore within a short span of three weeks. The three stores under
the hyper market format contributed a sales turnover of more than Rs 43 crores and
over Rs 2.89 crores to the PBDIT during the first year itself.
The launch of Big bazaar chain of stores was the result of realization by the top
management. The top management realized that in retail business volumes mattered,
which cannot come by life style retail formats. Management understood that the
volumes will come from the ever growing middle class population, which needs to be
tapped. Thus, Big Bazaar discount stores were launched to meet the aspirations of
middle class consumers. The company in a short span of two years added Food
Bazaar to further improve its penetration among the middle class consumers. Let us
learn the strategy of Big Bazaar.
Market Environment: The management of PRIL decided to make changes to the
concept of hyper market stores, to suit the needs of the Indian environment. The
management undertook a detailed study of the product mix on offering with kirana
stores as well as with a chain of discount stores that were operational in the 90s in
Chennai and other cities, by the name of Sarvanna stores. At the time of launch of
Big Bazaar there were not many Indian models available, except for the Giants, the
RPG hyper store, which had just opened in Hyderabad about two months before.
Strategy of Big Bazaar: The Indian consumer is prone to saving on expenses, which
is the bane of credit card companies in India. The management of PRIL thought of
cashing on this concept and decided to offer value to the consumer. Thus, the concept
of Big Bazaar hyper market got created.
The name Big Bazaar was thought of from the concept of bazaar or market place,
where the consumer would like to visit if he has to make substantial amount of
purchases. He may be assured of the competitive prices for the products of interest,
due to the big range of products on offer by different stores in the bazaar. In Kolkata
Bara Bazaar (which means big bazaar) is well known for offering different range of
products at wholesale prices. Thus, consumers preferred to visit this market in spite
of the traffic jams and other inconveniences faced by them, for the seer reason of
205
Buying and saving on their spending. Thus, the management decided to copy a similar kind of
Merchandising-II
concept, whereby, the product offerings and the prices would be very competitive. In
some cases this may be even lower than those offered by the stores in the bazaar
place. This strategy brought immediate recognition to Big Bazaar stores. Price
became the basic value proposition at Big Bazaar stores. Thus, a tag line was created
to emphasise on this value proposition, which stated “Isse sasta aur achchha kahin
nahin”.
Buying and Merchandising Process at Big Bazaar: The buying process for most
of the product categories at big Bazaar was mainly price-driven. The management’s
objective was to deliver good quality products at the best possible prices. For
achieving this strategic element the management followed ‘market-breaking” pricing
strategy. For achieving this, the team would first decide on the price for a category,
based on its research, that would offer real value to customers. Once the price of a
category is determined the buying team would then get into scouting for appropriate
sources that can match both the quality and pricing criteria. Thus, value pricing and
maintenance of quality would be the basis of Big bazaar’s buying and merchandising
team’s pricing policy.
Food Bazaar: Based on the trend in the international scenario, the management was
sure that the food sector would be the fastest growing sectors in the Indian retail
scenario too. Behind this phenomenon was the clear understanding that food and all
the categories within this sector would never go out of fashion. In fact, this may
provide a wide scope for expanding the categories. The fact that Indian families
spend almost 53 per cent of their total budget on food items, provided the company a
strong reason to consider entering into food retailing business. Hence, the company
decided to launch Food Bazaar during the first year of operation of the Big Bazaar
store. The company expected that the inclusion of Food Bazaar would greatly
increase the foot falls of the store. The management was very much correct in their
strategy and expectations. The Food Bazaar worked on the model of ‘Indian Mandi”,
where the customers could touch, feel, and even taste the products on offering.
These products were supplemented by other packaged products to cover the
complete gamut of food requirements of middle class consumers.

Check Your Progress A

1. Which sector has contributed the most to the retailing sector in India?
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2. Which items lead in the total retail business in the U.S. and European markets?
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3. Why do you expect the increased use of credit cards in India in future?
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206
 The Process
4. Why was Big Bazaar successful as the first retail store chain in India? of Buying
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5. Describe the uniqueness of food bazaar.
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13.3 CASE STUDY: SAVLA STORE

To get a feel of the operation of a food and grocery stores, particularly the kirana
store, which is omnipresent in every part of Indian retail market, we present a case
study of the same. Students are expected to carefully look at all the facts of the case
for being able to analyze it and offer practical solution to the problem faced by the
owner of the store.
Savla store has just completed 50 years, and as expected in a traditional Gujarati
Family. Its being under the management of the third generation, run very smoothly
and efficiently by Mr Nirmal Savla, aged 35 years and a commerce graduate. Mr
Nirmal has been looking after the store for the past 5 years and prior to this his father
Mr Jakkubhai aged 65 years used to run it. Mr Jakkubhai had taken care of the store
management since he was 18 years of age under the able guidance of his late father
Mr Savla. Presntly Mr Jakkubhai has left the responsibility of day to day management
of the store to his son Nirmal. He devotes most of his time in making purchases for
the store from the New Mumbai Wholesale Market, situated at Sanpada, in New
Mumbai, which is about 100 Kms far away from the main city.
Savla Store is mainly a grocery or kirana store and thus can be categorized as a
convenience store. Earlier it used to operate from a single gala of 100 square feet and
now it has expanded to three galas of totally 750 square feet and a usable area
(including wall space) of 1000 sq ft. It is situated in the lower middleclass locality in
central Mumbai area. Due to the convenience and proximity to the residential area
and also being situated in the local bazaar it has emerged as the prominent store in the
area.
The store makes most of all the advantages that normally applies to a small kirana
store in a lower middle class society as follows:
● It has proximity to customers’ home;
● Customers get fresh quality of items;
● The prices are reasonable;
● Customers are quite familiar with both the owners and the staff. Thus there is
somewhat familiarity amongst them. This helps when there is too much rush
during peak hours and the customers may have to wait. The customer shows
more understanding towards the store;
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Buying and ● The owner learns about the preferences of his customers over a period of time
Merchandising-II
and thus stocks items as per the customer need;
● Customer gets personal attention from the owner due to familiarity with each
other;
● Certain level of loyalty is developed from one generation to the other between
the family of the owner and family of individual customer;
● Retailer provides credit to certain high bill value customers;
● Retailer may offer discounts to certain customers with bulk buys;
● The retailer provides home delivery to the regular customers;
● There is no queuing up for bills due to small scale of operation
● There are low overheads;
● Low employee cost;
● The retailer provides facility of getting a certain product for a customer on his/
her demand;
The store is maintaining most of the necessary items as a grocery store, and has
categorized the items as specified in the list below.
● Rice
● Wheat
● Dal
● Pulses
● Sugar
● Jaggeries
● Spices
● Other Grains
● Tea
● Pickles
● Oil & Ghee
● Pharali Items
● Soap /Detergents
● Bath Soaps
● Dish Wash
● Coffee
● Pohe
● Table salt.
Look at Table 13.1 which shows the sub product categories being covered under
each of the above categories. The list also provides the number of varieties in each
sub product category, the price range, and other important remarks. This Table 13.1
has been given only to familiarise you with the various main and sub product
cadegories. You may only glance the table and get exposed to these categories.

208
 Table 13.1 The Process
of Buying
Main Sub Product Number Price Range Remarks Other
Category Category of Varieties In Rs Information
in Stock
Rice Parimal 10 16 to Rs 0.5 to 1 20% share
20 per Kg difference in in Rice sales
rates for
different
varieties
Kolamb 17 24 to About Rs 1.5 difference in
40 per Kg rates for 40% share
different in Rice sales
varieties
Basmati Kinki 16 to 22 per 3 to 4 Overall 40%
Kg varieties share of
Basmati in
the Rice sale
Mogra 22 to 26 per 4 to 5
Kg varieties
Dubar 30 to 40 per 4 to5
(branded Kg varieties
items)
Tibar 40 to 50 per 4 to5
(branded Kg varieties
items)
Whole 60 to 120 per 10 varieties
Basmati Kg
Wheat Lokvan 7 to 8 16 to 30 per Varieties are
(long types) Kg as per
supplies from
different states
Sibori 7 to 8 18 to 50 per Varieties are Rs 17 to 18
(rounded Kg as per per Kg is
short supplies of fast moving
types) different variety
states
Daals Tur 2 to 3 60 to 65 per Kg Tur is the
fast moving
sub
product
category
Masoor single 50 to 60 per Kg
Moong single 60 to 70 per Kg
Urad single 50 to 70 per Kg
Chanaa single 40 to 50 per Kg
Matki single 50 per Kg
Pulses Watana - 4 to 5 35 to 100 per Watana is
Black Kg fast moving
sub cate-
gory
among
pulses
Watana – 2 34 to 50 per
Green Kg
Watana - 2 to 3 30 to 40 per
White Kg 209
Buying and
Merchandising-II
Chana - Red single 30 to 50 per The quality Chana is
Kg is as per another fast
different state moving sub
suplies category
Chana – single Average This is
White Kabuli quality – imported
60 per Kg; variety
Better quality –
70 per Kg
Chawli small 50 to 70 per Variety as
Kg per state
large 50 to 70 per 4 to 5 varieties
Kg as per states
Whole single 50 to 60 per
Masoor Kg
Whole 4 to 5 60 to 70 per
Moong Kg
Whole Waal 5 (plain, 70 to 100 per
kadwa, ran- Kg
gooni, etc.)
Whole Urad Black & Green 50 per Kg
Whole Rajmaa single 60 per Kg
Whole Soyabin single 30 per Kg
Sugar Crystal White, 26 to 30 per
Small, Less Kg
White
Jaggery 3 to 4 varieties 30 to 50 per Mainly from
Kg Maharashtra
Spices Dhane single 100 per Kg
(Whole)
Jeera single 200 per Kg
Mustard single 60 per Kg
Methi single 60 per Kg
Lavang single 500 per Kg
Black Pepper sngle 250 per Kg
Dalchini single 400 per Kg
Cardamom Masala Velchi 500 per Kg
Green 1000 per Kg
Badiyan single 400 per Kg
Badishep single 140 per Kg
Chillies 2 100 to 150 per
Kg
Spices Turmeric single 120 per Kg
(Powder)
Dhana single 120 per Kg
Jeera single 200 per Kg
Black pepper single 250 per Kg
Mirchi 3 to 4 120 to 250 per
Kg
Other Grains Jowar 2 16 to 20 per Kg
Bajri 2 16 to 20 per Kg
Nachni single 16 per Kg
Makaa single 17 per Kg

210
 The Process
Tea Leaves Society In different 250 per Kg 25, 50. 100, Fast moving of Buying
(Packed) pack sizes 250, 500, item
1000 grams
Tata Agni 160 per Kg 50 gms to 1 Kg
Assam 240 per Kg - do -
Loose Tea 200 per Kg
Pharali Items Sabudana single 40 per Kg
Sengdana single 60 per Kg
Vari rice single 50 per Kg
Rajgiri singe 60 per Kg
Pickles Mango Siddhi Vinayak 40 per Kg
Oil & Ghee Palm Oil single 56 per Kg
(Loose Oil)
Groundnut single 64 per Kg
Mustard sinle 70 per Kg
Vanaspati Ghee single 65 per Kg
coconut single 80 per Kg
Packed
Branded Oil Sunflower oil Gemini, 75 per litre
& Ghees Fortune,
Sunday
Kardi oil Saffola 140 per litre
Groundnut oil Dhara, Gini 100 per litre
Dairy ghee Sagar 200 per litre 200, 500,
1000 ml packs
Amul 200 per litre -do-
Aarey 200 per litre
Vijay 200 per litre
Soap / Washing Wheel 20 per Kg 0.5 & 1 Kg Fast moving
Detergents Powder item (50%
share in
Washing
powder sale)
Tide 60 per Kg 200, 500, 30% share
1000 gms
Surf Excel/ 34 per 200 20% share
Ariel gm pck
75 per 500
gm pack
140 per 1000
gm pack
Washing Wheel 3.30 per piece Fast moving
Soap item
5.00 per piece
Surf Excel 8 per piece 75 gm
16 per piece 150 gm
Other 3 to 4
varieties
Bath soap Lifebuoy 15 per piece 100 gm
Lux 18 per piece 75 gm
Hamam 18 per piece 75 gm
Rexona 18 per piece 75 gm
Godrej no 1 35 per pack 3 soaps ina pack
211
Buying and
Merchandising-II
Breeze lime 9 per piece 75 gms
Pears 25 per piece 75gms
Dove 35 per piece 75 gms
Dish Wash Vim Bar 6 per piece 75 gms
11 per piece 120 gms
20 per piece 220 gms
Hair Oil Paracute 50 ml 12
Cocnut Oil
100 ml 21
200 ml 39
500 ml 90
1000 ml 176
Other Poha Thick 30 per Kg
Grocery
Thin 36 per Kg
Salt Table Salt Captain Cook 7 per 500 gm
12 per 1000 gm
Tata 7 per 500 gm This is fast
moving item
12 per 1000 gm
Coffee Nescafe 12 gm 1 per sachet
32 gm 10 per sachet
50 gm 49 per sachet

Let us now study the other aspects of the categories and sub product categories by
studying their stocks, sales, margin, turnover ratios, and any other relevant details in the
following Table in order to understand the operation of the store.

Main Sub Number Price Stock Turn Gross Remark

Category Product of Range Maintained over Margin
Category Varieties In Rs Ratio %
in Stock per
month
Rice (400 Parimal 10 16 to 20 20 to 30 sacks (each 3 10 20% share in
sq ft) per Kg sack of 50 Kgs) (average) Rice Sales
Kolamb 17 24 to 40 70 to 100 2 10 (avg) 40% share;
per Kg sacks Rs 20 to 25
range very
popula
Basmati Kinki 16 to 22 30 to 40 sacks 2 10 (avg) 40% share;
per Kg for all varieties Rs 20 to 25
range very
popular
Mogra 22 to 26
per Kg
Dubar 30 to 40
(branded per Kg
items)
Tibar 40 to 50
(branded per Kg
items)
Whole 60 to 120 Generally for fast
Basmati per Kg moving items 8%
margin is
charged , while
for slow items
12% margin is
212 charged
Wheat (200 Lokvan 7 to 8 16 to 30 50 sacks for both 3 5 to 10% Rs 17 to 18 per The Process
sq ft) long per Kg sub categories Kg is the fast of Buying
types (each sack moving variety
of 50 Kgs)

Sihori 7 to 8 18 to 50
(rounded per Kg
short
types)
Daals (60 Tur 2 to 3 60 to 65 20 to 25 sacks for 2 15 to 20% Tur is fast
sq ft) per Kg all sub categories moving item
(each sack
of 50 Kgs)
Masoor single 50 to 60
per Kg
Moong single 60 to 70
per Kg
Urad single 50 to 70
per Kg
Chanaa single 40 to 50
per Kg
Matki single 50 per Kg
Pulses Watana - 4 to 5 35 to 100 20 sacks 1.5 to 2 15 to 20% Watana &
(40 sq ft) Black per Kg (each sack of Chana are fast
50 Kgs) moving sub
categories
Watana – 2 34 to 50
Green per Kg
Watana - 2 to 3 30 to 50
White per Kg
Chana - Single 30 to 50
Red per Kg
Chana – single Average
White quality – 60
Kabuli per Kg;
Better
quality – 70
per Kg
Chawli small 50 to 70
per Kg
large 50 to 70
per Kg
Whole single 50 to 60
Masoor per Kg
Whole 4 to 5 60 to 70
Moong per Kg
Whole 5 (plain, 70 to 100
Waal kadwa, per Kg
rangooni,
etc.)
Whole Black & 50 per Kg
Urad Green
Whole single 60 per Kg
Rajmaa
Whole single 30 per Kg
Soyabin
Sugar Crystal 26 to 30 3 to 4 sacks 4 5%
(17 sq ft) White, per Kg (each sack of
Small, 100 Kgs)
Less White
Jaggery 3 to 4 30 to 50 100 Kgs 2 20%
(3 sq ft) varieties per Kg
Spices Dhane single 100 per Kg 50 Kgs 1 30%
(Whole) 213
Buying and
(50 sq ft
Merchandising-II
including
for powder
spice)
Jeera single 200 per Kg 25 Kgs 1 30%
Mustard single 60 per Kg 50 Kgs 0.5 30%
Methi single 60 per Kg 50 Kgs 0.33 30%
Lavang single 500 per Kg 1 Kg 1 30%
Black sngle 250 per Kg 10 Kgs 1 30%
Pepper
Dalchini single 400 per Kg 2 to 3 Kgs 1 30%
Cardamom Masala 500 per Kg 2 to 3 Kgs for 1 30%
Velchi both varieties
Green 1000 per Kg
Badiyan single 400 per Kg 2 to 3 Kgs 1 30%
Badishep single 140 per Kg 10 to 12 Kgs 1 30%
Chillies 2 100 to 150 10 to 12 Kgs 1 30%
per Kg
Spices Turmeric single 120 per Kg 25 Kgs 1 30%
(Powder)
Dhana single 120 per Kg 25 Kgs 1 30%
Jeera single 200 per Kg 4 to 5 Kgs 1 30%
Black single 250 per Kg 1 to 2 Kgs 1 30%
pepper
Mirchi 3 to 4 120 to 250 25 Kgs 1 30%
per Kg
Other Jowar 2 16 to 20 2 to 3 sacks 1 10%
Grains per Kg
(stored (each sack of
with wheat) 50 Kgs)
Bajri 2 16 to 20 2 to 3 sacks 1 10%
per Kg (each sack of
50 Kgs)
Nachni single 16 per Kg 2 to 3 sacks 1 10%
(each sack of
50 Kgs)
Makaa single 17 per Kg 2 to 3 sacks 1 10%
(each sack of
50 Kgs)
Tea Leaves Society In different 250 per Kg 15 to 20 Kgs 1 10% Society Tea is
(50 sq ft) (Packed) pack sizes fast moving
Tata Agni 160 per Kg 4 to 5 Kgs 1 10%
Assam 240 per Kg 4 to 5 Kgs 1 10%
Loose Tea 200 per Kg 70 to 80 Kgs 1 20%
Pharali Sabudana single 40 per Kg 100 Kgs 2 10%
Items
(20 sq ft)
Sengdana single 60 per Kg 10 Kgs 2 10%
Vari rice single 50 per Kg 1 to 5 Kgs 1 20% Depends on
season
Rajgiri single 60 per Kg 1 to 5 Kgs 1 20% Depends on
season
Pickles Mango Siddhi 40 per Kg 20 Kgs 1 15%
(10 sq ft) Vinayak
Oil & Ghee Palm Oil single 56 per Kg 150 Kgs 2 3 to 4% Palm oil is fast
(Loose Oil) moving item
(40 sq ft
including
packed)
Groundnut single 64 per Kg 200 Kgs 1 5%
Mustard single 70 per Kg 150 Kgs 2 8%

214
 Vanaspati single 65 per Kg 50 to 60 Kgs 1 10% The Process
Ghee of Buying
coconut single 80 per Kg 15 to 20 Kgs 1 15%
Packed Sunflower Gemini, 75 per litre 150 litres 2 2 to 3% Sun flower is
Branded oil Fortune, fast moving sub
Oil & Sunday category
Ghees
Kardi oil Saffola 140 per litre 40 to 50 litres 1 4%
Groundnut Dhara, Gini 100 per litre 50 litres 1 5%
oil
Dairy ghee Sagar 200 per litre 20 to 30 litres 1 2%
for all brands
combned
Amul 200 per litre 2 2%
Aarey 200 per litre 2 2%
Vijay 200 per litre 2 2%
Soap / Washing Wheel 20 per Kg 20 Boxes for all 1 7 to 8% 50% share of
Detergents Powder brands combined washing
(70 sq ft (each box of 6 powder sale
including Kgs)
space for
other
personal
care
products)
Tide 60 per Kg 30% share of
washing
powder sale
Surf 34 per 200 20% share of
Excel/ gm pck washing
Ariel powder sale for
all pack sizes
put together
75 per 500
gm pack
140 per
1000 gmpack
Washing Wheel 3.30 per 10 to 15 boxes 1 7 to 8%
Soap piece (6 Kgs per box)
for all brands
combined
5.00 per
piece
Surf Excel 8 per piece
16 per piece
Other 3 to
4 varieties
Bath soap Lifebuoy 15 per piece 1 box (1 box = 1 7 to 8% Lifebuoy is fast
10 dozens) moving brand
Lux 18 per piece 1box 1 7 to 8%
Hamam 18 per piece For rest of the 1 7 to 8%
brands combined
1 box
Rexona 18 per piece
Godrej 35 per pack
no 1
Breeze 9 per piece
lime
Pears 25 per piece
Dove 35 per piece
Dish Wash Vim Bar 6 per piece 1 box (7 Kgs per box) 2 7 to 8%
11 per piece 1 box (7 Kgs per box) 2 7 to 8%
20 per piece 1 box (7 Kgs per box) 2 7 to 8%
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Buying and
Hair Oil Parachute 50 ml 12 20 litres for all 2 7 to 8%
Merchandising-II
Coconut Oil packs together
100 ml 21
200 ml 39
500 ml 90
1000 ml 176
Other Poha Thick 30 per Kg 2 sacks for both 2 15 to 20%
Grocery varieties ( 50 kgs
(10 sq ft per sack)
including
salt and
coffee)
Thin 36 per Kg
Salt Table Salt Captain 7 per 4 to 5 sacks for 2 10% Captain Cook
Cook 500 gm both brands has 30% share
combined (50 kgs in salt sale
per sack)
12 per
1000 gm
Tata 7 per Tata has 70%
500 gm share in salt sale
12 per Tata is a fast
1000 gm moving brand,in
which 1000 gms
is most popular
pack
Coffee Nescafe 12 gm 1 per 1 strip (1 strip = 2 10%
sachet 12 sachets)
32 gm 10 per 1 strip (1 strip = 2 10%
sachet 12 sachets)
50 gm 49 per 1 strip (1 strip = 2 10%
sachet 12 sachets)
Source: The case is excerpted from ‘Product Category Management’, Chiplunkar R.M.,ch 5B, Tata McGraw Hill
Education Pvt. Ltd. New Delhi.2010

Nirmal worked out his monthly overheads as follows:

Rent Rs 12000
Electricity Rs 3000
Manpower Rs 40000
Daily Tea etc. Rs 4000
Telephone Rs 1000
Cleaning/ maintenance Rs 3000
After getting his data organized as above, Nirmal was pondering over what analysis
he should do in order to get better insight into his overall grocery business.
Questions about the case:
1. What kind of pattern you see between Stock, Sales and Margin among various
categories?
2. Identify the three most important categories in terms of Sales.
3. Identify the three most important categories in terms of absolute profit margins.
4. Which are the top three categories in terms of highest gross return on
investment?
5. Among all the sub categories which ones are in top ten in terms of absolute
profit percentage and gross margin return on investment. Is there a major
216 difference in the two lists?
6. Please prepare a yearly sales and profitability statement for the store. While The Process
of Buying
preparing the said statement you may make necessary assumptions wherever
necessary, with a proper reasoning.

13.4 GUIDELINES FOR FINDING ANSWERS TO THE

QUESTIONS
For finding the sales value of different categories the student should first prepare an
excel chart specifying each of the categories and their sub-categories. Then, the
students should find the price for each such sub-category. Wherever the prices are
given in the range, then the student can take the mid-price of the given range. If the
price is not given then the estimated price based on other similar such items could be
derived.
The student should write down the current stocks being maintained against each of
the sub-categories. Wherever the stock is not clear then an estimated stock can be
taken based on the stock for other similar such items. It would be better for the
students to work out the value of stocks for each of the sub categories. From the
grouping of stock value of concerned sub-categories, the value of stock for main
category can be found.
The turnover ratio is given for most of the items. Wherever turnover ratio is missing
then an estimated turnover ratio could be taken based on the turnover ratio for similar
such items.
From the turnover ratio the sales can be found out as per the formula explained in the
text.
The gross margin percentage has been provided for most of the sub categories.
Wherever the percentages are missing then an estimated percentage could be taken
based on similar such categories.
Now, percentage gross margin value can be determined based on the formulae given
for finding the gross margin value. On the basis of grouping of gross margins for sub
categories the total gross margin value for each of the categories can be found.
In the above case, since there are no separate operational expenses for each
category. We can assume that the gross margin for categories or sub categories can
be treated as profit margin too.
For working out the yearly profitability figures the student would have to make use of
operational expenses for the month given at the end of the case. The formula for
finding profit from the gross margin working is provided in the text.
The students should be able to answer all the questions based on the analyses of the
data as suggested above.

Check Your Progress B

1. List the characteristic features of Savla store.
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217
Buying and
Merchandising-II 2. List the categories of the grocery items offered in Savla store.
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3. List the sub-categories of the soap/detergents category available in Savla store.
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4. List the turnover ratios per month of the following:
(a) Rice parimal
(b) Sugar
(c) Sunflower Oil
(d) Nescafe Coffee
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5. Which of the following statements are True or False?
(i) Fashion sector commands lion’s share in Indian’s organized retail sector.
(ii) Food and grocery form the largest component in the leading U.S. and
European retail store.
(iii) Big Bazaar opened its first retail store at New Delhi.
(iv) Big Bazaar sells only food and grocery items.
(v) Savla store caters to the needs of especially middle class.

13.5 LET US SUM UP

Keeping pace with globalization, the Indian retail scenario has changed very fast
during the last decade. The categories available on the retail counters as well as the
new retail formats have made major strides.
The international scenario has evolved through a series of developments on the economic
and political fronts over a number of decades. In all major chains of U.S. and European
retail markets, food and grocery make a significant share of the total sales.
Big Bazaar – the hyper market chain was introduced in India in the year 2001. After
a systematic study of the behaviour of Indian customer, the management of Big
Bazaar found him to be prone to saving on expenses and decided to cash on this
concept and to offer value to the customer. They offered a variety of products on
very competitive prices, in some cases, even lower than those offered by the stores in
the bazaar place. This strategy brought immediate recognition to Big Bazaar stores.
The buying process for most of the product categories at Big Bazaar is mainly price-
driven with the objective to deliver good quality products to the customers at the best
218 possible prices. The fact that Indian families spend almost 53 per cent of their total
budget on food items, the management of Big Bazaar into the food retailing business The Process
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too. It was expected that inclusion of Food Bazaar would greatly increase the foot
falls on the store and in fact, management proved to be correct in this strategy and
expectations.
The case study of a retail store namely Savla Store, being run for the three
generations, shows that following appropriate strategies, such as proximity to
customers’ homes, making fresh quality of items available on reasonable prices,
learning about the preferences of the customers, low overheads, low employee, etc.,
success can be achieved.

13.6 KEY WORDS

Aspirational Level : The degree or quality of performance which an
individual desires to attain or feels he can achieve.
Competitive Prices : A price lower than that offered by the competitors,
or a price made more attractive because of added
incentives, such as longer payment terms.
Disposable Income : The amount of income left to an individual after
taxes have been paid, available for spending and
saving.
Evolution : It is defined as a series of changes over a period of
time, resulting in something new arising.
Kirana store : Where one can get commodities pertaining to
kitchen, and daily life uses.
Lion’s share : It means the majority of something.
Mckinsey : An organizational model developed in the year 1980
by Tom Peters and Robert Waterman.
Proximity : The quality or state of being next in time, place,
causation, influence, etc.
Value proposition : A business or marketing statement that summarizes
why a consumer should buy a product or use a
service.

13.7 ANSWERS TO CHECK YOUR PROGRESS

B4. (a) 3; (b) 4; (c) 2; (d) 2
B5. (i) True; (ii) True; (iii) False; (iv) False; (v) True

13.8 TERMINAL QUESTIONS

1. Describe briefly the current retail scenario in India. Which products command
the top position in retail at present?
2. Compare the food and grocery retail markets in US and India. What are its
prospects of development in India?
3. How was the idea of Big Bazaar conceived? Describe its salient features.
4. What was the motivating force for the management of Big Bazaar to add food
bazaar?
5. Suppose you want to open a retail store in a town in India. Describe your
priorities and strategies for merchandising to achieve success. Justify your
strategies. 219