Absentee assignment on wholesaling and Store retailing

Prepared By
Viplav Nigam
16FT-140
Section -C

Key Learning
Retailing
All activities involved in selling goods & services directly to final consumer for personal, nonbusiness use.
Types of Retailers
a. Specialty Store: Narrow Product line with a deep assortment, such as
apparel stores, furniture stores, bookstores etc.
b. Department Store: Several Product lines-typical clothing, home furnishings and household
goods
c. Super market: Relatively large, low cost low margin, high volume, self service operation
designed to serve total needs for food, laundry and household maintenance products
d. Convenience Store: Relatively small store located near residential area, open long hours
seven days a week and carrying a limited line of high turnover convenience products at slightly
higher prices
e. Discount store: Standard merchandise sold at lower prices with lower margins and higher
volumes
f. Off-Price Retailer: Merchandise bought at less than regular wholesale price and sold at less
than retail; often left over goods, overruns and irregulars obtained at lower prices.
Retailers can position themselves as offering one of four levels of service:
a. Self-service: It is corner stone of all discount operations.
b. Self selection : Customers find their own goods, although they can ask for assistance
c. Limited service: These retailers carry more shopping goods and customers need more
information and assistance
d. Full Service: Sales people are ready to assist in every phase of the locate compareselect process.
Non store Retailing falls into 4 major categories
a. Direct selling
b. Direct marketing
c. Automatic vending
d. Buying services is a store less retailer serving a specific clientele usually employees of large
organizations, who are entitled to buy from a list of retailers who have agreed to give them
discounts in return for memberships.

Major types of corporate retailing

a. Corporate chain stores: Two or more outlets commonly owned and controlled, employing
central buying and merchandising and selling similar lines of merchandise.
b. Voluntary chains; A wholesaler sponsored group of independent retailers engaged in bulk
buying and common merchandising
c. Retailer cooperatives; Independent retailers who set up a central buying organization and
conduct joint promotion effort
d. Franchises;
e. Merchandising conglomerates: A free form corporation that combines several diversified
retailing lines and forms under central ownership along with some integration of distribution
and management
Target Market
A retailers most important decision concerns the target market. Periodic marketing research is
a must to ensure that they are reaching their target customers.
Product Assortment and procurement
Must match the target markets shopping expectations. The retailer has to decide on
product-assortment breadth and depth.
The real challenge begins after defining the product assortment in terms of developing a
product-differentiation strategy.
Some possibilities are:
Feature exclusive national brands not available at competing retailers
Feature mostly private branded merchandise
Feature surprise or ever-changing merchandise
Feature latest merchandise first
Offer a highly targeted assortment
Services and store atmosphere
Decide on the services mix
o Pre-purchase services like accepting telephone and mail orders
o Post-purchase services like shipping and delivery
o Ancillary services like parking, restaurants etc.

Price decision
Most retailers fall into the high-markup, lower-volume group or the low-markup, higher volume
group
Place decision
_ General business districts
_ Regional shopping centers
_ Community shopping centers/ malls etc

Trends in retailing
_ New retails forms emerge but most of them face a short life span. They are rapidly
copied and quickly lose their novelty.
_ Growth of non-store retailing: electronic age
_ Competition becoming more intertype or between types of store outlets
_ Retailers moving towards becoming either mass merchandisers or specialty retailers
_ Departmental stores to malls, one-stop shopping
_ Marketing channels are increasingly becoming professionally managed and
programmed. New store formats launched
_ Technology as a competitive tool for inventory management, fund transfer etc.
_ Retailers with unique formats and strong brand positioning are moving to other
countries like McDonalds etc
_ Rise in establishments that provide a place for people to congregate such as coffee
shops etc.
Wholesaling
It includes all the activities involved in selling goods or services to those who buy for resale or
business use. Wholesaling excludes manufacture and farmers because they are engaged
primarily in production and it excludes retailers.
When r wholesalers used?
When they are efficient in:
- Selling and promoting
- Buying and assortment building
- Bulk breaking
- Warehousing
- Transportation
- Financing
- Risk bearing
- Market information
- Management services and counseling
Types of wholesaling
Merchant wholesalers: Independently owned businesses that take title to the merchandise they
handle.
They fall under two categories:
a. Full service wholesalers: carry stock, maintain a sales force, offer credit, make deliveries and
provide management services. There are 2 types of full-service wholesalers: i) wholesale
merchant: sell primarily to the retailers and provide a full range of services. General line
wholesalers carry one or two lines. Specialty wholesalers carry only one part of line. ii)
Industrial distributor sell to manufacturer rather than to retailers and provide several services.
b. Limited service wholesalers: Offer fewer services to suppliers and customers
Brokers and agents: do not take title to goods, perform few functions.

Key Understanding of the case

Analysis of the Case: Big Bazaar

Values offered
1. Pantaloons: Departmental store
High Fashion
Family departmental store
Fashion trendsetter
Youth Appeal
Value for money
2. Central Mall: Super store
Shop, Eat, Celebrate
Entertainment Rich
Family Time
One Stop Destination
Aspirational Consumer
Seamless Shopping
3. Big Bazaar: Hyper Market
Modern retailing features
Value for money
Fashion led, Family oriented
Indian-ness
Huge variety of product lines
Traditional bazaar experience in a modern retail
Good quality
Effective promotional offers
Discounted prices
4. Food Bazaar: Super Market
Western values of convenience, cleanliness, hygiene
Value for money
Variety of grocery items
Indian-ness
Freshness and Purity
Expansion of personal grocery brands

Good quality
Driver for other business, daily consumables more footfall for other PRIL
stores

Changes required in each format

Pantaloon
1.
2.
3.
4.

Branded items should be kept at the store

More promotional activities - sales offer
Membership program to increase repeat sales
Product assortment:
Private labeling should be featured on one side and increase its branding
Feature latest or newest merchandise first
Central Mall
1. periodically hold events to promote the mall
2. Introduce well-known brands into the mall
3. Advertising more to get more footfall

Big Bazaar
1.
2.
3.
4.
5.

More payment counters (people dont stand in the queue for long)
Introducing portable payment slip generation machine to reduce queue time
Mobile payment
Home delivery of the selected items
Services:
Pre-purchase: Mailers, advertising, shopping hours
Post-purchase: Delivery, flexibility in return and exchange

Food Bazaar
1. Quicker payment options to avoid standing in long queues
2. Home delivery of the selected items
3. Services:
Pre-purchase: Mailers, advertising, shopping hours
Post-purchase: Delivery, flexibility in return and exchange

Retail opportunities to be given up

1. The Departmental store (Pantaloon) should be given up
a. Growth rate of from 2001 - 2003:
i. Super market 183%
ii. Hypermarket 300%
iii. Departmental store 44%
2. Threat for the super store other well-known brands wont enter Central
mall

Analysis of balance sheet and profit loss statement

Profit and Loss
Financial Statements in U.S. Dollars
Domestic Sales
Export Sales

2001

2002

2003

2004

2005

41.50

65.42

101.66

150.78

246.79

0.06

0.23

0.69

0.70

2.64

41.56

65.65

102.35

151.48

249.43

Other Income

0.10

0.15

0.18

0.31

0.98

Total Net Sales

41.66

65.80

102.53

151.79

250.41

Cost of Goods Consigned Sold

27.15

42.82

69.84

100.79

161.14

Contract Work Expenses

1.91

1.50

1.56

1.60

3.51

Packaging Material

0.29

0.49

0.71

1.30

2.86

Power

0.46

1.23

1.83

2.78

5.05

Excise

0.10

1.05

0.78

0.77

0.06

Rent

1.42

2.31

3.61

6.35

11.04

Personal Cost

1.57

3.13

4.40

6.33

11.65

Advertisement Expenses

1.39

2.02

2.72

4.31

7.49

Transportation Expenses

0.40

0.63

0.79

1.37

2.91

Sales Tax

0.82

1.21

1.78

3.43

7.46

Net Sales

Misc Expenditure

2.76

4.13

5.72

9.60

16.32

38.27

60.52

93.74

138.63

229.49

EBDIT

3.39

5.28

8.79

13.16

20.92

Interest

1.43

2.59

4.07

5.51

5.61

Depreciation

0.38

0.97

1.46

2.02

3.07

EBT

1.58

1.72

3.26

5.63

12.24

Extraordinay Items

0.01

0.00

0.18

0.02

0.01

Taxes, current and deferred

0.10

0.11

0.46

1.05

3.29

Total Expenses

After Tax Earnings

1.47

1.61

2.62

4.56

8.94

2001

2002

2003

2004

2005

Inventory Turnover Ratio

Inventory Holding Period
Quick Ratio

2.09
171.85
0.57

2.13
169.07
0.46

2.65
135.67
0.46

2.78
129.51
0.43

2.54
141.84
0.23

Creditors Turnover Ratio

Creditors Payable period
D/E Ratio
Operating Profit Margin (%)

8.59
41.90
1.93
7.23

7.81
46.07
2.03
6.55

17.20
20.93
2.15
7.15

32.30
11.14
2.49
7.34

8.97
40.15
1.29
7.13

Return on Equity (ROE) %

Debtors Turnover Ratio
Debtors Receivable Period

17.73
13.93
25.84

12.95
16.17
22.27

16.83
19.95
18.05

20.89
37.48
9.61

17.54
88.48
4.07

Analysis of ratios:

Inventory holding period - This ratio clearly shows that their holding period for inventory is
increasing which is a healthy sign for the retail industry
Quick Ratio- this is not good for the company as they will not be able to pay their current
creditors on regular basis due to less current assets
D/E Ratio - This ratio signifies about the financial leverage the company has over the banks
which improved significantly in 2005
Debtors Turnover ratio this signifies how efficiently the firm uses its assets and seeing

the trend over the years it has tried to convert most of its assets into production

Pril Balance Sheet

Year
Sources of Funds
Equity Share Capital
Reserves and Surplus

2001

2002

2003

2004

2005

3.06
5.23

3.99
8.44

4.18
11.39

4.4
17.43

5.06
45.22

Warrant Application money

Shareholders fund
Deferred Tax Liability
Secured Loans
Unsecured Loans
Total Loans
Total Liabilities

0
8.29
0
15.7
0.33
16.03
24.33

0
12.43
0.41
25.2
0.07
25.27
38.11

0
15.57
0.67
32.52
0.97
33.49
49.74

0
21.83
1.39
49.42
4.91
54.33
77.55

0.69
50.97
3
58.94
6.91
65.85
119.83

9.49
1.2
8.29
1.81
10.1
1.17

17.88
2.17
15.71
1.45
17.16
1.17

28.3
3.61
24.69
0.76
25.45
1.21

42.5
5.6
36.9
3.32
40.22
1.21

57.78
8.6
49.18
3.63
52.81
7.34

12.96
2.99
0.55
2.55
0
19.05

20.11
4.07
0.93
5.37
0
30.48

26.32
5.14
1.86
4.93
0
38.25

36.26
4.05
3.19
9.42
0
52.92

63.49
2.83
4.95
21.56
0.11
92.94

3.16

5.48

4.06

3.12

17.97

Other Current liabilities

Provisions
Total Current Liabillities
Net Current Assets

2.77
0.23
6.16
12.89

5.07
0.28
10.83
19.65

10.22
1.01
15.29
22.96

12.17
1.6
16.89
36.03

11.13
4.22
33.32
59.62

Miscellaneous expenditure
Total Assets

0.17
24.33

0.14
38.11

0.12
49.74

0.09
77.55

0.06
119.83

Application of Funds
Gross Block
Depreciation
Net Block
Capital WIP
NB + CWIP
Investment
Current Assets
Inventories
Debtors
Cash and Bank Balances
Loans and Advances
Other Current Assets
Total Current Assets
Current Liabilities
Creditors

Market Share in terms of retail stores in 2003

0.0290

0.23

17.38
0.18

Hypermarket share
Supermarket Share
Traditional retailors share
Departmental stores share
Speciality Stores share
82.18

Analysis :
As given in exhibit 5, there has been continues marginal increase in the share percentage by
value of Hypermarket, Supermarket, Specialty Retail Stores and Departmental Retail Stores
whereas the traditionally market share is continuously decreased.

Sales vs Expenses
300.00
250.00
200.00
150.00
100.00
50.00
0.00

Total Net Sales

41.66

65.80

102.53

151.79

250.41

Total Expenses

38.27

60.52

93.74

138.63

229.49

Total Net Sales

Total Expenses

Analysis : This particular graph shows the health of the company over the year indicating that in
starting years their profit margin was less but increased in later years thus giving them the
opportunity to enter into new sectors of retailing .

Current assets vs current liabilities

100
90
80
70
60
50
40
30
20
10
0

Net Current Assets

12.89

19.65

22.96

36.03

59.62

Total Current Liabillities

6.16

10.83

15.29

16.89

33.32

Total Current Liabillities

Net Current Assets

Analysis : This graph clearly depicts that on a given particular year the current assets are higher
for pantaloons than current liabilities thus they were acquiring more retail space for increasing
their presence

Compounded annualgrowth rate (CAGR)

50.000

43.484

45.000
40.000

32.713

35.000
30.000
21.244

25.000
20.000
15.000
10.000

4.654

5.000
0.000
CAGR

2002

2003

2004

2005

4.654

21.244

32.713

43.484

Analysis : the above graph is clearly indicating that the return on investment is increasing for
pantaloons thus validating the success of retail model of biyanis