Leadership Style - An Important Aspect

Leaders -  Leadership is both a research area and a practical skill encompassing the ability of an individual, group, or organization to "lead", influence, or guide other individuals, teams, or entire organizations.  (Wikipedia). 

Leaders make history. We do not need to go to see any special person who carries a special kind of trait which influences us. All are available near us.  We meet them every day, and no doubt everyone is a leader in their own capacity. You are a leader at your home, at your village, at your block or ward level, and can go up to the world level.  It can be social or political or from the corporate world. When we talk about history we have a number of leaders who influence us in a big way, they make us proud. Like we have Maharana Pratap, Chhatrapati Shivaji Maharaj, Mahatama Gandhi, for us they are the pride of our nation. Why we remember them? They are the leaders who made special kinds of decisions in their life and those decisions made a big impact politically as well as socially.  Here I would not go deep about their kind of deed they did during their lifecycle but I will try to figure out the style of leaders. 

In the same way, there are various leaders in the corporate world who made some distinct decisions which made them special and impressive. Leaders from Apple Inc, Microsoft, Google, Facebook, Twitter are known to the world and they are visible everywhere but still, millions of leaders are there who brought innovation in their work, made the best use of technology, and providing solutions to a big portion of the populations in the world.  Those who identified problems at the mass level and brought solutions to make big positive disruptions in the life of millions. Here talking about especially about few leaders will be an injustice to the others. 

Do we ever think about what kind of leadership style they were adopting or inherent?  No, you never thought about this. You just see the example from your very near place. Like, take it from office, your boss who is the leader there, and to whom you are reporting your day-to-day workings.  Let me clear one thing, here I am not going to tell you how they should behave or what kind of behavior they have.  This post is about Leadership Style.  after reading this post you will better judge your boss/ leader and accordingly categorize him as per my style. 

Based on certain personal habits, traits, and attitudes I am going to define them in the following way. 

Based on my experience  and close working with various leaders in corporate, political, and social front, I can categorize them in the following way: 

1. Autocratic Style
2. Authoritative Style
3. Pacesetting Style
4. Democratic Style
5. Coaching Style
6. Affiliative Style
7. Laissez-Faire Style

above types of leadership has some distinct characteristics which categorize them in the best fit. 

Let's describe the type of leadership in my way: 

Autocratic:  This kind of leadership is distinguished based on its special characteristics because here a leader has a high level of authority, influence, and backup of featured followers who always protect them from any kind of agitations. Leaders of this type always put his efforts to implement his own thoughts without consulting with his core team, panel, or advisory board. Since such leaders always keep themself in a special aura which propels them ahead to take fast decisions. Leader of this type has a different mindset, no doubt they carry various qualities and knowledge of various fields which make them overconfident.  Such overconfidence energies them to think in their own way.  

Autocratic leadership mindset well worked in the business world because it is people-centric and a leader through his dictatorship style forcefully implement policies and policies which organisation has to follow to great extend but overexploitation of resources and misutilisations of power bring unrest and agitation which cause a downfall of leadership only in the long run so as per my aspects this is one of the good traits.  

also, this kind of leadership style is workable in proprietary business concerns where a proprietor has to take a decision for his business so to this extend his autocratic behavior is natural and leaves no marks on a third party or society or to his stakeholders. Here his behavior matters which makes him successful or failure. 

But, when a leader is a promoter, founder, and director of a corporate / company/organization then this style of leadership will only drag them down and can delay the success miserably. How it is not favorable to a corporate? A leader in a Corporate carry a bigger role like Founder, Cofounder, Promoters, Directors & CEO so whom with his autocratic behavior will influence and how long-lasting impact will remain the system?  No, you can not be an autocratic leader in your organization unless you carry strong experience, knowledge of each and every domain, department & functionality. Each department and function is headed by an individual leader which makes a hierarchy from top to down. Each level of the department is further divided into sub-department and accordingly based on its functionality there he needs to onboard skill. Despite all such well organizational flow and the system still, the leader of the company i.e. CEO/ Founder/ Director thinks that I am the super and high authority person but he has to remind all the time his staff that he is the leader. He always gives directions and expecting employees /staff to follow his instruction without seeing left or right on a straight mode. It is good when one starts a company alone so definitely for each and every department and functionality he /she has to think, brainstorm, build, analyze, and activate various things. But, when organize start growing in terms of new brains, numbers, and expanding to other markets then need capabilities either in the form of Co-founders or Key Management employees because without that one can not run the organization. Now, you are head of family /organization so there you need to balance various things. An Autocratic leader tries to build self-centric systems so that all go from him and into him. This means without his single will nothing can move.  

Here I am not much interested in his style of working but if few things are not counted or taken care then an organization will collapse without any indication. Other aspects are that no one has multi-skills or organs who can control each and every functionality of an organization. Take a break and think, why you form various departments in your organization and appoint its supervisor /managers at a higher cost? You being an owner of the organization have enough knowledge of each and every functionality so why you are going to increase your admin cost by appointing experienced and intelligent minds?  and if they are experienced and expert in their domain then why you are sitting on their seat. 

Here as a leader, you need to work on a strategic roadmap and should act as a mentor to each functional head.  Remember autocratic nature no doubt will built a successful empire in a short period and I have seen successful ventures leading by dictators but if the delegation of authorities does not happen in your organization then you are at risk. Risk is not of money, it is related to your health and prestige, and the future of the organization. 

The phrase most illustrative of an autocratic leadership style is "Do as I say." Generally, an autocratic leader believes that he or she is the smartest person at the table and knows more than others (Americanexpress.com)

Democratic / Diplomatic Leaders:

As nomenclature defines the meaning diplomatic, the leaders totally depend on their subordinates. You must have seen this kind of leadership style in State-run enterprises and some old business houses where a successful and sustainable business is done and the organization is self-sustained through current level profitability and having huge reserves. Political parties to some extend follow this kind of leadership for run long.  The leader of this trait has a total dependency on their KMPs or downlines which sometimes causing a delay in taking decisions resulting in sometimes a big backfire and miserably. This kind of style makes decision delay in most cases so not fit for private organizations.

Laissez-Faire Style

When a leader is known for teamwork, he always takes decisions and implements after due consulting with his team. This kind of cohesive working style makes spread confidence into the department heads where they feel part of the system.  We can see this kind of leadership style in new startups where each member works cohesively and each decision becomes part of brainstorming before it goes on the battleground i.e. implementation. Leaders who work directly with their Key management team gain their trust which further helps leaders to get work done within TAT.  Employees respect leaders who take them to the conference table and mutually major decisions happened on a round table with a cup of coffee or tea.

A true leader should not be autocratic purely or Democratic,  she should adopt hybrid traits of both of the characteristics and should win the confidence of their team. 

A  true and intelligent leader should know the following mentioned behavioral traits.

1. Leaders should not be impatient in terms of making decisions. 

2. Leaders should not give space to people for back bitting their colleagues. 

3. Identify people who want to polish his tongue for buttering and lift the air-filled weight. 

4. Make a team of close heart people, make a strong board team of 7-8 members. 

5. Understand ground realities when you are choosing to enter the new business segment. Never rely upon on google or its knowledge. Some leaders quickly respond to messages, email, and phone, if you doing this stop immediately. Never respond to people directly especially on social media. Create a second layer that will filter your messages. This will create your personal PR and a high class of repo among the ecosystem and people will respect you. Do not discuss your business model except stakeholders. 

6. If you start your company for business then only focus on doing this and strengthen it, but never think that you will bring change. The change will come automatically over a period of time if your vision is there. 

7. Think 10 times before jumping to a conclusion. The rapid change in the decision will make you down in front of your management team and they will create a different perception for you. 

10. Behave like a father when you are heading an organization but don't try to become a friend. A friend has more liberty than a father, where a father tries to bring discipline in the organization. 

11. Never talk negative with your team members, if you continue doing such things one day they will become completely negative and become deadwood for you. 

12. Never stop when they are trying to speak when there is a meeting or some strategic discussion is going on. If you do so, they will lose their confidence and they will never tell you the truth. 

13. I have seen that few leaders have a different kind of thought process, in that they expect a high level of execution, perfection, and likewise passion in the team member which causes unrest among them. If you are Albert Einstein but you can not expect that there will be other Albert Einstein. Do not finger their mistakes in front of other team members. If you chase them for every move they will lose their confidence. They become dependent on you, despite enrolling high professionals, you will feel that you are the only man who is running the organization. You become the most unhappy person in the world despite you hold a big position in the company. 

14. Do not overthink. Overthinking makes our subconscious mind confused. and if the subconscious mind becomes confused it will send the wrong instruction to the conscious mind which further becomes against the first thought. Do not think alone if you are working on a strategy. Talk to your relevant KMP(s) and take them to a venue where with a cup of tea or a glass of bear things will become more friendly. The best equipment for a perfect strategy is brainstorming. 

15. As a leader you must build a strong review mechanism but remember it should not hamper working hours spending hours in the meeting room. Plan review as per department wise and as per the priority. 

• A great leader is healthy and wised who carries with him Integrity, Ability to delegate, Communication, Self-awareness, Gratitude, Learning agility, Influence, Empathy.

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Writer:  Balwant Singh Rana,  

a self-made man and a leader in grocery retail. 

How to setup distributions for Brands/Private Labels in Kirana Segment

Article Written by  Balwant Rana, Retail & PL 

How to Start a Distribution Business in Food Products in India -  

Private label is future 

For Domestic Companies

Dear Readers 

This post is dedicated to those readers who want to start their own business in India's most innovative Kirana Retail Market.  Based on feedback from readers I am getting most of the requests related to food products. Most of them are from business families and a few are new entrants who are willing to start their own business.  Well, today I will explain how you need to explore the market in a very short period of time and without big expenditure on the marketing end. There are certain small-2  strategies that help a new Enterprise to start with.  

My session with Kirorimal college was dedicated to business opportunities for new entrepreneurs after 2014 and how the future of the retail market is going to change in a big way. 



Can you imagine, Indian Retail still run by mom & pop i.e. small Kirana stores, said to have 12 million stores and still 90% of market is unorganized,  USD 600 Billion dollar size of the market is there, less than 1% is online with companies like Amazon, Flipkart & snapdeal, 


The expected Market by 2020 is around USD 1 trillion, with 3% online penetration and 12 % organize retail.  



Private Label by Reliance fresh, Big Bazar, Easyday, and many other organized retailers going to change FMCG company's fate, for them it would be a great challenge. my predictions about Reliance is on a higher side,  may in next 2  or 3-year reliance retail /fresh come with big agenda for retail transform and by then it would be a direct collision with Amazon or Future group & Flipkart. However, Flipkart's own situation is a little bit of high fever and low recovery. 



This is just a brief about retail,  now let's come to our main topic of private label branding in India. 

Retail in the Food segment is full of opportunities but at the same time full of challenges for new entrants. The majority of the food market i.e. main staples or ready-to-eat segment is dominated by big corporate and MNC's propelling the market with huge market budgets and burning money. Even there are market leaders at the regional level having a strong grip line of business. So introducing a new brand is not an easy task for newcomers but always there is space for everyone who has passion and wants to do hardship.   

You must have read my previous post where I have mentioned what to do and how to do new experiments in the new market with a new line of products. Here first I will give you a brief on some marketing techniques which are needed to adapt at this moment because of the competitive business scenario.  

Before we start we should benchmark the following thing for our business: Short-Term and Mid Term Planning.

Product: Private Label - Food Products

Product Category: Let's say 5  with  15 SKU size. 

Focus Market:  1000 retailer 

Focused market:  Mid size  say upto Tier II cities

Packaging: Consumer Packing. 

Manpower:  50. 

Operating Cost:  Rs. 10 Lakh per month. including Bank interest on credit lines. 

Marketing Plan:  Rs. 5 Lakh per month

Logistics :   4 or 5 Semi load capacity Truck/ Pickup/ VAN.

Warehouse/ Manufacturing facility:  5000 sq feet Area. 

Machinery:  Semi-Auto or Manual - Pouch Packaging.

Financial Plan:  50 Lakh Initial investment,   1 Cr. Banking Line  Total 1.5 Cr. 

Credit Exposure:  First 6 month 1 Month,  Next 6 month 15 days, Second Year first 6 months 10 days and next 6 month 7 days. Credit period depends as per the market Terms & conditions for the product line. 



Sales annual Target:  25 Cr. 

Monthly Cycle: 2   ( 15 days credit in the market) 

Gross Profit: 6 -10 % 

Break-Even: 2 Year from the commencement of Business. 

Basics of New Business setup 

1. Business Plan

2. Execution Plan

3. Marketing Plan

4. Compliance


Before you moved on to your business path you need to align 3 main elements of management:

1. People

2. Process

3. System



All you need to describe in your execution planning.



Primarily market survey 



First of all, prepare a business plan from an industry expert consultant.  It should have a minimum of 70 pages which shall cover business planning in detail with a financial projection for the next 5 years.



Once Business Plan is prepared then you should frame Policies, Strategies, and Standard Operating Procedures ( 'SOP's). This would be your execution plan for giving shape to business.  The main element of the 'Execution plan is the development of the Product portfolio and allied packaging solutions. Manufacturing process, Supply Chain Management. 



Define Organisational Structure..  Financial Plan and based on the plan you should start recruiting Executive officers.  These Head hunters will be the owner of their domain.  Once they will be onboarded they will start working on individual departmental SOPs and policies.  


Compliance:  As per the nature of your product line you need an FSSAI license, registration of Company name, Trademark for Brand name registration, Income Tax PAN, and other required compliance certificates and registration. It is very much important.  You need to hire a consultant who will help you to get all the required details. 



-------------------

You are ready to go in the market:   

So far you have managed and aligned the following resource

• Money


• Material


• Manpower


• Machine


• Market


• Mentors

Execution plan role is to make things smooth and prepare a platform for your product where it become Measurable, Salable  and Marketable  

Now Role of Marketing Execution comes :

The marketing plan consists of framing marketing policies, Sales Planning, and marketing activities, altogether it helps to generate a revenue stream for the company. 

You are ready to launch your product in your focus market. Now you need to map your market so that your sales executives visit the focus customer and start generating sales orders.  

Let's illustrate this in the following way : 

    

Your focus market is spreading in 50 KM Radius, Population of the area is around 4 Million, Size of Market in terms of Kirana Stores is approx   10000 Stores.  Your target Stores are among the A and B categories. Let's say you are targeting 10 % of total retailer base i.e. 1000 Stores. So here you have to divide your area into 5 Zones.  Every Zone will be headed by a Sales Executive(SE).  One SE can visit up to 200 Shops in a 6 days week.  30- 35 Stores appx per day per SE.  Here you have to consider one major thing in mind,  if you are launching, let say 5 Products having 15 SKU  so in this situation one SE can visit/cater 30-35 Stores per day but when you have a large product basket, Let say you have more than 15 SKU then in a comfortable and productive way one SE must have 20 Stores per day.  Because they have to sale all products to the visiting stores.  Once you completed a placement at your focus customers than time in taking sales order will be less so SE can cater more stores,  It depends on his personal capacity and relationship with the retailers/ Store. 

Once you have mapped your focus market, now you have to prepare a beat plan.  Following Beat Matrix will help you understand the market visit plan.  

As per the above matrix,  One SE will have 200 Stores on a weekly basis.   Day wise you have to plan out the Market area under one Beat Name.  for example.   you have a market in  3 KM radium having 200 outlets, your sales executive (SE) will visit on Monday to  One Area   in 3 colonies , A , B , C , so here you can give a name to this beat having 3 colonies i.e. D area.  Under this D area this SE will Visit 30 Outlet on Monday.  Now here you have to prepare a few reporting patterns:



a. Daily Sales Report

b. Sample distribution Kit report

c. Scheme distribution Memo.

d. Sales order booklet

e. Payment Follow up form ( for late payment's realization & visit report).

f. Customer Enrollment Form.  (The registration form)



SE will visit all 30 outlets in the D Area on Monday....  Let say out of 30 Stores he could succeed to get sales orders from 10 outlets.  So here we can say that out of 30 Visits 10 calls were productive.



Very Important:   in this example Strength of the Sales team should be likewise:   5 SE  under the supervision of 2 Sales officers.,  Sales officers shall report to you.  Each Sales officer will have 2 or 3 SE whom they will supervise and guide. This hierarchy is needed for smooth sales planning and execution.



Remember  -   You are going to establish a long-term relationship with Retailers so here you need to make some special extra efforts. If possible in the first phase, primarily introduction or launching a product in the market you should visit a retailer with your SE.  This will give be benefiting you in your ongoing relationship with the retailer and in the first go your direct interaction with retailers will give you confidence and at the same time, you will have the proper judgment of the Retailer's shop, his behavior, and business.  Your SE is just a daily wage employee so he will only represent your product but when you are going to interact with them with your individual capacity you will come up with a long-lasting relationship.



But, here the role of your distributor is big because he knows the market and without his inherent knowledge you can not go keep with retailers. I will let you know about the appointment of distributors.



I have seen that some business head has that level of ego which restrict them to visit retailers, here they think that these small retailers don't have status whom he should meet. This is a wrong approach for a Company head/ owner because you are going to establish a relationship with them for your benefit.  The retailer is the main chain between you and your end consumer so he is like King. You have to bow in front of him whatsoever the situation is from your end.



Personal Relationship with Retailer is the Key of your success.

• keep this thing in mind and try to visit all your focus customers.  


• Make your calendar according to beat plan and target to visit all your target customers in 365 days time.  


• Believe me, if you do this 50% of your way towards success is mapped. 


• Rest 50% of your product's quality,  Product Price Competency,  


• Timely Delivery and redressal of graveness will help you to reach your goal in a very short period of time.

Since you have started your journey from Surveying the focus market till placement of product to Targeted product, now you need to plan for expansion.



You are matching the pace with the projected Sales plan and accordingly, the business has attended Break-Even Status well within the projected time,  Now you start earning profit.



Here  I have assumed that Break Even status will be very much in 2nd year.  No, you will feel that you win the battle but this is not the real victory.  Remember you have completed only the first phase of your business plan.  So far Retailer's has given you favor due to your personal relationship with them or you increased their margin or did something special where they feel and showing loyalty to your brand. Now you are in 3rd year where end Consumers will decide your fate.



For every new business, if you could succeed to pass through 2nd year and you attend No Loss No Profit status i.e. BEP, the real challenge comes in 3rd year and for some business line, it is 4 or 5th Year.



Why this situation arise?  Let's have a brainstorming on this.   This situation is called " Hammering attention of your Customer".  Here you need to start hammering consumers through marketing activities. Your budget in the initial stage was less than it was required by now you have to double it to create awareness among the consumer base.  You need to do ATL/ BTL activities through the various mean of modern communication methods.  Pull the consumer in a respectful way and bring them to the retailer's shop. This situation is called Pull Strategy. Here you need to bring a WOW element through your marketing activities, Consumer should feel delighted.  But all this will go waste or useless if they found quality issues, availability issues, and pricing issues in your products.



So you need to take care by rotating your head 360 degrees.  Your growth curve takes J  shape for the next 2 year.



Now you can plan Expansion :  

You have attend 100 Cr benchmark in 3 years of continuous operation. Now you are targeting a bigger territory,  want to move to other states.  and you Set your target 500 Crores in next year's

Very soon India Retail is going to fund by foreign VC funds where you can get funds from them, even funding on Private labels shall be available. Year 2014 onward market dynamics are going to change.  A flood of startups is about to come in the Retail segment.  the market is huge.  90% market is a virgin for passionate people like you so if you have passion, idea, and patience let's start your own business.



Soon I am going to provide you with information on the funding Scenario, mechanism of Angel, Seed, VC, Pre-Series, Series A to G, and how this kind of ecosystem works.



In case want to react to my post, you may reach me on my email id and post your comments here.

forgive me for the spelling and grammatical error, if found may please send me to correct the same immediately.

Writer: 

Balwant rana

Simranriceinc@gmail.com

Kirana (Grocery) Startup in India is full of Challenges

Today we will
talk about problems and challenges in Indian Kirana (Grocery)
Retail.  

The Indian Retail
sector is one of the most unorganized markets in terms of structure.  As was stated in various studies India Kirana is run by small-2 families,
still in its raw form. When we compare Indian retail with western, or other developed countries we
can see a big difference. Today Indian Kirana Market is contributing around
$450 billion, a big contributor to Indian GDP, nearly 10%, and contributing to employment to the tune of 6%.  But,
still, 90% of Kirana retail is unorganized

Running a grocery store in this semi-modern India is no easy task. The economic
condition of the consumer is shifting from low to middle and middle to high,
accordingly, preferences are also changing resulting in changes in shopping
habits and convenience. Tier 1 to Tier 3 people in cities with higher
disposable income are finding a way to experience shopping through the category
of retail. For people of such income groups, Modern Retail is the shopper’s stop.

  

Amidst the
proliferation of organized retail, something went awry in and around these mom-and-pop shops, and their numbers are dwindling day by day. The aggressive
players in offline retail are Reliance Fresh, Big Bazaar, DMart, More, and
Vishal, some having 4 to 5 stores in a city through over 100,000 sq ft of
space. If I change the location and put the size of the mom-and-pop store then
about 1000 stores are equivalent space they are using in a city running 4 or 5
hypermarkets.

Now that
offline organized retail is making a noise, e-commerce is also booming. Both
Walmart and Amazon's giant e-commerce platforms have now deepened their eyes and
started mining biological data to increase the ticket size from Rs 2550 to Rs.
5000/. Despite claiming to have lakhs of retailers joining them, they are not
making money. If we talk about Walmart, 40% of the business is coming from
retailers but not in investment ratio i.e. millions of dollars are needed to
set up Cash & Carry. The average basket size should be above Rs. 5000/- per
month when one is catering to the entire market or 70-80%.

According to hypermarket owners "based out in Delhi" - no one can
wipe out mom and pop shops from India even in the next 50 years. "We have
to build our own consumer base and leave them to their consumer base. We're on
it. Why is a section not paying attention? Burning money is not the solution.
Indian consumers are unpredictable so don't think about loyalty on their part. When
Metro C&C, Carrefour, and Walmart were entering India, they used to say
that they are a big threat to retailers despite they were allowed to do
business in B2B only i.e. Retailers. This is my honest prediction that after
5-7 years in the near future they will have to pack up their own system from India
and they will be forced to sell their setups.  No one can think to wipe out Kirana stores
from India.

Based on my one-year-long in-depth survey across 7 major cities of India and hours spent on the
streets inquiring about the Kirana retailer's business pattern, future aspects, and their interest, I can predict that the coming year will be a good
year for grocery stores. It will be more dedicated to grocery retail and the
entire ecosystem. There will be a focal point i.e. grocery retailer. All is
going to please them to find the precious space for their products. Even many
will try to provide various IT solutions to them like POS, auto-replenishment
systems, etc, and accounting systems and VAT management. Also, various
banking services from micro banking will come to assist their working capital
need.

I can predict
based on my deep conversations with thousands of people in 2011 and 2012 that
as the consumer is adapting to the changes, they are happy to buy a new
package, clean and quality product. In food products, they are less brand
savvy. This will revolutionize the growth of private-label brands in India.
This means that there will be an influx of regional and local brands in
a way but the only challenge for them will remain the "retail space"
i.e. retailer, and connector.

So what's the harm if I'm talking more of a grocery retailer? After all, they
are  the main connector and channel partner
to the brand connecting to the end consumers, without pleasing them how can one
think of their brand entering the retail space and how will they go about
reaching the end consumers? nobody.

I can see the
pain point of retailers and I would ask new entrepreneurs to talk to them about
the challenges they face and what solutions they can provide as a business to
protect their business.

Usually, the
average size of a Kirana store in India is less than 150 square feet but here
we will talk about medium-sized stores which are doing business of Rs. 5 to 10
lakhs per month. In this segment, you can find 20% of the shops in the city
having 300 sq ft of shop space. Let us take this figure here for the purpose of
our study.

I am taking the example of the Capital city of India,  Delhi.
Here in Delhi, there are more than 25000 stores running in the different surrounding
areas whose size is 200-300 sq ft and if we talk about all the Kirana stores
below 100 sq ft then these figures are beyond uncountable, approx. 110000
stores are within 50 km. radius in Delhi

These 25000
stores are major grocery stores contributing nearly 60-70% of the total market
size.

I have visited
more than 1000 retailers and personally met them and also interviewed them
about their business prospects, challenges, problems, and also their personal
life, social life, etc. The results were out of the box and it is surprising how
these people are managing their regular lives, dealing with more than 150 to
300 products having 1000 to 2000 SKUs and fitting them in their small-sized
shop, having regular discussions with distributors/ vendors/salesmen etc. and
the difficulty of hours really makes us think and so we can know the basics of
their business.  

 Before we go ahead  Let's figure out their shop : 

 

Now we will
talk about the problems and challenges that a Kirana store owner is facing: Based
on the personal interview of retailers, I found that they are facing numerous problems
and running their small shops almost seating on the future challenges.

• Space
  constraint


• Improper
  Product Assortment


• Hygiene
  issue - Lack of cleanliness


• Poor Time
  Management in Buying and Sourcing. 


• Decreasing
  Footfall


• Mishandling
  of Product expiry resulting losses. 


• Communication
  Gap Company to Retailer. 


• Competition
  from large format Retail stores and walk-through stores. 


• Change in
  Consumer Behavior


• Manpower
  Issue. 


• Promotions
  and Offers not available 


• High
  Density of Kirana Stores in one vicinity. 


• Next
  Generation is moving out of this business. 


• Lack of
  IT, not using computer billing & POS.


• Limited
  Working Capital.


• Food
  Safety compliance. 


• Do not
  want to keep records of bookkeeping and due to


• Lack of
  market knowledge. 


• Due to their stand-alone status and no apex body representing them to safeguard their
  business. 


• No Banking
  facility in terms of Credit line as a retailer does not maintain books of
  accounts. 

The problem
mentioned above now leads them to  this picture:

They
are facing more than 20 types of issues, so do you think they will have a
solution for these problems or is there someone who says:

Last
week I spoke with a senior executive at Walmart, they are in the process of
developing a retail-oriented model in which they will provide their various
products from their centralized centers, as well as create a credit line with
banks or financial institutions. are planning to do., In terms of volume
purchase discounts, QPS, and other offers they have started giving to the
retailers. The sales team is going to the market and takes orders from the
retailers. But even then, a major problem is the credit facility that retailers
currently get from traditional distributors.

I
have gone through various analyzes and since 2009 I am working on this project
but there I have not found any solution to save their life. I mean when big
retail players are opening their stores in almost every corner of the market,
most of the retailers who have money and vision are converting their stores
into modern outfits.

I
have a plan that how they will be saved from such stiff competition and what
kind of solutions will work for them. My concept  “Pragati” is almost in the business model
stage and looking for investors who can give their 15-minute time to go through
my business Plan. It will be more suitable for companies like Flipkart or
companies who want to start retail offline to online.  A franchise model will give a uniform
name to unorganized retailers, by giving this uniform name they will be open to the market.  They will have the power to drive
consumers to their Stores.  Brands will
be waiting for their turn to exhibit their products or get dynamic
shelf space, more consumers can place orders from their nearby store and they
will be delivered within 15 minutes. It will be Quick.  There will be numerous revenue streams if
anyone can go through my model.

Their
concern comes from the outer side but they are unaware of the inner flaws.  

Journey
continued..................

04.10.2012 (published)

 

Layman's prediction for Staples in brands & Private Label and its Future

Indian Retail is going through a greater magnitude which is driving it through Kirana retailer's route to organized retail and further online platform. Based on my few digging in major 7 cities where I have personally seen how things are taking shape in various retail formats. One thing drags my attention to a serious development that starts with the big box retailers. Experienced from our past, the retailers and how in earlier days they used to sell merchandise from their shops.  

80% of products were sold loose, mainly all staples were loose. Except for a few national-level brands in Food like MDH, Everest, ITC, biscuit mfr, bread, and cookies, etc but the rest of all bulk staples have unorganized practice and being sold in loose form.

Going to Khari Baoli and Naya Bazar in Delhi was my routine so for me correlating things with developments going in the West was something intolerable. But, it has started invoking me to dig more about the packing of food products and bring them in the stream of Indian Kirana Retail.  It took me more than 7 months to envisioned the future of Private labels in food staples.  

Again on the investment front, I have seen that whether producing private labels will attract foreign investors or they will find it lucrative. 

Why this,  made me so specific to think about it and how it will take shape in coming days>

Let's put some lights on the present condition of Staples being sold in the market, retail stores, mandies etc. 

Source of Food:  All food items are originated from Agri produce, produced by the farmer and making sweat more lime so that we can get the things easily from our nearby stores. The journey starts from Farming Agri produce in a field. A farmer collects all its produce and travel to sell to a nearby APMC mandies. Mandi is an aggregator of local traders who buy from farmers at a very low cost, further adding semi processing cost elements, their margin etc. and sell to the manufacturer.  

The manufacturer produces identical products from the raw material like Sugar is from sugarcane and Rice from Paddy.  Finished products like main staples - Rice, Sugar, Oil, Wheat, Flour, Spices etc packed in bulk packaging and then send to Mandi traders, Wholesalers, Distributors. 

Retailers buy from Distributor, mandies and sell in loose form as per the requirement of the consumer.  during the whole process, bulk pack start from Mandi to Retailer where the idlest situation for products happened when it is lying in the retail store. There is no hygiene at all and the way it is being sold there are lots of health and economic issues. 

But on the same hand when we visit a organized retail store like going to Walmart, Metro, Big Bazar, More and many more things are positive in terms of hygiene and mostly found packed either in a plain pouch or in their private label. 

All such differentiation between a small retailer and big-box retailer is just a hundred feet distance, is this not an illusion? or it is not a matter of surprise?  So, Mount and Valley in the same vicinity. but it is part and partial of life and we continue our journey. from the same locality, there was such a big difference. I have seen small shops where poor consumers come to shop. I think, most of us who asked themself, retail experts, even do not know how a poor consumer buys their daily needs. 

I have stayed more than a week in different-2 cities including Bangalore, Chennai, Hyderabad, Raipur, Indore, Ahmedabad, Mumbai, Kolkata, UP's Meerut, and Lucknow, and few cities in Punjab there was no big difference in the status of a small Mom & Pop Store ( Kirana Retailer).  I have seen how a poor consumer approach a retailer for his needs.  He asked for weighing for Dal for Rs.10,  100 g rice, 50-gram sugar, oil for Rs. 5 and 10, and in this way buy almost all main staples under 100-150.  

This kind of comparison made me unrest, troll me all day and I start thinking why we can not pack a small size like a shampoo pouch is available in Rs.1 so why not we make available Dal even in a pack of Rs. 5/-.  Sugar for 10/-  etc.   Is hygiene is a legacy of the middle class or high-income group or rich people, whether available staples should not be packed even for the poor? 

It was a small thought but my entrepreneur mind made its billion-dollar business idea.  Keeping in mind the huge population of India where 70% are living their livelihood below a normal standard life. 

I start analyzing things from all inputs I get from various sources and finally start predicting that after 2014 or onward there will be a big change in the packaging of food products.    A 500 Billion grocery market of which 40% is staples need that kind of space. 

further, I have seen that consumer is also welcoming this move that they will get food in clean, hygienical manner, and even Govt is in sync with Fssai department to monitor food safety and ensure that maximum products will have a bright future in this segment.  When food staples come in packaging, it would be easy to fix responsibility by the food safety department and they can control adulteration in Food. 

On the other hand, the modern trade practice of FMCG brands is also going to hamper as most of the big box retailers started replacing various products from its private-label brands. The future group already started doing this, Reliance Fresh also started and all have a keen interest in this practice. For all big box, private labels are revenue and margin booster. Future group is projecting 20% revenue from their Private label in the coming years.  It is a big support for them. 

On the other side, MSME is going to start various incentive plans for manufacturers, various EPO, FPOs, PPC, and Cluster planning is going on to give direct supply chain from Farmer to Fork.  Lots of Developments are there at MSME level. 

Just check out?  following stakeholders in the retail ecosystem is aligning themself for the storm (Products). Products and products only. 

• Players from overseas > a greater interest in the Indian food sector,
• Local Players and regional players are going to give finest competition to all national level FMCG companies.
• Startups

• Investors
• Business Families
• NBFC  

I am predicting that after 2017  investors will infuse a heavy amount to promote startups and manufacturers who are going to develop food products in consumer packing. Create Value first - Valuation is a by-product that will help you to create wealth for a successful business venture. 

Future is there in private Label>

"Retailhaidetail" is my punchline where things should go in detail. 

Be in touch and write to me about your own thoughts about Indian retail. Are you okay with my above thoughts?

Writere : Balwant Singh Rana

Aug,2012, Delhi

Sources: economictimes.indiatimes.com/industry/services/retail/private-labels-owned-by-

Way to Organize Distribution in Grocery Retail – Syndication of Distribution

 

Way to Organize
Distribution in Grocery Retail – Syndication of Distribution

Distribution in India:

Distribution in India is broadly
fragmented but the only thing that is reassuring is that the distributors are
operating their business with low operating costs. This is a major advantage of
the Indian distribution system. A brand can reach the consumer by giving 4-6%
margin by taking the distribution channel which is very less when compared with
the distribution margin in developed countries. National FMCG brands are paying
4% margin to distributors and ~1.5% to 2% to C&F&SS, thus it is almost
a funnel of ~ 6-8%.

Small-2 distributors manage 4-5
brands with their small infra catering to 300-500 retailers and investing 10-15
lakhs with an annual ROI of 18-24%. This is the acronym for most grocery
distributors. For ease of understanding, I am categorizing Grocery (Kirana)
which includes food and non-food products i.e. FMCG segment including staples.

Traditional
distribution in India flow:

The distribution of fmcg in India is more or less
organized but it still 98% of the funnel is channelized by the small distributors. As
per the nature of Products & brands I have categorized distribution channels
into three categories.

Classification
of Distributors

1.       Organised & Centralised

2.       Organised & Decentralised

3.       Un-organised & Decentralised

Organized
& Centralised:

FMCG companies in India are working in a very
organized manner and with their strong system, they are doing last mile delivery
through the systematic distribution system. Many established brands have robust
distribution systems in their operational areas and are doing last mile
deliveries through proper inbuilt systems. They have dedicated Distributors who
are completing the supply chain for the state or a large area. India still
needs such an organized and centralized platform for distribution but few
companies like Procter & Gamble (P&G) are working.

P&G employs a large distributor that
directly caters to thousands of retailers without any sub-distribution, thus it
is centralized. Developed markets like UAE, Singapore, UK and USA, and Europe have
organized and centralized distribution systems. A single company is facilitating
last-mile distribution for various brands, but in India, we don't have much
context to demonstrate that a single brand has one centralized distributor who
has access to thousands of retailers at the state level over a large area.  Why centralized distribution could not pace up
in the ecosystem, there is fear of monopoly. In such an arrangement, there is
dependence on the single stake of the brand which sometimes becomes
counterproductive if the distributor is not performing or there is some kind
of rigidity, so most of the brands do not entertain centralization of the distribution system. This is a major constraint, so a single identity distributor
could not gain popularity in the Indian retail sector, especially in Kirana.

 

Organized & Decentralised

In this range of distribution, brands appoint
C&F or through company depots to appoint larger distributors, city-wise,
considering the larger area. Sometimes in big cities like Delhi, Bangalore,
Mumbai, and Jaipur they appoint more than one distributor, or in some cases one
distributor caters to two or three cities, which varies depending on the
business volume of the distributors. Hindustan Unilever (HUL) is following such
a philosophy. An HUL distributor generally serves over 3000 retailers in a city
which is a large number. In the case of HUL, the supply chains up to the
C&F/Company depot is well organized but decentralized at the distributor
level. It is a passive system but why not gain popularity in India? This question
is valid. Again the strategy depends on the philosophy of the brand and how they
want to reach the retailers. Decentralization of the distribution system has its
advantages. If we take the example of Jaipur city. There are more than 10000
Kirana Stores in Jaipur District which are catered by 450+ Distributors
carrying more than 350 Brand Companies (Local, Regional, and National Level
Brands). So why other brands are not following this stream?  Still, they don’t want to create a monopoly
or do not want to depend on their supply chain on a few distributors.

Un-organized & Decentralised

Distributors tend to be
unorganized, not because of systems or processes, but because of their working
style and infrastructure. A distributor generally serves 4-5 brands. Each brand
has its own system and procedures and everyone has to follow the same for their
endeavor. There are many distributors who have more than 5 brands. They have to
work on different technology stakes and follow the procedures as per the brand.
The sales team of the brand interacts with him regularly and he has to
entertain them. He arranges their visits to retailers, he is the one who
distributes POP content and works on various IT stacks. All brands have their
thesis so they have to go with it. Carries their inventory, sales, and
outstanding i.e. credit in the market. 98 percent of distributors fall in this
category.

Why decentralized? This is the
potential for brands to centralize or decentralize distribution. The brand is
of the view that centralized distribution will not work and they do not have
the appetite to reach out to a large network or at times they do not want to
depend on a single distributor. 90% of the brands in FMCG employ more than 3
distributors in a large city (ie the size of the city in terms of population
1mn).

Now the question comes that when
the brands are getting organized, their C&F system is operated then how is
the distributor disorganized?

Just take a picture, it will be more
convincing and self-explanatory:

98 percent of distributors fall
under this category. No doubt they are the real heroes who are constantly
working to make the products a brand. He is the person who has a good relationship
with the retailers and without his help, no brand can reach the minds of the
consumers. But from the above chart, you can see how a distributor is bound to
work under great pressure. He has to carry maximum brands i.e. 4-5 brands, so
he will be able to generate the desired ROI and meet his OPEX.

In the above chart, a distributor
is holding four brands. So it has to deal with all the four brands in its area
and serve 500 retailers or more or less. He has a small warehouse, two or three
manpower inside the warehouse /accounts, one or two vehicles, and two/three
salespersons. Everyone is managing the show together with a small infra. On
daily basis, the ASMs and their SOs (Sales Officers) of the four brands visit
their office and discuss with them the sales targets, market visits,
promotions, etc., and MIS. His salesman goes to the market. Some are taking sales
orders manually and others are on their Mob applications. All four brands
have their own IT tools which the distributor has to use and accordingly
provide the secondary sales data to the respective brands. This is how his daily
routine works and he manages it slowly in a very unorganized way.

What he does in this form:

1.       Buy
goods from different - 2 C&F locations or Brand depots

2.       Working
on different brands IT stacks

3.       Various
stakeholders viz Brand ASM / SO communicate with

4.       Carrying
Inventory of All Brands - Average 15 days

5.       Manage
All Logistics

6.       Lend
money to retailers as per the nature of the products, the average credit period
is 21 days.

Is there any better solution we
can provide to distributors or how we can make them organize?

-------

In a developed world like Dubai, I
have seen many large distributors doing direct-to-retail (DTR) carrying
over 200 brands and 5000 SKUs, even more than 10000 Skus. If people are
managing such a big show under one roof, then what is stopping us from doing
the same thing in India? When a manufacturer introduces its brand in the market
it has to first establish the distribution channel which is a time-consuming
process. Once the distribution channel is in place, it struggles to place its
product at the retailers again which is time taking process. Taking mind share
of consumers, they have to go for various ATL/BTL activities which is again a
time-consuming process. In doing so all their efforts go into establishing their
brand in the focus market and it takes years to establish a name as a brand.

According to my market survey and
analysis, I can see future prospects. The way new entrepreneurs are coming up
with new ideas and going through the startup route, things will change
dramatically after 2014. Many startups are trying to build horizontal distribution
through technology-driven markets. They will have the principle of eliminating
the middleman from the market and will do directly to retail. They will call it
disruption but in my view, it will destroy the old values, and systems and wipe out
maximum distributors from the ecosystem. Also, another concept will be Direct to
Consumer (D2C) where brands will directly reach the consumer through e-commerce platforms. Again such a concept would hinder both the distributor and the
retailer. But whatever the concept, if they are going to change the existing
system they will only burn money. Grocery is not a technology business for
retail. It is the physical movement of goods where physical activities are
involved, so in my view technology will only empower or enable speed and
enhance efficiencies and it will bring operational excellence in the system to
the maximum extent possible.

I strongly believe in empowering
the existing ecosystem. In one of my visions, I discussed with Mr. Sachin Bansal
of Flipkart that they need technology to accelerate the market where they can
hire existing distributors to do their last mile deliveries or they can go
through retailers up to can reach. I started my project with the name of
"Pragati” but somehow it was before time so I could not find investors. It
was a blend of C&F  and distributors
and named it “syndication of distribution” a kind of aggregation that will
give “speed to market” and will give a large portfolio of retailers.  Just take an example to clarify the same.  

Shree BSR is a manufacturer of
wheat products and manufactures Wheat flour, whole wheat flour, semolina, toast, and flour cookies in its manufacturing unit. He offers all the products under
the brand name "Bhardari". Earlier he was selling his produce in
bulk packing to the mandis or wholesalers. With the emergence of technology and
change in consumer behavior, the philosophy of wholesale has been changed to
consumer packing and manufacturers have started offering smaller consumer packs
as per the requirement of the consumers. It does so and offers its products in
consumer packing. They planned the distribution and accordingly appointed three
C&F and two company depot, 150 distributors in 3 States. Recruited Area Sales
Manager, Sales Officers, and many other officers and started burning money in
marketing, his OPEX increased accordingly but again this whole process takes
years to reach the last mile. BSR started this process in 1998 and till writing
this post he was struggling in his operational territories and regularly
encountered new competitions.  But,
do you think we have so much time to wait in this technology age and fast-paced
and changing landscape? No, if years ago it took 20 years for a product to come
out & become a brand, but now it should take a maximum of five years to
reach that level. The time is now for valuation; the value will create automatically.
Increase footprint with speed, scale, and top line.

Now the question comes to mind
that in this fast pace era how will we remove this gap of 15 years with our
efforts and we think to establish a product in five years? Yes, it is possible
but only with some innovative ideas and the right use of technology. The
syndication of distribution as aggregation is going to do that.

How will this work? First, build
a strong brand (Your company name) in the pilot city, build a strong IT stack, and start incorporating new brands or emerging brands. Recruit distributors and
hire retailers under them. Take the example of Bangalore. Bangalore has more
than 25000 retail stores in grocery. You can target to onboard 18000 retailers
on your application, and assign 500/700 retailers under one distributor. This way
you will have 35-40 distributors. Now you can add new brands with you and give
8-10 brands to each distributor. Brands will consider you as an organized
C&F, they will stock their products in your distribution channel. You being
an aggregator list all the products on your mobile application like Alibaba,
Amazon in US and many others are doing in US and China.

You have retailers and
distributors under your control, so just imagine how much power you would have.
You can live with any brand in the Bangalore Kirana market maximum of two months. This
will be the power of aggregation and technology. You will get many backend
margins from your brand. Also once you have established all the brands in the
funnel you can start working on their centralized marketing activities i.e.
creating demand from consumers.

The aggregation of services is
the future of Indian retail, especially grocery retail. Whether it is moving to
B2B or B2C. Different terminology will be used in this section.

This kind of innovation will only
lead to a boom in the market. Please share your thoughts with me and meet up
for more brainstorming about the new developments ahead in the retail ecosystem.

I am available on +91-9968313005
(WhatsApp) email ranabhardari@gmail.com

Written on 8.7.2012.