IRM Project Report_ Merchandising & Procurement

8/3/2019 IRM Project Report_ Merchandising & Procurement

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Management Development Institute

Gurgaon 122 001

December, 2011

Submitted By:

Group 1

Abha Bhuskute 10P133

Deepak Ranjan Rout 10P135

Nikhil Singhal 10P155

Venkata Narsi Reddy 10P178

Submitted To:

Prof. S. Chandwani

MDI, Gurgaon

Merchandising and Procurement practices of

Rural retailers and compare and contrast withUrban retailers



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ACKNOWLEDGEMENT

We would like to express our deepest gratitude to Prof. S. Chandwani for guiding us on the course

“Issues in Rural Marketing” and for his invaluable guidance, support, and encouragement

throughout our term paper which has helped us in the successful completion of our project.

We also extend our gratitude to our friends who directly or indirectly helped us during our project

work.

Abha Bhuskute

Deepak Ranjan Rout

Nikhil Singhal

Narsi Reddy



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TABLE OF CONTENTS

ACKNOWLEDGEMENT....................................................................................... 3



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Objectives of the Project:

1. Understanding the merchandising practices being followed in Kiryana stores in rural

areas

2. Understanding the procurement practices of Kiryana stores in rural areas

Stores Selected: Kiryana Stores in villages

Kiryana stores cater to the basic day to day needs of rural people in villages & keep a large

number of products which includes some big brands as well as local brands. As these stores are

have big brands as well, we wanted to study if these retail stores are being influenced by MNCsfor merchandising & what is the procurement methods being followed by the rural retailers and

contrast it with urban retailers where the channels of distribution are established & well

developed.

Primary Research:

To collect information about the rural retailers villages near Gurgaon were visited, details of

which are given below. For understanding urban retailers, Retailers in Gurgaon & Rohini, Delhi

were visited. Interviews of these retailers were conducted asking various questions about the

practices they follow related to merchandising & procurement.

Village Visited

Basai Village near Gurgaon

Teekli Road near Sohna Road

Urban Retailers Visited:

Sector-14 Gurgaon

Sector-9 & 13, Rohini, Delhi

These are villages in Gurgaon District and can be categorized as well off villages with constant

interaction with urban areas as they are in vicinity (10-15kms) from urban areas. People

regularly travel between village & urban centers for work & to meet other needs.



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Procurement Practices in Rural vs Urban Retailing - Our Observations:

The procurement practices in urban and rural retailing differ in two ways – in terms of

replenishment cycle and in terms of travelling.

1. In terms of travelling:

Rural Retailers

In the villages visited by us, the retailers themselves travel to the nearby

wholesalers to procure stocks of FMCG goods.

Shopkeepers with larger shops and greater inventory, hire tempos to bring

their stock from the wholesaler to their shops. They usually go themselves for

procuring or send their sales boys while they manage the store themselves.

Shopkeepers with smaller shops use their cycles or motorbikes for

transportation of the stocks. This also leads to smaller replenishment cycle

which is discussed in detail below. Given the poor road connectivity and

smaller inventory procured per cycle, wholesalers are reluctant to supply

these shops and hence they have to do the procuring themselves.

In case of local products like chips, bread, biscuits etc. the manufacturers

generally send their aids with stocks on cycles and motorbikes to supply the

retailers.

For many of the above products, distributors send sales boys on cycle

carrying loads of material who visit many villages every day. Procurement of

products is done through this channel.

Urban Retailers

However in urban retail, it is the wholesalers who supply the retailers with

stocks periodically using tempos or mini trucks as the medium of transport.

Given the larger bulk of supply and much better connectivity, the wholesalers

are willing to bear the transportation costs in urban areas.



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2. In terms of number of days per replenishment cycle:

Rural Retailers

For the retailers visited in Basai Village and Teekli Road, the replenishment

cycle is two to three days for FMCG products which are obtained from the

wholesalers and every alternate day for local products like potato chips,

biscuits etc. which have a short shelf life. The retailers attributed this short

replenishment time to the lack of storage space as they had small stores and

used their houses as well as a part of the store for stock keeping.

Also, they could not afford to invest capital to buy goods to last for longer

periods and the customer base being very small, limited to one or two nearby

villages, they did not want goods to lie in stock for longer periods.

They also said that shorter replenishment time was more suitable for them

because FMCG companies changed schemes, discounts and offerings very fast

and advertised the same via mass media. But since the time to market was

much longer, customers were unwilling to buy older stock without discounts

once they heard about the new discounts. Since the shopkeepers had to

procure stocks themselves as compared to delivery by the wholesalers in

urban areas, hence returning old stock regularly when customers did not

want to buy them represented additional transportation costs for them.

Hence shorter replenishment time helped the rural retailers overcome this

problem.

Urban Retailers

This is in contrast to urban retail, where the replenishment time is usually a

week. Given the larger stores, greater capital investment, a huge customer

base which leads to large demand as well as demand for greater variety of

SKUs, urban retailers procure stocks in much larger quantities as compared

to rural retailers which usually last for about a week.

IRM Project Report_ Merchandising & Procurement

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