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A Project Report On “An Analytical study on Customer Acquisition Strategies of Subhiksha Trading Services in R.T.Nagar, Bangalore” Prepared in partial fulfillment of Master of Business Administration, INC, Hubli College logo Prepared by Ms. A. Beulah Sam Rachel M.B.A, III Semester Under the Guidance of 1

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Page 1: Fatima College

A Project Report

On

“An Analytical study on Customer Acquisition Strategies of

Subhiksha Trading Services in R.T.Nagar, Bangalore”

Prepared in partial fulfillment of Master of Business Administration,

INC, Hubli

College logo

Prepared byMs. A. Beulah Sam Rachel

M.B.A, III Semester

Under the Guidance ofMr. Sadanand.Rodagi

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A Project Report

Submitted by

Ms. A. Beulah Sam Rachel

Enroll No: 6ND10448

Guide

Faculty Guide

Mr. Sadanand. Rodagi

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A

Project Report

On

“An Analytical study on Customer Acquisition Strategies of

Subhiksha Trading Services Ltd in R.T.Nagar Bangalore.”

Prepared by

Ms.A. Beulah Sam Rachel

6ND10448

INC HUBLI

As per the instructions issued by

INC, HUBLI

On the completion of sixteen weeks in retail sector

And Partial fulfillment of M.B.A course for session of

2006-2008

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To Whomsoever It May Concern

This is to certify that Ms. A. Beulah Sam Rachel, student

of MBA studying in INC National College, Hubli has

undergone summer training from 15-03-07 to 15-07-07.

She has done a project on “An Analytical study on

Customer Acquisition Strategies of Subhiksha Trading

Services in R.T.Nagar Bangalore.”During the aforesaid

period, we found her to be sincere & hard working. She

possesses a good moral character and values.

We wish her all the success in future.

SUBHIKSHA TRADING SERVICES LTD

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College logo

The INC National College, HUBLIAhalya Plaza, Club Road, Behind Centurion Bank,Hubli – 580 020. Karnataka.Phone: 0836-5251566 Fax: 91 836 5251565Website: www.inc.org [email protected]

CERTIFICATE

This is to certify that the Summer Internship Project-2007 titled “An

Analytical study on Customer Acquisition Strategies of Subhiksha

Trading Services Ltd in R.T.Nagar Bangalore” a bonafide work of

A. Beulah Sam Rachel (Enrollment No: 6ND10448 & Center:

Hubli) is original and has been done under my supervision in partial

fulfillment of the requirement for the award of M.B.A for the period of

four months from march 2007 to July 2007.

I am pleased to record here that her performance during the period was

extremely satisfactory.

Mr. Sadanand Rodagi

DECLARATION

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I hereby declare that this dissertation is the outcome of my corporate

exposure learning at “SUBHIKSHA TRADING SERVICES LTD”.

This corporate exposure learning is to find the “An Analytical study

on Customer Acquisition Strategies of Subhiksha Trading Services

Ltd in R.T.Nagar Bangalore” prepared by me during the year 2007

under the valuable guidance of Mr.Sadanand Rodagi Faculty guide of

INC, Bangalore.

This project is submitted to INC HUBLI and to “SUBHIKSHA

TRADING SERVICES LTD”, Bangalore.

Place: Hubli

Date: 9/9/07

Ms. A. Beulah Sam Rachel

(6ND10448)

M.B.A III Semester

INC-Hubli

TABLE OF CONTENTS

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Contents Page No

Acknowledgement………………………………………………………. . 9

List of Tables…………………………………………………………….. 10

Abbreviations…………………………………………………………….. 11

Summary………………………………………………………………… 12

1 Introduction…………………………………………………………… 15

1.1 Objectives……………………………………………………… 16

1.2 Methodology……………………………………………………. 17

1.3 Limitations……………………………………………………. 22

1.4 Findings……………………………………………………… 23

1.5 Conclusion………………………………………………….. 30

2 Industry Profile

2.1 Summary……………………………………………………… 31

2.2 Retail Industry……………………………………………………. 34

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2.3 Indian Retail – An overview…………………………………… .38

2.4 Retail Sector in India…………………………………………… 45

3. Company Profile………………………………………………………… .49

3.1 Vision…………………………………………………………….. 54

3.2 Organization Chart……………………………………………. .54

4. Annexure……………………………………………………………………55

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Acknowledgement

This Summer internship training and Project report was written at the

INC, Bangalore as per the instruction issued and partial fulfillment of

the degree in Master of Business Administration. I wish to express my

deep sense of gratitude and profound thanks to my guide

Mr.Sadanand Rodagi from INC, Bangalore. I am thankful to my SIP

Co-ordinator Mrs.Hemalatha, for all their help and support during this

master’s project.

My sincere gratitude to our institution for the guidance and the other

staff members of Subhiksha Trading Services Ltd for the guidance and

I would like to thank the respondents that helped me gather all the data

needed by dedicating a lot of time and thinking to the questions that I

raised.

Finally, I thank my parents and my friends for their support and

valuable time at every stage of my work.

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Ms. A. Beulah Sam Rachel

List of Tables

1 Predicted mall distribution space in India

2 Retail space distribution in NCR

3 Organization Chart

4 Role of customer acquisition strategies

5 Customer acquisition & customer retention

6 Factors of acquisition

7 Acquisition helpful

8 Acquisition be targeted

9 Acquisition can be made through

10 Word of mouth the strongest medium

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Abbreviations

FDI – Foreign Direct Investment

FMCG – Fastest Moving Consumer Goods

GDP – Gross Domestic Product

HR – Human Resource

IT – Information Technology

MoU – Memorandum of Understanding

NCR – National Capital Region

ROI – Return on Investment

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Summary

Customer acquisition cost is the cost associated with convincing a Customer acquisition cost is the cost associated with convincing a

consumer to buy a product or service, including research, marketing,consumer to buy a product or service, including research, marketing,

and advertising costs. An important business metric, customerand advertising costs. An important business metric, customer

acquisition cost should be considered along with other data,acquisition cost should be considered along with other data,

especially the value of the customer to the company and the resultingespecially the value of the customer to the company and the resulting

return on investment (ROI) of acquisition.return on investment (ROI) of acquisition.

Targeted marketing is a Targeted marketing is a

critical component of marketing success. Attracting and retainingcritical component of marketing success. Attracting and retaining

profitable customers and turning potential customers into actualprofitable customers and turning potential customers into actual

customers is a huge challenge – especially when the multitude ofcustomers is a huge challenge – especially when the multitude of

consumer data is available. Whether it's business-to-businessconsumer data is available. Whether it's business-to-business

marketing or business-to-consumer marketing, you need to knowmarketing or business-to-consumer marketing, you need to know

your customers. By understanding the demographic characteristics,your customers. By understanding the demographic characteristics,

lifestyle behaviors and purchase preferences that drive audience’slifestyle behaviors and purchase preferences that drive audience’s

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decisions, we can successfully tailor marketing strategies to reachdecisions, we can successfully tailor marketing strategies to reach

those most likely to purchase product or service, increase customerthose most likely to purchase product or service, increase customer

loyalty and improve customer profitability.loyalty and improve customer profitability.

The best practices for The best practices for

customer acquisition and customer retention to begin with a completecustomer acquisition and customer retention to begin with a complete

examination of both customer base and market to identify the highestexamination of both customer base and market to identify the highest

value customer segments and best new sales opportunities. This linkvalue customer segments and best new sales opportunities. This link

between internal information and the marketplace provides valuablebetween internal information and the marketplace provides valuable

insight into the customers' purchasing behavior and preferences –insight into the customers' purchasing behavior and preferences –

revealing who is likely to buy more and which products or servicesrevealing who is likely to buy more and which products or services

they want. With this information in hand, we can immediatelythey want. With this information in hand, we can immediately

improve opportunities to increase customer profitability and improveimprove opportunities to increase customer profitability and improve

customer loyalty.customer loyalty.

Lifestyle segmentation is a key component of the customer analysisLifestyle segmentation is a key component of the customer analysis

phase and helps to identify life stages, income ranges, and educationphase and helps to identify life stages, income ranges, and education

levels and media preferences. levels and media preferences.

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INTRODUCTION

Study Background

Purpose

Methodology

Limitations

Activity Period Duration (in weeks)

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1 Introduction

Study Background

This master’s project started with interviews aiming to find a subjectThis master’s project started with interviews aiming to find a subject

and scope. People at company where contacted in order to establish aand scope. People at company where contacted in order to establish a

more specific approach. This master’s project focused on merely onmore specific approach. This master’s project focused on merely on

customer acquisition strategies used by the company.customer acquisition strategies used by the company.

Therefore, the project’s approach were made making the study moreTherefore, the project’s approach were made making the study more

interesting and based on substantial and available data, which couldinteresting and based on substantial and available data, which could

be analyzed, and, in the best case, produce interesting results.be analyzed, and, in the best case, produce interesting results.

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1.1Purpose

The objective of this study is to analyze and accomplish the followingThe objective of this study is to analyze and accomplish the following

objectives:objectives:

Main objectiveMain objective

To conduct survey and find out “Customer AcquisitionTo conduct survey and find out “Customer Acquisition

strategies of Subhiksha”.strategies of Subhiksha”.

Sub ObjectiveSub Objective

I.I. Proper understanding and analysis of “Subhiksha TradingProper understanding and analysis of “Subhiksha Trading

Services”.Services”.

II.II. Proper understanding and analysis of “Customer AcquisitionProper understanding and analysis of “Customer Acquisition

strategies” in R.T.Nagar.strategies” in R.T.Nagar.

III.III. Conduct a survey on a sample selected from population ofConduct a survey on a sample selected from population of

R.T.Nagar.R.T.Nagar.

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IV.IV. Analyze the results of the survey conducted and proposeAnalyze the results of the survey conducted and propose

recommendations to the company-Subhiksha Trading recommendations to the company-Subhiksha Trading

Services LtdServices Ltd so that the existing customers derive maximumso that the existing customers derive maximum

satisfaction and new customers are attracted towards thesatisfaction and new customers are attracted towards the

services. services.

1.2 Methodology

The objective of the present study can be accomplished by conductingThe objective of the present study can be accomplished by conducting

a systematic market study in a systematic design, collection, analysisa systematic market study in a systematic design, collection, analysis

and reporting of data and findings that are relevant to differentand reporting of data and findings that are relevant to different

marketing situations facing the company.marketing situations facing the company.

I)I) Defining the problem and the objective:Defining the problem and the objective:

The objective states what information is needed to solve the problem.The objective states what information is needed to solve the problem.

The objective is to derive the opinion of the customers of SubhikshaThe objective is to derive the opinion of the customers of Subhiksha

Trading Services Ltd.Trading Services Ltd.

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II)II) Developing the research plan: Developing the research plan:

Once the problem is identified, the next step is to prepare a plan forOnce the problem is identified, the next step is to prepare a plan for

getting the information needed to solve the problem. The presentgetting the information needed to solve the problem. The present

study will adopt the exploratory approach wherein there is a need tostudy will adopt the exploratory approach wherein there is a need to

gather large amount of information before making a conclusion. Ifgather large amount of information before making a conclusion. If

required, the descriptive and casual approaches may also be used.required, the descriptive and casual approaches may also be used.

III)III) Collection and Sources of data:Collection and Sources of data:

Primary data and secondary data are required and are the sources ofPrimary data and secondary data are required and are the sources of

data. Being a firm in the retail industry, data gathering will involvedata. Being a firm in the retail industry, data gathering will involve

usage of both primary and secondary data though there will be anusage of both primary and secondary data though there will be an

extensive usage of primary data. Well-structured questionnaires willextensive usage of primary data. Well-structured questionnaires will

be prepared as well as there will be personal interview surveys.be prepared as well as there will be personal interview surveys.

IV)IV) Analyze the collected information:Analyze the collected information:

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This involves converting raw data into useful information. It involvesThis involves converting raw data into useful information. It involves

tabulation of data, using statistical measures on them for developingtabulation of data, using statistical measures on them for developing

frequency distributions and calculating the averages and dispersions.frequency distributions and calculating the averages and dispersions.

V)V) Report findings:Report findings:

This phase will mark the culmination of the marketing research effort.This phase will mark the culmination of the marketing research effort.

The report with the research findings is a formal written document.The report with the research findings is a formal written document.

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Methodology explains the methods used in collecting information.Methodology explains the methods used in collecting information.

Definition of Research ObjectivesDefinition of Research Objectives

Identification of the potential customer’s perception about theIdentification of the potential customer’s perception about the

terminal and the market survey was conducted in Bangalore city forterminal and the market survey was conducted in Bangalore city for

the purpose of the study for the master’s project the data wasthe purpose of the study for the master’s project the data was

bifurcated into primary and secondary data.bifurcated into primary and secondary data.

Primary DataPrimary Data – The data is a first collected directly from the – The data is a first collected directly from the

respondents, it’s the first handed information gathered to solve therespondents, it’s the first handed information gathered to solve the

problem regarding the strategies of acquisition.problem regarding the strategies of acquisition.

Secondary DataSecondary Data –– Data collected from the company’s internal andData collected from the company’s internal and

external resources. Internal data such as annual reports and salesexternal resources. Internal data such as annual reports and sales

reports are collected and the external sources were magazines,reports are collected and the external sources were magazines,

journals and legal documents. This information is readily availablejournals and legal documents. This information is readily available

and can be easily compiled.and can be easily compiled.

Survey ResearchSurvey Research – The method used to collect data for this study wasThe method used to collect data for this study was

through survey research. Survey research in the systematic gatheringthrough survey research. Survey research in the systematic gathering

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of information from respondents for the purpose of understanding andof information from respondents for the purpose of understanding and

predicting some aspects of the behavior of the population of interest.predicting some aspects of the behavior of the population of interest.

Measurements Techniques Measurements Techniques - Measurements may be defined as the- Measurements may be defined as the

assignment of numbers to characteristics of objects, persons, states, orassignment of numbers to characteristics of objects, persons, states, or

events itself but some characteristics of being present. Some of theevents itself but some characteristics of being present. Some of the

measurement techniques used is;measurement techniques used is;

Open-Ended Questions Open-Ended Questions – these questions leave thethese questions leave the

respondents free to offer, any replies that seem appropriate in lightrespondents free to offer, any replies that seem appropriate in light

of the question. Questionnaire administered included open-endedof the question. Questionnaire administered included open-ended

question to find out respondents personal opinion.question to find out respondents personal opinion.

Multiple- Choice –Multiple- Choice – These questions are immediatelyThese questions are immediately

followed by a list of possible answers from which the respondentfollowed by a list of possible answers from which the respondent

must choose. Questionnaire included multiple-choice questions tomust choose. Questionnaire included multiple-choice questions to

find out the interest of level.find out the interest of level.

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Dichotomous questions –Dichotomous questions – dichotomous represents andichotomous represents an

extreme form of the multiple-choice question, allow two responsesextreme form of the multiple-choice question, allow two responses

such as “yes-no”, “agree- disagree”.such as “yes-no”, “agree- disagree”.

Sampling processSampling process

PopulationPopulation – Population of this project is a survey of all– Population of this project is a survey of all

business people, unemployed youth, and housewives.business people, unemployed youth, and housewives.

Sampling unitSampling unit – The sampling unit is the basic unit containingThe sampling unit is the basic unit containing

the elements of the population to be sampled. Elements of thethe elements of the population to be sampled. Elements of the

population are business people, unemployed youth and housewives.population are business people, unemployed youth and housewives.

Time- periods Time- periods – The period of study was also limited to 16The period of study was also limited to 16

weeks.weeks.

Sample planSample plan – Based in the questionnaires information wasBased in the questionnaires information was

gathered and analyzed for identifying potential customer.gathered and analyzed for identifying potential customer.

1.3 Limitations

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This master’s project uses the following limitations: Though theThis master’s project uses the following limitations: Though the

present study aims to achieve the above- mentioned objectives in fullpresent study aims to achieve the above- mentioned objectives in full

earnest and accuracy, it may be hampered due to certain limitations.earnest and accuracy, it may be hampered due to certain limitations.

Some of the limitations of this study may be summarized as follows:Some of the limitations of this study may be summarized as follows:

I.I. Locating the target market area of Subhiksha TradingLocating the target market area of Subhiksha Trading

services is very time consuming and costly and tedious.services is very time consuming and costly and tedious.

II.II. The selection of customers to cover the various strata of theThe selection of customers to cover the various strata of the

society is tedious and time consuming.society is tedious and time consuming.

III.III. Getting accurate responses from the respondents due to theirGetting accurate responses from the respondents due to their

inherent problems are difficult. They may be partial or refuseinherent problems are difficult. They may be partial or refuse

to cooperate.to cooperate.

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1.4 Findings

Awareness on role of Customer Acquisition Strategies for any industry?

Yes 189

No 61

Total 250

Role of customer acquisition in any industry

0

20

40

60

80

100

120

140

160

180

200

1

Yes

No

Interpretation: the table shows that out of 250 customersthe table shows that out of 250 customers

interviewed, about 75% customers opted that customer acquisitioninterviewed, about 75% customers opted that customer acquisition

does play an important role and 25% customers are unaware aboutdoes play an important role and 25% customers are unaware about

the role customer acquisition strategies.the role customer acquisition strategies.

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Does Customer Acquisition & Customer Retention go hand in hand?

Yes 213

No 37

Total 250

Do Customer Acquisition & Customer Retention go hand in hand

Yes82%

No18%

Yes

No

Interpretation: the table shows that out of 250 customers 82% of the table shows that out of 250 customers 82% of

them agree that customer acquisition and customer retention go them agree that customer acquisition and customer retention go

hand in hand. hand in hand.

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Factors by which acquisition can be made effective?

Quality 171

Reliability 26

Convenience 53

Total 250

Quality, 171

Reliability, 26

Convenience, 53

0

20

40

60

80

100

120

140

160

180

Quality Reliability Convenience

Factors of acquisition

Series1

Interpretation: the table shows that out of 250 customers 68.4%the table shows that out of 250 customers 68.4%

opted for quality, 16.4% opted for reliability and 21.2% opted foropted for quality, 16.4% opted for reliability and 21.2% opted for

convenience.convenience.

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Is acquisition helpful in acquiring new customers?

Yes 104

No 146

Total 250

Yes

No

0

20

40

60

80

100

120

140

160

Yes No

Ia acquisition helpful in acquiring new customers

Interpretation: the table shows that out of 250 customers about 58%the table shows that out of 250 customers about 58%

customers opted that acquiring new customers is not helpful.customers opted that acquiring new customers is not helpful.

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Can acquisition be targeted on the basis of?

Lifestyle 41

Income 73

Habits 19

Preferences 62

Needs 55

Total 250

Acquisition be targeted on the basis of

Lifestyle16%

Income29%

Habits8%

Preferences

25%

Needs22%

Lifestyle

Income

Habits

Preferences

Needs

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Interpretation: the table shows that out of 250 customers about 29% the table shows that out of 250 customers about 29%

said that it should be targeted on income, 25% on preferences, 22%said that it should be targeted on income, 25% on preferences, 22%

on needs, 16% on lifestyle, and 8% on habits.on needs, 16% on lifestyle, and 8% on habits.

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Should Acquisition be made through?

Advertising 156

Mailing 13

Phone calls 21

Organizing fares 60

Total 250

Acquisition can be made through

156

13 21

60

250

0

50

100

150

200

250

300

Advertising Mailing Phone calls Organizingfares

Total

Series2

Interpretation: 62.4% opted for advertising, 24% for organizing 62.4% opted for advertising, 24% for organizing

fares, 8.4% for phone calls and 5.2% for mailing.fares, 8.4% for phone calls and 5.2% for mailing.

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Word of mouth the strongest medium?

Yes 218

No 32

Total 250

Yes

No

0

50

100

150

200

250

Yes No

Word of mouth the strongest medium

Series1

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Interpretation: the table shows that out of 250 customers’ about the table shows that out of 250 customers’ about

87.5% people agreed that, the word of mouth is the strongest 87.5% people agreed that, the word of mouth is the strongest

medium.medium.

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1.5 Conclusion

Indian retail sector is booming, accounting 10% GDP (GrossIndian retail sector is booming, accounting 10% GDP (Gross

Domestic Product) and 8% employment. From the above dataDomestic Product) and 8% employment. From the above data

analysis it can be interpreted that acquiring new customer is costsanalysis it can be interpreted that acquiring new customer is costs

more, and customer acquisition and retention go hand in hand.more, and customer acquisition and retention go hand in hand.

The major strength of the company lies in retaining the The major strength of the company lies in retaining the

old customer. If acquisition is to be made, the company shouldold customer. If acquisition is to be made, the company should

focus on certain criteria such as lifestyle, income, preferences,focus on certain criteria such as lifestyle, income, preferences,

habits and needs. The company need to focus more on thehabits and needs. The company need to focus more on the

advertising as many of the customers agreed that advertisingadvertising as many of the customers agreed that advertising

creates awareness about the company.creates awareness about the company.

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2 Industry Profile

2.1Summary

The globalization of the Indian Economy has brought forward aThe globalization of the Indian Economy has brought forward a

change in the Indian consumerism psyche with the consumerchange in the Indian consumerism psyche with the consumer

becoming more aware of his/her value of money strength and theirbecoming more aware of his/her value of money strength and their

economic purchasing power becoming more evident than in theeconomic purchasing power becoming more evident than in the

previous generations. The concept of product quality and serviceprevious generations. The concept of product quality and service

delivery which were earlier not very engraved in the consumerdelivery which were earlier not very engraved in the consumer

psyche are now very much demanded and delivered for in the newpsyche are now very much demanded and delivered for in the new

age format of organized product retailing in the Indian consumerage format of organized product retailing in the Indian consumer

goods market.goods market.

These changes have led to the overall increase of professionalismThese changes have led to the overall increase of professionalism

in the service delivery as well as the consumer purchase patternsin the service delivery as well as the consumer purchase patterns

shifting from "need only" based to "extended storage-based bulkshifting from "need only" based to "extended storage-based bulk

purchase characteristics.purchase characteristics.

These have led to the entry and expression of interest by manyThese have led to the entry and expression of interest by many

global retail majors in the Indian organized retail market whereinglobal retail majors in the Indian organized retail market wherein

many products and services are offered to the same consumer atmany products and services are offered to the same consumer at

the same location which present multiple attractions to theirthe same location which present multiple attractions to their

monthly disposable incomes. The middle class has been a leadingmonthly disposable incomes. The middle class has been a leading

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adaptor of this change process by its changing lifestyles, strongadaptor of this change process by its changing lifestyles, strong

income growth and changing demographic patterns which areincome growth and changing demographic patterns which are

placing the growth projections for this industry comfortably atplacing the growth projections for this industry comfortably at

25% annually. 25% annually.

Today, synergies based on huge consumer bases developed inToday, synergies based on huge consumer bases developed in

unrelated industries like telecom to retail are being seen in theunrelated industries like telecom to retail are being seen in the

Indian market as the combined purchase affinity of the middleIndian market as the combined purchase affinity of the middle

class far outstrips the specialist purchase patterns of the higherclass far outstrips the specialist purchase patterns of the higher

income strata in the Indian sub continent; with the industryincome strata in the Indian sub continent; with the industry

projected to become a US$175-200 billion business by 2016 andprojected to become a US$175-200 billion business by 2016 and

the economy playing a comfortable upswing role, the competitionthe economy playing a comfortable upswing role, the competition

in the marketplace is expected to be fierce.in the marketplace is expected to be fierce.

The present scenario of the industry is focused on forward buyingThe present scenario of the industry is focused on forward buying

of retail real estate in order to reap balance sheet advantages laterof retail real estate in order to reap balance sheet advantages later

in the business cycle and also rapid ramping of operations inin the business cycle and also rapid ramping of operations in

presently operating outlets in order that the loyalty purchase habitspresently operating outlets in order that the loyalty purchase habits

of consumers are built over a period of time before the worldof consumers are built over a period of time before the world

majors enter the market with deeper pockets and buying power.majors enter the market with deeper pockets and buying power.

The Asian retailers are not willing to give in an easy competitiveThe Asian retailers are not willing to give in an easy competitive

fight on their home turf as well as the smart small time mom & popfight on their home turf as well as the smart small time mom & pop

store retailer known as the "kirana store" in India is also wizeningstore retailer known as the "kirana store" in India is also wizening

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up to the challenge and building personal relationships apart fromup to the challenge and building personal relationships apart from

increasing the service spectrum like never before. increasing the service spectrum like never before.

The market in all seems to be ready for a big explosion of intenseThe market in all seems to be ready for a big explosion of intense

competitive activity over ridden by social and economiccompetitive activity over ridden by social and economic

considerations which will make it one of a kind business study inconsiderations which will make it one of a kind business study in

the corporate universe as an economy which did not open up tillthe corporate universe as an economy which did not open up till

the early 1990's where in the industry was dominated bythe early 1990's where in the industry was dominated by

unorganized retailer till then and any kind of central purchase orunorganized retailer till then and any kind of central purchase or

retail formats where only propagated by the government for whichretail formats where only propagated by the government for which

the awareness as well as effort were low.the awareness as well as effort were low.

The Indian Retail Industry is an in-depth and comprehensive crossThe Indian Retail Industry is an in-depth and comprehensive cross

industry review on the Indian Retail Industry which explores theindustry review on the Indian Retail Industry which explores the

macroeconomic scenario of Indian economy which coupled withmacroeconomic scenario of Indian economy which coupled with

growth of GDP led to the shift of consumer purchase patterns andgrowth of GDP led to the shift of consumer purchase patterns and

the build up confidence in the retail sector thereby giving shape tothe build up confidence in the retail sector thereby giving shape to

the government allowance for FDI in the Indian retail sector.the government allowance for FDI in the Indian retail sector.

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2.2 Retail Industry

Retail includes all business activities that involve the sale of goods Retail includes all business activities that involve the sale of goods

and services to consumers for personal, family, or household use. It and services to consumers for personal, family, or household use. It

is the final step in the distribution of these goods and services.is the final step in the distribution of these goods and services.

India's vast middle class and its almost untapped retail industry areIndia's vast middle class and its almost untapped retail industry are

key attractions for global retail giants wanting to enter newerkey attractions for global retail giants wanting to enter newer

markets. Driven by changing lifestyles, strong income growth andmarkets. Driven by changing lifestyles, strong income growth and

favorable demographic patterns, Indian retail is expected to growfavorable demographic patterns, Indian retail is expected to grow

25 per cent annually. 25 per cent annually.

Modern retail in India could be worth US$ 175-200 billion byModern retail in India could be worth US$ 175-200 billion by

2016. With the economy booming, competition in the marketplace2016. With the economy booming, competition in the marketplace

is fierce. According to 'Retail in India Getting Organized to Driveis fierce. According to 'Retail in India Getting Organized to Drive

Growth', a report by AT Kearney and the Confederation of IndianGrowth', a report by AT Kearney and the Confederation of Indian

Industry, retail is one of India's fastest growing industries with a 5Industry, retail is one of India's fastest growing industries with a 5

per cent compounded annual growth rate and expected revenues ofper cent compounded annual growth rate and expected revenues of

US$ 320 billion in 2007. Rising incomes, increasing consumerismUS$ 320 billion in 2007. Rising incomes, increasing consumerism

in urban areas and an upswing in rural consumption will fuel thisin urban areas and an upswing in rural consumption will fuel this

growth to around 7-8 per cent.growth to around 7-8 per cent.

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Retail spaceRetail space

Retailers in India are the most aggressive in Asia in expandingRetailers in India are the most aggressive in Asia in expanding

their businesses, thus creating a huge demand for real estate. Theirtheir businesses, thus creating a huge demand for real estate. Their

preferred means of expansion is to increase the number of theirpreferred means of expansion is to increase the number of their

outlets in a city, and also expand to other regions, revealed theoutlets in a city, and also expand to other regions, revealed the

Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia. Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia.

Deutsche Bank's research report on 'Building up India' says India'sDeutsche Bank's research report on 'Building up India' says India's

burgeoning middle class will drive up nominal retail sales throughburgeoning middle class will drive up nominal retail sales through

2010 by 10 per cent per annum. The country may have 600 new2010 by 10 per cent per annum. The country may have 600 new

shopping centers by 2010. shopping centers by 2010.

Food retail Food retail

Food dominates the shopping basket in India. The US$ 6.1 billionFood dominates the shopping basket in India. The US$ 6.1 billion

Indian foods industry, which forms 44 per cent of the entire FMCGIndian foods industry, which forms 44 per cent of the entire FMCG

sales, is growing at 9 per cent and has set the growth agenda forsales, is growing at 9 per cent and has set the growth agenda for

modern trade formats. Since nearly 60 per cent of the averagemodern trade formats. Since nearly 60 per cent of the average

Indian grocery basket comprises non-branded items, the brandedIndian grocery basket comprises non-branded items, the branded

food industry is homing in on converting Indian consumers tofood industry is homing in on converting Indian consumers to

branded food.branded food.

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The mobile revolutionThe mobile revolution

The retail market for mobile phones -- handset, airtime andThe retail market for mobile phones -- handset, airtime and

accessories -- is already a US$ 16.7 billion business, growing ataccessories -- is already a US$ 16.7 billion business, growing at

over 20 per cent per year. In comparison, the consumer electronicsover 20 per cent per year. In comparison, the consumer electronics

and appliance market is worth US$ 5.6 billion, with a growth rateand appliance market is worth US$ 5.6 billion, with a growth rate

that is half of the mobile market.that is half of the mobile market.

Retail Industry StructureRetail Industry Structure

The most common types of retail establishments areThe most common types of retail establishments are

Department Store – a store organized into several individualDepartment Store – a store organized into several individual

‘departments’ and selling a variety of merchandise.‘departments’ and selling a variety of merchandise.

Discount/Mass Merchandiser – a self-service store displayingDiscount/Mass Merchandiser – a self-service store displaying

and selling different kinds of merchandise at lower profitand selling different kinds of merchandise at lower profit

margins than other retailers.margins than other retailers.

Specialty Store – a retail store concentrating on a limitedSpecialty Store – a retail store concentrating on a limited

range of merchandise.range of merchandise.

Warehouse Club/Superstore – a self-service retailer withWarehouse Club/Superstore – a self-service retailer with

cash-and-carry checkout operations. These retailers tend tocash-and-carry checkout operations. These retailers tend to

shun advertising, credit purchases, deliveries, and othershun advertising, credit purchases, deliveries, and other

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amenities. The main attraction for consumers is nationalamenities. The main attraction for consumers is national

brands at low prices. Membership may be required.brands at low prices. Membership may be required.

Wholesale Club – a self-service retailer who offers nationallyWholesale Club – a self-service retailer who offers nationally

advertised brand name goods at wholesale prices toadvertised brand name goods at wholesale prices to

businesses and group members only. These stores usuallybusinesses and group members only. These stores usually

operate in a warehouse environment.operate in a warehouse environment.

Factory Outlet – these are outlet retailers that either sellFactory Outlet – these are outlet retailers that either sell

clearance merchandise from other retailers or manufacturesclearance merchandise from other retailers or manufactures

or sell their own excess stock, seconds, returns, etc, at vastlyor sell their own excess stock, seconds, returns, etc, at vastly

discounted prices.discounted prices.

Catalog – retailer selling merchandise that is advertised inCatalog – retailer selling merchandise that is advertised in

catalogs produced by the retailer’s main office and usedcatalogs produced by the retailer’s main office and used

universally in their retail establishments. universally in their retail establishments.

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2.3 Indian Retail: An Overview

The Indian retail industry in valued at about $300 billion and isThe Indian retail industry in valued at about $300 billion and is

expected to grow to $427 billion in 2010 and $637 billion in 2015.expected to grow to $427 billion in 2010 and $637 billion in 2015.

Only three percent of Indian retail is organized. Retailers ofOnly three percent of Indian retail is organized. Retailers of

multiple brands can operate through a franchise or a cash-and-multiple brands can operate through a franchise or a cash-and-

carry wholesale model. carry wholesale model.

Retail is India’s largest industry, accounting for over 10 percent ofRetail is India’s largest industry, accounting for over 10 percent of

the country’s GDP and around eight percent of employment. Retailthe country’s GDP and around eight percent of employment. Retail

in India is at the crossroads. It has emerged as one of the mostin India is at the crossroads. It has emerged as one of the most

dynamic and fast paced industries with several players entering thedynamic and fast paced industries with several players entering the

market. That said, the heavy initial investments required makemarket. That said, the heavy initial investments required make

break even hard to achieve and many players have not tastedbreak even hard to achieve and many players have not tasted

success to date. However, the future is promising; the market issuccess to date. However, the future is promising; the market is

growing, government policies are becoming more favorable andgrowing, government policies are becoming more favorable and

emerging technologies are facilitating operations. emerging technologies are facilitating operations.

Retailing in India is gradually inching its way to becoming the nextRetailing in India is gradually inching its way to becoming the next

boom industry. The whole concept of shopping has altered in termsboom industry. The whole concept of shopping has altered in terms

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of format and consumer buying behavior, ushering in a revolutionof format and consumer buying behavior, ushering in a revolution

in shopping. Modern retail has entered India as seen in sprawlingin shopping. Modern retail has entered India as seen in sprawling

shopping centers, multi-storied malls and huge complexes offershopping centers, multi-storied malls and huge complexes offer

shopping, entertainment and food all under one roof. shopping, entertainment and food all under one roof.

The Indian retailing sector is at an inflexion point where theThe Indian retailing sector is at an inflexion point where the

growth of organized retail and growth in the consumption bygrowth of organized retail and growth in the consumption by

Indians is going to adopt a higher growth trajectory. The IndianIndians is going to adopt a higher growth trajectory. The Indian

population is witnessing a significant change in its demographics.population is witnessing a significant change in its demographics.

A large young working population with median age of 24 years,A large young working population with median age of 24 years,

nuclear families in urban areas, along with increasing working-nuclear families in urban areas, along with increasing working-

women population and emerging opportunities in the serviceswomen population and emerging opportunities in the services

sector are going to be the key growth drivers of the organized retailsector are going to be the key growth drivers of the organized retail

sector.sector.

Initially, this was about Indian corporate houses rolling out mallsInitially, this was about Indian corporate houses rolling out malls

and supermarkets, but with Wal-Mart coming into the Indianand supermarkets, but with Wal-Mart coming into the Indian

market, the era of the superstore is dawning. Unlike the kiranamarket, the era of the superstore is dawning. Unlike the kirana

stores that served us for decades, this new breed of retail chains isstores that served us for decades, this new breed of retail chains is

heavily dependent on IT. heavily dependent on IT.

Wal-Mart, the world’s largest retailer, and Bharti Enterprises haveWal-Mart, the world’s largest retailer, and Bharti Enterprises have

signed a Memorandum of Understanding (MoU) to exploresigned a Memorandum of Understanding (MoU) to explore

business opportunities in the Indian retail industry. This jointbusiness opportunities in the Indian retail industry. This joint

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venture will mark the entry of Wal-Mart into the Indian retailingventure will mark the entry of Wal-Mart into the Indian retailing

industry.industry.

The biggest competitor for Bharti-Wal-Mart is likely to beThe biggest competitor for Bharti-Wal-Mart is likely to be

Reliance Retail, the retail wing of Reliance, which had planned toReliance Retail, the retail wing of Reliance, which had planned to

establish 10,000 stores by 2010. It had already opened 11 pilotestablish 10,000 stores by 2010. It had already opened 11 pilot

stores under the “Reliance Fresh” format in Hyderabad.stores under the “Reliance Fresh” format in Hyderabad.

All these trends and developments present a great businessAll these trends and developments present a great business

opportunity for software and hardware vendors from across theopportunity for software and hardware vendors from across the

globe. Indian solution providers are targeting this segment haveglobe. Indian solution providers are targeting this segment have

reason to rejoice. For while organized retail occupies a minisculereason to rejoice. For while organized retail occupies a miniscule

two to three percent of the overall Indian retailing industry, that istwo to three percent of the overall Indian retailing industry, that is

poised to change.poised to change.

In spite of the prospects being good things aren’t quite as rosyIn spite of the prospects being good things aren’t quite as rosy

when it comes to awareness of IT systems. In most cases,when it comes to awareness of IT systems. In most cases,

organized retailers in India have installed solutions that help themorganized retailers in India have installed solutions that help them

automate transactional systems. automate transactional systems.

With the retail sector in India undergoing a transformation due toWith the retail sector in India undergoing a transformation due to

the entry of large corporate houses, IT managers and CIO’s arethe entry of large corporate houses, IT managers and CIO’s are

now looking forward to know how IT can help them achieve thenow looking forward to know how IT can help them achieve the

business goals of their organizations.business goals of their organizations.

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Standards-based architecture and software support all kinds ofStandards-based architecture and software support all kinds of

mission-critical IT applications for enabling greater efficiency,mission-critical IT applications for enabling greater efficiency,

significant cost savings, and new business value. The criticalsignificant cost savings, and new business value. The critical

activities that can be handled by IT are finance and accounting,activities that can be handled by IT are finance and accounting,

business intelligence, vendor development and management,business intelligence, vendor development and management,

supply chain management, merchandising and inventorysupply chain management, merchandising and inventory

management, facilities management, stores management, customermanagement, facilities management, stores management, customer

relationship management, branding, marketing, sales promotionrelationship management, branding, marketing, sales promotion

and HR.and HR.

Like any other vertical, retail also stands to benefit from elaborateLike any other vertical, retail also stands to benefit from elaborate

IT set-ups. However, this is subject to the scale and size of theIT set-ups. However, this is subject to the scale and size of the

organization, as well as an objective assessment of itsorganization, as well as an objective assessment of its

requirements. Key common challenges that can be tackled throughrequirements. Key common challenges that can be tackled through

IT implementations include accurate merchandising, improvedIT implementations include accurate merchandising, improved

planning, and increasing profitability, enhancing customerplanning, and increasing profitability, enhancing customer

experience, strengthening store operations, improved workforceexperience, strengthening store operations, improved workforce

management, and improving the supply chain. This is in fact onemanagement, and improving the supply chain. This is in fact one

of the key imperatives facing retailers in India, to have a robustof the key imperatives facing retailers in India, to have a robust

and scalable supply chain that will facilitate rapid growth. and scalable supply chain that will facilitate rapid growth.

Since a basic objective is to make data available to users andSince a basic objective is to make data available to users and

customers, proper IT implementation and superior IT infrastructurecustomers, proper IT implementation and superior IT infrastructure

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ensure that in spite of getting minimal details, the retailer capturesensure that in spite of getting minimal details, the retailer captures

the right information, which flows to everyone from the backthe right information, which flows to everyone from the back

office staff to the head office managers. The entire informationoffice staff to the head office managers. The entire information

flow must be seamless. A retail business works on a networkflow must be seamless. A retail business works on a network

environment because the stores connect to one another as well asenvironment because the stores connect to one another as well as

to supplier sites. This is because in the retail business quickto supplier sites. This is because in the retail business quick

response is the key to success. Proper IT implementation alsoresponse is the key to success. Proper IT implementation also

ensures that investment in retail reduces substantially.ensures that investment in retail reduces substantially.

Retail SizeRetail Size

India is one of the ten largest retail markets in the world.India is one of the ten largest retail markets in the world.

Retail sales were $206 billion in 2004, over 30% 0f GDP.Retail sales were $206 billion in 2004, over 30% 0f GDP.

‘Organized Retail’ contributes only 3% of total retail sales –‘Organized Retail’ contributes only 3% of total retail sales –

about $6.4 billion p.a.about $6.4 billion p.a.

Top Players in the Retail Industry

Players Revenues($ million)(2003-04)

Space (sq. ft.)Dec 2004

Format

Pantaloon Retail 150 1,000,000 F&G, Specialty

RPG Retail 135 590,000 F&G, Specialty

Shoppers’ Stop 100 740,000 Specialty Retail

Lifestyle International 53 325,000 Specialty Retail

Vivek’s Ltd. 46 150,000 Consumer Durables

Trent (Tata) 38 270,000 F&G, Specialty

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OutlookOutlook

The overall retail market is expected to grow three-fold in theThe overall retail market is expected to grow three-fold in the

next 10 years from $206 billion today to about $660 billion bynext 10 years from $206 billion today to about $660 billion by

2015.2015.

India is expected to be among the top 5 retail markets in theIndia is expected to be among the top 5 retail markets in the

world in 10 years.world in 10 years.

Organized retail is expected to grow rapidly to reach $ 100Organized retail is expected to grow rapidly to reach $ 100

billion by 2015.billion by 2015.

Likely to account for 12-15% of total retail sales by 2015.Likely to account for 12-15% of total retail sales by 2015.

PotentialPotential

The high growth projected in domestic retail demand will be The high growth projected in domestic retail demand will be

fuelled by:fuelled by:

i)i) The migration of population to higher income The migration of population to higher income

segments with increasing per capita incomes.segments with increasing per capita incomes.

ii)ii) An increase in urbanization.An increase in urbanization.

iii)iii) Changing consumer attitudes especially the increasingChanging consumer attitudes especially the increasing

use of credit cardsuse of credit cards

iv)iv) The growth of the population in the 20 to 49 years ageThe growth of the population in the 20 to 49 years age

bandband

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There is retail opportunity in most product categories and for There is retail opportunity in most product categories and for

all types of formats.all types of formats.

Food and Grocery: The largest category; largely unorganized.Food and Grocery: The largest category; largely unorganized.

Opportunities for investment in supply chain infrastructure.Opportunities for investment in supply chain infrastructure.

India also has significant potential to emerge as a sourcing India also has significant potential to emerge as a sourcing

base for a wide variety of goods for international retail base for a wide variety of goods for international retail

companies.companies.

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2.4 Retail Sector in India

Retail and real estate are the two booming sectors of India in theRetail and real estate are the two booming sectors of India in the

present times. And if industry experts are to be believed, thepresent times. And if industry experts are to be believed, the

prospects of both the sectors are mutually dependent on each other.prospects of both the sectors are mutually dependent on each other.

Retail, one of India’s largest industries, has presently emerged asRetail, one of India’s largest industries, has presently emerged as

one of the most dynamic and fast paced industries of our timesone of the most dynamic and fast paced industries of our times

with several players entering the market. Accounting for over 10with several players entering the market. Accounting for over 10

per cent of the country’s GDP and around eight per cent of theper cent of the country’s GDP and around eight per cent of the

employment retailing in India is gradually inching its way towardemployment retailing in India is gradually inching its way toward

becoming the next boom industry. becoming the next boom industry.

As the contemporary retail sector in India is reflected in sprawlingAs the contemporary retail sector in India is reflected in sprawling

shopping centers, multiplex- malls and huge complexes offershopping centers, multiplex- malls and huge complexes offer

shopping, entertainment and food all under one roof, the concept ofshopping, entertainment and food all under one roof, the concept of

shopping has altered in terms of format and consumer buyingshopping has altered in terms of format and consumer buying

behavior, ushering in a revolution in shopping in India. This hasbehavior, ushering in a revolution in shopping in India. This has

also contributed to large scale investments in the also contributed to large scale investments in the real estate sectorreal estate sector

with major national and global players investing in developing thewith major national and global players investing in developing the

infrastructure and construction of the retailing business. The trendsinfrastructure and construction of the retailing business. The trends

that are driving the growth of the retail sector in India arethat are driving the growth of the retail sector in India are

Low share of organized retailing Low share of organized retailing

Falling real estate prices Falling real estate prices

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Increase in disposable income and customer aspiration Increase in disposable income and customer aspiration

Increase in expenditure for luxury items Increase in expenditure for luxury items

Another credible factor in the prospects of the retail sector in IndiaAnother credible factor in the prospects of the retail sector in India

is the increase in the young working population. In India, heftyis the increase in the young working population. In India, hefty

pay-packets, nuclear families in urban areas, along with increasingpay-packets, nuclear families in urban areas, along with increasing

working-women population and emerging opportunities in theworking-women population and emerging opportunities in the

services sector. These key factors have been the growth drivers ofservices sector. These key factors have been the growth drivers of

the the organized retail sector in Indiaorganized retail sector in India which now boast of retailing which now boast of retailing

almost all the preferences of life - Apparel & Accessories,almost all the preferences of life - Apparel & Accessories,

Appliances, Electronics, Cosmetics and Toiletries, Home & OfficeAppliances, Electronics, Cosmetics and Toiletries, Home & Office

Products, Travel and Leisure and many more. With this the retailProducts, Travel and Leisure and many more. With this the retail

sector in India is witnessing a rejuvenation as traditional marketssector in India is witnessing a rejuvenation as traditional markets

make way for new formats such as departmental stores,make way for new formats such as departmental stores,

hypermarkets, supermarkets and specialty stores. hypermarkets, supermarkets and specialty stores.

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The retailing configuration in India is fast developing as shoppingThe retailing configuration in India is fast developing as shopping

malls are increasingly becoming familiar in large cities. When itmalls are increasingly becoming familiar in large cities. When it

comes to development of retail space specially the malls, the Tiercomes to development of retail space specially the malls, the Tier

II cities are no longer behind in the race. If development plans tillII cities are no longer behind in the race. If development plans till

2007 is studied it shows the projection of 220 shopping malls, with2007 is studied it shows the projection of 220 shopping malls, with

139 malls in metros and the remaining 81 in the Tier II cities. 139 malls in metros and the remaining 81 in the Tier II cities.   TheThe

government of states like Delhi and National Capital Regiongovernment of states like Delhi and National Capital Region

(NCR) are very upbeat about permitting the use of land for(NCR) are very upbeat about permitting the use of land for

commercial development thus increasing the availability of landcommercial development thus increasing the availability of land

for retail space; thus making NCR render to 50% of the malls infor retail space; thus making NCR render to 50% of the malls in

India.India.

India is being seen as a potential goldmine for retail investors fromIndia is being seen as a potential goldmine for retail investors from

over the world and latest research has rated India as the topover the world and latest research has rated India as the top

destination for retailers for an attractive emerging retail market.destination for retailers for an attractive emerging retail market.

India’s vast middle class and its almost untapped retail industry areIndia’s vast middle class and its almost untapped retail industry are

key attractions for global retail giants wanting to enter newerkey attractions for global retail giants wanting to enter newer

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markets. Even though India has well over 5 million retail outlets,markets. Even though India has well over 5 million retail outlets,

the country sorely lacks anything that can resemble a retailingthe country sorely lacks anything that can resemble a retailing

industry in the modern sense of the term. This presentsindustry in the modern sense of the term. This presents

international retailing specialists with a great opportunity. Theinternational retailing specialists with a great opportunity. The

organized retail sector is expected to grow stronger than GDPorganized retail sector is expected to grow stronger than GDP

growth in the next five years driven by changing lifestyles,growth in the next five years driven by changing lifestyles,

burgeoning income and favorable demographic outline. burgeoning income and favorable demographic outline.

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3. Company Profile

Subhiksha started its journey in March 1997, from ThiruvanmiyurSubhiksha started its journey in March 1997, from Thiruvanmiyur

in Chennai, is the brain child of R. Subramanian, its Managingin Chennai, is the brain child of R. Subramanian, its Managing

Director. Subramanian, who has been inspired by Mahatma GandhiDirector. Subramanian, who has been inspired by Mahatma Gandhi

and Mother Teresa is a workaholic and believes in the philosophyand Mother Teresa is a workaholic and believes in the philosophy

of doing more business with less margin than less business withof doing more business with less margin than less business with

more margin. “When we do more volumes we get a better dealmore margin. “When we do more volumes we get a better deal

from the suppliers,” said Subramanian in an interview.from the suppliers,” said Subramanian in an interview.

Subhiksha is an Indian Subhiksha is an Indian retail chainretail chain with with

more than 760 outlets selling groceries, fruits, vegetables,more than 760 outlets selling groceries, fruits, vegetables,

medicines and mobile phones. It was started and is managed by medicines and mobile phones. It was started and is managed by RR

SubramanianSubramanian, an , an IIM AhmedabadIIM Ahmedabad alumni. He also plans to invest alumni. He also plans to invest

Rs.500 crore to increase the number of outlets to 2000 across theRs.500 crore to increase the number of outlets to 2000 across the

country by 2009.country by 2009.

The name "Subhiksha" means The name "Subhiksha" means

prosperity in prosperity in SanskritSanskrit. It opened its first store in . It opened its first store in ThiruvanmiyurThiruvanmiyur in in

ChennaiChennai in March, 1997 with an investment of about Rs. 5 lakhs. in March, 1997 with an investment of about Rs. 5 lakhs.

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The retail chain has seen a considerable growth by offering goodsThe retail chain has seen a considerable growth by offering goods

at cheaper rates and there by increasing its customer base. It is alsoat cheaper rates and there by increasing its customer base. It is also

dubbed as India's largest retail chain. Subhiksha now has evendubbed as India's largest retail chain. Subhiksha now has even

opened Specialized Mobile shops called Subhiksha Mobile whereopened Specialized Mobile shops called Subhiksha Mobile where

mobiles are sold at a discounted price.mobiles are sold at a discounted price.

Subhiksha has created a niche for Subhiksha has created a niche for

itself as the leading discount retail store for grocery and pharmacy.itself as the leading discount retail store for grocery and pharmacy.

The retail chain is working at moving out of Tamil Nadu, where itThe retail chain is working at moving out of Tamil Nadu, where it

has 145 stores across 31 centres. has 145 stores across 31 centres.

Subhiksha, the Chennai based, Subhiksha, the Chennai based,

400 stores strong, India’s biggest grocery and pharmacy discount400 stores strong, India’s biggest grocery and pharmacy discount

retail chain, is growing at a scorching pace and is bracing up toretail chain, is growing at a scorching pace and is bracing up to

take its tally of retail stores to 750, by March 2007. During thetake its tally of retail stores to 750, by March 2007. During the

current financial year it is also confident of doubling its 2005-06current financial year it is also confident of doubling its 2005-06

turnover of Rs. 335 crore.turnover of Rs. 335 crore.

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The fast growth of Subhiksha is The fast growth of Subhiksha is

an outcome of Rs. 300 crores it raised earlier to fund its networkan outcome of Rs. 300 crores it raised earlier to fund its network

expansion. While, Rs. 80 crore came in the form of equity, Rs 100expansion. While, Rs. 80 crore came in the form of equity, Rs 100

crore was raised as working capital and Rs 70 crore as long-termcrore was raised as working capital and Rs 70 crore as long-term

debt. ICICI Ventures holds 24% in the company.debt. ICICI Ventures holds 24% in the company.

With the economies of scale With the economies of scale

already in place, Subhiksha, which presently has a portfolio ofalready in place, Subhiksha, which presently has a portfolio of

private labels for staple products, is actively creating a portfolio ofprivate labels for staple products, is actively creating a portfolio of

private labels for a rage of other products including baby foods,private labels for a rage of other products including baby foods,

edible oils, etc. This will help Subhiksha raise its profit margins.edible oils, etc. This will help Subhiksha raise its profit margins.

By March 1999, Subhiksha started expanding rapidly. From 14By March 1999, Subhiksha started expanding rapidly. From 14

stores, it expanded to 50 stores by June 2000. In the next twostores, it expanded to 50 stores by June 2000. In the next two

years, it had 120-130 stores across Tamil Nadu. Another big thingyears, it had 120-130 stores across Tamil Nadu. Another big thing

was, in 2000, ICICI Venture invested in Subhiksha. was, in 2000, ICICI Venture invested in Subhiksha.

Subhiksha decided to look at every part of India which isSubhiksha decided to look at every part of India which is

significantly literate and is a significant consumption market.significantly literate and is a significant consumption market.

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Subhiksha wanted to be everywhere. Subhiksha looked at theSubhiksha wanted to be everywhere. Subhiksha looked at the

telecom companies as their role model. They employed capabletelecom companies as their role model. They employed capable

regional managers and expanded.regional managers and expanded.

Subhiksha’s business is also extremely local. Subhiksha decided toSubhiksha’s business is also extremely local. Subhiksha decided to

have very good quality people to run the region, area, town and thehave very good quality people to run the region, area, town and the

store.store.

In 2004-05, Subhiksha decided to have 420 stores in places likeIn 2004-05, Subhiksha decided to have 420 stores in places like

Gujarat, Delhi, Mumbai, Andhra and Karnataka by 2006. In 2005,Gujarat, Delhi, Mumbai, Andhra and Karnataka by 2006. In 2005,

& started recruiting people in various regions. Today, it has 500& started recruiting people in various regions. Today, it has 500

plus stores in all the places that it had planned & will go up to 600-plus stores in all the places that it had planned & will go up to 600-

plus by the month end.plus by the month end.

Subhiksha is already India’s largest retail chain store with 500-plusSubhiksha is already India’s largest retail chain store with 500-plus

stores & plan’s to have 1,000-plus stores by the end of this year. stores & plan’s to have 1,000-plus stores by the end of this year.

The rapidly-growing retail chain has The rapidly-growing retail chain has

already crossed the 450-store mark across five states in the countryalready crossed the 450-store mark across five states in the country

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and is currently occupying retail space of more than one millionand is currently occupying retail space of more than one million

square feet.square feet.

“Subhiksha is targeting a 1,000-strong retail network by end-2007“Subhiksha is targeting a 1,000-strong retail network by end-2007

& are looking at providing customers across the country with a& are looking at providing customers across the country with a

viable smart shopping option,” viable smart shopping option,”

“With the implementation of its “With the implementation of its

expansion in Maharashtra, Subhiksha will complete our 600-storeexpansion in Maharashtra, Subhiksha will complete our 600-store

target. Subhiksha will shortly activate Phase II of its expansiontarget. Subhiksha will shortly activate Phase II of its expansion

plans by foraying into the north and east including Chandigarh,plans by foraying into the north and east including Chandigarh,

Punjab, Madhya Pradesh, Uttar Pradesh, Haryana and WestPunjab, Madhya Pradesh, Uttar Pradesh, Haryana and West

Bengal”, Phase II involves Rs 200-crore investment in opening 400Bengal”, Phase II involves Rs 200-crore investment in opening 400

stores.stores.

The rapidly expanding chain, which The rapidly expanding chain, which

claims to be the biggest chain in the country, is following theclaims to be the biggest chain in the country, is following the

carpet bombing strategy for its expansion, wherein, to createcarpet bombing strategy for its expansion, wherein, to create

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maximum impact, it simultaneously launched a cluster of stores inmaximum impact, it simultaneously launched a cluster of stores in

a given geography.a given geography.

It may be recalled that only a few It may be recalled that only a few

months back Subhiksha to finance its ambitious expansion drivemonths back Subhiksha to finance its ambitious expansion drive

had raised Rs. 300 crore. It has also recently raised Rs. 80 crorehad raised Rs. 300 crore. It has also recently raised Rs. 80 crore

through the rights issue. Currently, ICICI venture Capital holdsthrough the rights issue. Currently, ICICI venture Capital holds

24% in the equity capital of Subhiksha.24% in the equity capital of Subhiksha.

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3.1 Vision

To be the largest retailer in all segments & all geographies.To be the largest retailer in all segments & all geographies.

3.2 Organization Structure

President

Vice-president Senior VP/VP

operationsAVP Pharmacy AVP Telecom

BDM Operations BDM PharmacyBDM Fruits &

Vegetables

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4. Annexure

Questionnaire

Dear Sir/ MadamDear Sir/ Madam

I wish to conduct a project concerned with the “An I wish to conduct a project concerned with the “An

analytical Study on Customer Acquisition Strategies of Subhikshaanalytical Study on Customer Acquisition Strategies of Subhiksha

Trading Service in R.T.Nagar” for the fulfillment of my academicTrading Service in R.T.Nagar” for the fulfillment of my academic

curriculum.curriculum.

Hence I request you to spare few minutes.Hence I request you to spare few minutes.

Thanking You Name of the collegeThanking You Name of the college

Studen Studen

tt

Name: __________________Name: __________________

Address: _____________________Address: _____________________

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__________________________________________________________________________

Profession: _________________Profession: _________________

Family members: ______________________Family members: ______________________

Education Level:Education Level:

a) Primary b) High school a) Primary b) High school

c) Graduate d) Any Other c) Graduate d) Any Other

Is Customer Acquisition the major role for any industry?Is Customer Acquisition the major role for any industry?

YES NO YES NO

If so, does Customer Acquisition & Customer Retention goIf so, does Customer Acquisition & Customer Retention go

hand in hand?hand in hand?

YES NO s YES NO s

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On what factors acquisition can be made effectiveOn what factors acquisition can be made effective

Quality Reliability Quality Reliability

Convenience Convenience

Is acquisition helpful in acquiring new customers?Is acquisition helpful in acquiring new customers?

YES NO YES NO

Should acquisition be targeted on the basis of? Should acquisition be targeted on the basis of?

Lifestyle Income Lifestyle Income

Habits Preferences Habits Preferences

Needs Needs

Should Acquisition be made through? Should Acquisition be made through?

Advertisements Mailing Advertisements Mailing

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Phone Calls Organizing fares Phone Calls Organizing fares

Is word-of-mouth the strongest medium for retaining theIs word-of-mouth the strongest medium for retaining the

customer?customer?

YES NO YES NO

Place: Place:

Date:Date:

SignatureSignature

Thanking You,Thanking You,

Name of the student.Name of the student.

sorry was bit busy so couldnt send u

industry profile

emergence

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future trends

market potential

company profile

3c's

executive summary

objectives

1)purpose of study

2)scope of study

3)limitations of study

4)research methodology

finding & analysis

annexure

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conclusionThis is the html version of the file

http://utextension.tennessee.edu/publications/Documents/PB1719.pdf.

Google automatically generates html versions of documents as we crawl the web.

Page 1

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The University of Tennessee

Agricultural Extension Service

PB1719

Analysis of Grocery Store Market Access Opportunities

for Small-farm and Value-added Products

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This project was funded in part under an agreement with the Tennessee

Department

of Agriculture and the USDA Federal-State Market Improvement Program.

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Foreword

his publication is an important part of the Center for Profitable Agriculture’s

ongoing educational programs with individual farm families, value-added

entrepreneurs and agricultural leaders across the state. A study was

conducted to determine

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the requirements, criteria and grocers’ preferences for the selection of food

products sold in

their stores. The results presented in this publication represent one of five

objectives of the

2001 – 2003 Federal-State Marketing Improvement Program (FSMIP)

project titled

“Developing Target Markets for Value-Added Niche Products.” Insights for

value-added

agri-entrepreneurs planning to market products through grocery stores are

presented.

Specific information that is helpful in the development of efficient

marketing plans and in

the development of applicable teaching resources for those seeking a better

understanding of

marketing value-added products are described. These results can assist agri-

entrepreneurs

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and small farm agribusinesses in the development of new market

opportunities for value-

added products and enterprises, and can contribute to an improved overall

understanding of

the critical success factors and characteristics of market demand needed for

successful

value-added agribusinesses.

We are particularly appreciative of the cooperation and support of Dan

Gutzman and

nine retail sales counselors of the CB Ragland Company with this project.

Their

participation in the survey development and implementation phases of this

project was

valuable to the overall success. In addition, appreciation is expressed to

Anne Dalton and

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Shasta Hubbs for their contributions in implementing the entire project; to

Richard Maxey

for publication layout and design; Joe Gaines and Dan McLemore for their

assistance and

leadership in the project’s administration; David Eastwood, Stanley Trout

and John Brooker

for serving on the survey development team; and Charles Hall, David

Eastwood, Wanda

Russell and Stanley Trout for their participation in the peer review.

Additional information regarding this project may be obtained by contacting

the Center

for Profitable Agriculture at 931-486-2777 or <http://cpa.utk.edu>.

Rob Holland

Project Principal Investigator and Lead Author

Center for Profitable Agriculture

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T

Page 3

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Table of Contents

Project Background

4

FSMIP Grant

4

The Project Teams

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4

Results of the Survey

6

The Respondents

6

How Products Are Acquired

7

Deciding Which Products to Carry

9

Selecting New Products to Carry

11

Products Grocers Would Like to Feature

11

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How to Get Products to Grocers

11

Identifying Tennessee Products and the “Pick Tennessee Products” Logo 13

Conclusions

14

Implications for Future Studies

16

Appendix

17

Anne Dalton

Extension Assistant

Center for Profitable Agriculture

Rob Holland

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Extension Specialist

Center for Profitable Agriculture

Shasta Hubbs

Former Extension Specialist

Agricultural Development Center

Analysis of Grocery Store Market Access Opportunities

for Small-Farm and Value-Added Products

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Project Background

FSMIP Grant

In March 2001, the Agricultural Development Center (the Center’s

name changed to Center for Profitable Agriculture in July 2002) submitted a

proposal to the Federal-State Marketing Improvement Program (FSMIP) to

develop five market development resource tools that would allow users to

better evaluate market opportunities for value-added products and enter-

prises. One of the goals of the overall FSMIP project was to analyze market

access opportunities for small-farm and value-added products with local

grocery stores. Over the years, value-added entrepreneurs have found it very

challenging to get their products on the shelves of local grocery stores. The

Center often receives requests regarding the approach that should be taken

with grocery store personnel to achieve greater success in getting the

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products on local grocery shelves.

The Project Teams

This publication presents the results of a survey conducted with manage-

ment personnel of grocery stores. The survey (see Appendix) was developed

to obtain information needed to evaluate how receptive local grocers are to

carrying value-added products produced in Tennessee and to identify the

primary steps/procedures/conditions that value-added agri-entrepreneurs

should consider to best target local grocers. The entire grocery store survey

project was accomplished through the cooperative efforts of several teams of

contributing partners. Participants in each of the cooperating teams are

presented below:

Survey Development Team

- John Brooker, Agricultural Economics, The University of Tennessee

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- Anne Dalton, Center for Profitable Agriculture, The University of

Tennessee

- David Eastwood, Agricultural Economics, The University of Tennessee

- Rob Holland, Center for Profitable Agriculture, The University of

Tennessee

- Shasta Hubbs, Agricultural Development Center, The University of

Tennessee

- Cynthia Kent, The Tennessee Department of Agriculture,

Market Development Division

- Stanley Trout, The Tennessee Department of Agriculture,

Market Development Division

Survey Implementation Team

- Anne Dalton, Center for Profitable Agriculture, The University of

Tennessee

- Kevin Daugherty, CB Ragland Company

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- Brian Fitzgerald, CB Ragland Company

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- Lynn Goring, CB Ragland Company

- Dan Gutzman, CB Ragland Company

- Joel Harris, CB Ragland Company

- Rob Holland, Center for Profitable Agriculture, The University of

Tennessee

- Shasta Hubbs, Agricultural Development Center, The University of

Tennessee

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- Randy Kelly, CB Ragland Company

- Mike Mcquire, CB Ragland Company

- Jason Morris, CB Ragland Company

- Hugh Qualls, CB Ragland Company

- Keith Sullivan, Tennessee Grocers Association

- Kevin Whittaker, CB Ragland Company

Publication Team

- Anne Dalton, Center for Profitable Agriculture, The University of

Tennessee

- David Eastwood, Agricultural Economics, The University of Tennessee

- Charles Hall, Agricultural Economics, The University of Tennessee

- Rob Holland, Center for Profitable Agriculture, The University of

Tennessee

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- Shasta Hubbs, Agricultural Development Center, The University of

Tennessee

- Richard Maxey, Marketing and Communications, The University of

Tennessee

- Dan McLemore, Agricultural Development Center, The University of

Tennessee

- Wanda Russell, Marketing and Communications, The University of

Tennessee

- Stanley Trout, Chief of Marketing Services, The Tennessee Department

of Agriculture

The survey development team identified grocers in Tennessee and gave

ideas and suggestions on administering the survey. The team also

brainstormed potential survey questions, formats and methods and identified

the target audience of the survey. Due to the expected low response rate of a

mailed questionnaire, the team suggested and arranged for the delivery of

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the survey questionnaires to grocery stores by retail sales counselors of the

CB Ragland Company.

CB Ragland Company is a food wholesaler that supplies approximately

200 independently owned and operated retailers, no chain stores, in the

southeast region of Tennessee, Georgia, Alabama, Kentucky and North

Carolina with a full line of groceries, produce, meat, deli and non-food

items. Relationships already existed between the sales counselors and the

grocery store personnel, and the counselors could assist with interpreting the

questionnaire as needed. The survey participants were, therefore, limited to

those served by the CB Ragland Company, and this potential bias has been

considered in the analysis of the survey results, primarily in the section titled

“how products are acquired.”

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The survey implementation team cooperated in the preparation, distribu-

tion, completion and return of the questionnaires. Retail sales counselors

with the CB Ragland Company were provided survey implementation

packets containing questionnaires, return envelopes and a check-list of

implementation procedures. The counselors were given 96 questionnaires

and asked to duplicate or request additional forms as needed. Postage-paid

addressed envelopes were prepared and accompanied the questionnaires for

easy return to the Agricultural Development Center for analysis.

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Results of Survey

The Respondents

A total of 47 questionnaires were returned from 47 management person-

nel of 47 individual grocery stores within CB Ragland’s Tennessee and

Kentucky territory. At the time of the survey, CB Ragland was serving196

stores; therefore, the 47 returned questionnaires represent a 24 percent

response rate. The stores represented in the survey are located in 23

Tennessee counties, reaching from Polk County in the east to Carroll County

in the west, and two counties in Central Kentucky. The largest geographic

concentration of responses was from Middle Tennessee, with 87 percent of

the participants located within 70 miles of Nashville. The location of

Tennessee grocery stores represented in the survey is provided in the

following map.

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Location of Grocery Store Participants in Survey

Key:

1 Survey = Orange

2 Surveys = Light Orange

3 Surveys = Gray

9 Surveys = Light Gray

Note: 2 additional surveys from Kentucky

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A majority (79 percent) of the grocery store personnel completing the

questionnaires was male, while 21 percent was female. Almost three-fourths

(74 percent) of the personnel were between the ages of 31 and 50. A

distribution of the respondents by age category is presented in Table 1.

Table 1: Percentage of Survey Responses by Age Category

Age Category

Responses

20 to 30

4%

31 to 40

38%

41 to 50

36%

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51 to 60

18%

61 to 70

2%

70 and older

2%

Half (50 percent) of the respondents described their roles/positions in the

grocery stores as “store owner,” while 16 percent were described as

“manager,” 13 percent as “department manager” and 2 percent as “other.”

How Products Are Acquired

Almost all of the personnel indicated that food items are acquired for

their grocery store from a food wholesaler. This was not surprising, because

the participating stores were identified and selected by a wholesale supplier.

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While more than 97 percent of the stores acquire products from a wholesale

supplier, this is not their only supplier of food products. Seventy-seven

percent of the stores also acquire food products from direct-store-delivery

vendors, 38 percent of stores acquire food products directly from small food

producers (including farmers and entrepreneurs) and 4.3 percent of the stores

acquire products from large national manufacturing companies. Only 21

percent of the stores indicated that they acquire food products for their store

from only one supplier.

Although 97 percent of the stores acquire food products from

wholesalers, only 76 percent of the food items in their store are acquired

from wholesalers. A comparison of the percent of stores that use specific

sources of food products and the percent of food acquired through each

source is presented in Table 2.

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It is interesting that 38 percent of the grocery stores indicated that they

acquire products directly from small food producers, farmers and food

entrepreneurs; however, the amount of food products in the stores from this

group is relatively small (less than 2 percent).

The characteristics of the grocery stores that do acquire food products

from small food producers are not significantly different from the character-

istics of the entire sample. When the stores that acquire food products from

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small food producers were asked to describe their preferred way for small

food producers to pitch products to them, the majority (88 percent) indicated

that a visit to the store was the best way to introduce the product. In

addition,

70 percent of the stores indicated that a sample of the product is also an

important part of getting a new product considered. Three respondents

indicated that an introductory letter and a sample of the product should be

sent to the store rather than a personal visit. While some stores indicated

that

a phone call to discuss the product was preferred, one respondent specifi-

cally said “no phone calls.” Additional sales promotion tools for small food

producers to consider when pitching their product to a grocery store

included

providing a free case of the product, providing free point-of-purchase

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displays or shelf-talkers for the products and guaranteeing a minium level of

sales.

Table 2: The Percent of Stores That Use Specific Sources of Food

Products and the Percent of Food Acquired through Each Source

97.8

Wholesalers

76.0

4.3

Large, National

0.2

Manufacturers

77.0

Direct-Store-

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22.0

Delivery Vendors

38.0

Direct from a Small

1.8

Food Producers

(includingfarmers and

food entrepreneurs)

Percent of Stores

That Acquire Food

Products from

Certain Sources

Source of

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Food

Products

Percent of Food

Items in the Store

Acquired from a

Certain Source

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Sixty-two percent of the stores indicated that they do not acquire food

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products directly from small food producers. However, 81 percent of them

indicated that they would consider this option.

Deciding Which Products to Carry

Among a list of 12 criteria, survey participants indicated that “shelf

space,” “customer recommendations/requests” and “proven sales history”

are the most important criteria they use to decide whether or not to place a

new food product in their store. In addition, “promotion help,” “new prod-

ucts,” “ability to restock” and “product category” were also considered

important criteria. Sixty-two percent of the stores indicated that “shelf-

space” is one of the most critical criteria to product placement. However, as

shown in Table 3, when asked for the single most important criteria, “shelf

space” ranked fourth, falling behind “customer recommendations/ requests,”

“sales history” and “promotion help.”

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62

Shelf Space

15

50

Sales History

26

30

Promotion Help

18

26

New Product

19

Ability to Restock

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15

Product Category

11

Option to Consign

11

Price

6

Supplier Recommendation

2

Label in Spanish & English

Table 3: Percent of Stores Indicating a Specific Criteria as One of

Their Top Three Most Important or the Single Most Important Criteria

Percent of Stores

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Indicating a Specific

Criteria as the Single

Most Important

Criteria Used to

Decide Which Food

Products Will Be

Placed in the Store

Percent of Stores

Indicating a Specific

Criteria as One of

Their Top Three

Most Important

57

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Customer

41

Recommendations/

Requests

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Among a list of 11 possible requirements that all food products must

meet to be eligible to be sold in a grocery store, respondents most often

indicated the following minimum product requirements:

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• “evidence that a product meets all government standards”

• “amount of gross profit”

• “product must have a bar code”

• “evidence of the product’s previous sales”

The percent of stores indicating a specific requirement as the single

most important are presented in Table 4.

evidence that a product meets all

72

government standards

amount of gross profit

62

product must have a bar code

57

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evidence of the product’s previous sales

53

promotional help

45

supplier must guarantee a specific

40

delivery schedule

supplier must be responsible for restocking

23

must have liability insurance

17

evidence of delivery volume capabilities or a

17

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minimum amount of inventory

supplier must agree to furnish a display

15

other1

11

Table 4: Percent of Stores Indicating a Specific Requirement

as the Single Most Important

Requirements of Food Products

Eligible to be Sold in Grocery Stores

Percent of Stores

Indicating a Specific

Requirement as the

Single Most Important

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1 Other requirements include “my determination of whether it will sell,”

“quality,”

“if my supplier carries it” and “guarantee that the product will be fresh and

good quality.”

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Selecting New Products to Carry

Each store in the survey added an average of just under 100 new food

products each year, ranging from 2 to 420. However, of the 96 new products

added, only 44 are still on the shelves in one year. That is, only 46 percent of

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new food products placed in grocery stores are still in the store one year

later. Survey participants indicated that “price,” “image” and “taste” were

the primary reasons that new products generated enough sales during their

first year to remain on the shelf. Similarly, respondents indicated that

“price,” “image” and “taste” were the primary reasons that new products did

not achieve a level of sales high enough for them to remain on the shelf after

one year.

Products Grocers Would Like to Feature

When asked to identify “specific” products that are not currently

available to the grocery stores but that they would like to be featured in the

store, four products were mentioned in multiple instances and eight products

were mentioned once. Of the products mentioned more than once, “more

local products in general” was mentioned 37 percent, “bakery items” 27

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percent and “molasses/sorghum” and “pies” were each mentioned 18 percent

of the time. The following products were mentioned once:

• jams and jellies

• specialty hams

• bread

• candles

• fresh donuts

• more sugar-free items

• flowers (seasonal)

• locally produced dairy products

How to Get Products to Grocers

The following responses were given when store personnel were asked to

describe the process a small food producer should expect once the grocery

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store had decided to carry his/her product.*

• Pricing must be consistent with similar items; producer must be able to

back the item.

• Set up a delivery schedule and the process for reorders, cost and retails

would be determined and guidelines for shelf placement, point-of-sale

materials, price changes, etc. would be set up.

• As long as the price is right, the producer would have to handle

every aspect of this process – from shipping to stocking on shelves.

* In some cases, comments have been paraphrased for clarity.

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• An in-store demonstration/sampling day of some sort is helpful.

• Continued available inventory, stable pricing and good acceptance

from consumers are necessities.

• We contact our wholesale supplier and ask them to try to carry it.

• The product must be advertised to the customers.

• Delivery to the store will have to be by the producer, a delivery

truck or from our wholesaler.

• Either get the product from my wholesale supplier or the producer

should have a delivery schedule to bring product directly to the store.

• Vendor must approve credit and provide evidence they can deliver

sufficient quantities on schedule.

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• Run an advertisement with a good price.

The following comments were provided when the survey participants

were asked what specific advice they would give an entrepreneur who was

trying to get a value-added agricultural product in the grocery store.*

• Start small; don’t try to make a million dollars on the first go-round.

• Be diligent but not pushy, understand that even a little shelf space is

better than nothing; always be prepared to take care of damaged

merchandise.

• Make sure pricing is always right and be on a regular delivery

schedule.

• Call the store for an appointment, bring product sample to the store

manager, explain the type of business and how you will promote the

product.

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• Plan to make store visits and guarantee the product.

• Convince store personnel that the product is needed, that you will

deliver on a schedule to meet the store’s needs, that the product will

always be fresh and sanitary and that the product meets the required

inspections.

• The product should have the “Pick Tennessee Products” label, and

the product should not be overpriced.

• The product label should be attractive, should catch the buyer’s

attention and should have a UPC code.

• Make product samples available.

• Be honest; do what you say you will do.

• Tell the grocery store “Let’s try it. If it doesn’t work, I’ll credit you

for it and we’ll try something else.”

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• Success will come from long-established working relationships/

partnerships with the grocery store.

* In some cases, comments have been paraphrased for clarity.

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• Always use a friendly approach and be willing to demonstrate the

product.

• Make a good presentation, have product samples and then guarantee

the product.

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• Most of the best-selling products are carried by our wholesaler, so

there is not a problem for us to get it; their product must be in the

warehouse book.

• Look neat and clean and present good, fresh, clean merchandise.

• Be flexible and willing to work with store.

• Get an understanding of the products, make sure the price is competi-

tive with other name-brand products and plan to cater to the needs of

customers.

• Prepare to provide samples and display fixtures.

• Make a good guarantee on the product and make the first case free to

the store.

Identifying Tennessee Products and the

“Pick Tennessee Products” Logo

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The Tennessee Department of Agriculture (TDA) has operated a promo-

tion program for Tennessee products since 1985. The logo associated with

the promotion program has evolved over the years, and the current logo has

been used since 1998.

The logo was developed to help consumers identify and select Tennes-

see-produced and/or processed products and has become the emblem of the

state’s overall “Pick Tennessee Products” (PTP) Market Development

Program. Although there is no fee for joining the PTP program, the TDA

Market Development division oversees and authorizes the use of the logo

through an application-approval process. When a Tennessee firm or product

is approved for the PTP program, it will be included in the TDA Website

directory and in numerous related consumer and

buyer directories. Also included in the program is

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the right to use the “PTP” logo in promotions and

on product labels. Products bearing the PTP logo

must be high-quality agricultural products pro-

duced or processed in Tennessee. Changes in logo

composition or colors must be approved by the

market development division. All products bearing

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the logo must meet or exceed U.S. government and/or state of Tennessee

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standards where applicable.

Just over three-fourths (76 percent) of the survey respondents indicated

that Tennessee products are identified in their stores with 84 percent of the

identification made, in some way, for individual products. This individual

identification could be from shelf stickers or signs identifying products or

from individual products that bear the PTP logo. Sixteen percent of the

identification of Tennessee products is from a combination of individual

product identification and from a specific section or display in the store

identifying the products. Of the stores that do not currently identify Tennes-

see products, 95 percent indicated they would consider doing so.

Grocery store personnel appear to be very familiar with the PTP logo,

with 98 percent of the Tennessee respondents and 94 percent of all respon-

dents (including those from Kentucky) indicating that they are familiar with

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the logo. Seventy-eight percent of the respondents indicated that the PTP

logo contributes to increased sales of Tennessee products. However, there

appears to be a direct relation between the state in which the grocery store is

located and a grocer’s perception of whether or not having the PTP logo on a

product results in increased sales of the product. One hundred percent of the

Kentucky grocers said that the PTP logo does not contribute to increased

sales, while only 18 percent of Tennessee grocers said that the PTP logo

does not contribute to increased sales. Fifty-seven percent of the survey

participants indicated that the inclusion of the PTP logo on a product makes

them more willing to carry the product in their store, while 40 percent said

the logo does not affect their decision to carry the product.

Conclusions

To improve the economic viability of agricultural operations, farmers

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and agri-enterprises are processing, packaging and marketing farm com-

modities in different ways than has been done historically. End-products that

result from value-added enterprises often require the implementation of non-

traditional marketing techniques. The results presented in this publication

provide information that will be helpful for farmers and agri-entrepreneurs

planning to market value-added products through local grocery stores.

According to the results of the study, which are summarized in this

publication, wholesalers are the most frequently used suppliers of products

to grocers, and small food producers (including farmers and entrepreneurs)

supply the smallest percent of products to grocery stores. Therefore, value-

added entrepreneurs should consider working with/through wholesalers to

get products to local grocery stores.

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“Shelf-space,” “customer recommendations/requests” and “a proven

sales record” were indicated as the most important criteria used by grocers to

decide whether or not to accept a new product. Because there are so many

products that compete for limited shelf space in grocery stores, small food

producers should consider ways for their product to compete for this limited

space. For example, the size, shape, amount and type of packaging and use

of shelf space options such as hanging racks should be considered. In

addition, customer comments should be solicited during sampling opportuni-

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ties or through alternate marketing opportunities that substantiate positive

customer reaction. The comments should be summarized and communicated

to the grocer. Small food producers should also document and communicate

to the grocer evidence of a strong sales history, including number of units

and/or gross sales over a specific time period. This might be accomplished

through the use of effective brochures and charts.

Survey participants indicated that “price,” “image” and “taste” were the

primary reasons for products remaining on the shelf after the first year. In

addition to developing products that are price-competitive, appealing to the

eye and pleasing to the palate, small food producers should make sure their

products’ attributes are effectively communicated to potential consumers

and

grocers through consistent promotional activities, free sampling, effective

packaging and labeling and educational materials.

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Survey participants also indicated that their decision to carry a product

is influenced by the entrepreneur’s ability and willingness to assist with or

carry out such tasks as delivery, stocking, inventory, promotion and advertis-

ing. Therefore, in addition to producing value-added products, the entrepre-

neur should consider taking an active role in various marketing tasks. For

example, the value-added entrepreneur might assist grocers with advertising

expenses, do demonstration/in-store product sampling and/or provide the

grocer the first five cases of the product free. The entrepreneur might also

take the responsibility of maintaining an inventory of the shelves and/or

stockroom product level and even agree to a next-day delivery when product

levels are low.

More than three-fourths of the survey participants indicated that the Pick

Tennessee Products (PTP) logo contributes to increased sales of Tennessee

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products, and more than half indicated that the inclusion of the PTP logo on

products makes them more willing to carry the product in their store.

Therefore, small food producers should carefully consider including the PTP

logo on the labels on products sold in Tennessee stores. However, because

of

the response of the grocers in Kentucky, the use of the logo outside the state

of Tennessee should be carefully evaluated.

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Implications for Future Studies

The results of this study set the stage for a variety of future studies

that would further the understanding of and opportunities for marketing

value-added products through grocery stores. Some specific

opportunities for future studies include:

• Investigating and evaluating the requirements, criteria and

preferences of wholesale food suppliers used for the selection of

food products carried.

• Real-product evaluation screenings with grocery store managers and

wholesale food suppliers to evaluate the use of specific selection

criteria with actual products.

• Evaluating the effectiveness of actual product advertising and

promotion activities such as point-of-purchase displays, samples/

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demonstrations, price discounts and shelf-space allocation/location.

• Determining characteristics of grocery stores that acquire a larger

portion of their food products from small food producers (including

farmers and entrepreneurs) than the participants in this study.

• Evaluating requirements, criteria and preferences of grocery store

managers who acquire a larger portion of their food products from

small food producers (including farmers and entrepreneurs) than the

participants in this study.

• Determining the time frame of the initial product evaluation period.

• Investigating the difference in grocers’ willingness to consider and

their likelihood to carry food products supplied by small food

producers.

• Investigating how demographic variables affect a grocery store

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manager’s willingness to consider carrying food products from small

food producers.

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DEVELOPING MARKETS FOR TENNESSEE AGRICULTURAL

PRODUCTS

A Survey Conducted by

The University of Tennessee Agricultural Extension Service Agricultural

Development Center

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Your voluntary participation in this survey is greatly appreciated. The

purpose of this study is 1) to

evaluate how receptive local grocery stores are to carry value-added

products made in Tennessee and 2)

to identify the primary steps/procedures/conditions that the farmer/producer

must consider to best target

local grocers. Your answers to the questions in this survey will not be

disclosed; only aggregated

responses will be used in summarizing the study. As the person who makes

the purchasing decisions for

your store, please answer each question according to your knowledge and

understanding of the situation

presented.

1. Excluding meat and produce, which of the following sources do you

currently use to acquire

food items/products for your store? (Please check all that apply.)

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_____ a food wholesaler

_____ a large, national manufacturing company

_____ a direct store delivery vendor (DSD)

_____ decision made at headquarters

_____ directly from a small food producer (including farmers and small food

entrepreneur

businesses)

2.a. Excluding meat and produce, what percentage of the food

items/products in your store is

supplied by the sources you marked in question 1 above?

% supplied by a food wholesaler

% supplied by a large, national manufacturing company

% supplied by a direct store delivery vendor (DSD)

% decision made at headquarters

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% supplied directly by a small food producer (including farmers and small

food

entrepreneur businesses)

b. If you obtain any food products direct from a small food producer, please

describe the most

preferred way for them to pitch a product to you (such as a store visit, phone

call, direct letter,

product sample).

c. If you do not obtain any food products directly from small food producers,

would you consider

doing so in the future? Yes: _____ No: _____

3.a. Which of the following are the three most important criteria used to

decide which food products

will be placed on the shelves in your store? (Select only three.)

_____ available shelf space

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_____ label printed in English and Spanish

_____ product category

_____ customer recommendation/request

_____ sales history

_____ supplier recommendation

_____ new product

_____ packaging

_____ ability to re-stock

_____ option of consignment sales

_____ promotional help

_____ other (please list)_______________

b. Go back to the three criteria selected in #3a and circle the one that you

consider to be the single

most important? (Circle only one.)

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4. Which of the following are requirements that all food products must meet

to be eligible to be sold

in your store? (Only check things that are required and check all that

apply.)

_____ evidence of product’s previous sales

_____ evidence that the product meets all government standards

_____ supplier must guarantee that a specific delivery schedule can be met

_____ evidence of delivery volume capabilities or a minimum amount of

inventory

Appendix

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ADDED

VALUE

_____ supplier must be responsible for restocking

_____ product must have a bar code

_____ must have liability insurance

_____ amount of gross profit

_____ supplier must agree to furnish a display

_____ promotional help

_____ other (list)_________________________________

5.a. Approximately how many new food products are placed on the shelves

in your store in a given

year? ____________

b. Approximately how many of these new food products are still available in

your store 12 months

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after being added? _____________

c. Assume for a moment that the reason products remain on the shelf for a

year is due to high sales.

What is the one characteristic that these products have in common that

contributes to their high

sales? (Check the one that applies.)

_______ price

_______ taste

_______ packaging

_______ brand image

_______ location in store

_______ other (please list) __________

d. Assume that the products not remaining on the shelf after a year is due to

a low volume of sales.

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What do you think is the one characteristic that these products have in

common that most

prevented higher sales? (Check the one that applies.)

_______ price

_______ taste

_______ packaging

_______ brand image

_______ location in store

_______ other (please list)___________

6. Now, assume that a small food producer has pitched a product to you and

you are interested in

carrying it in your store. Describe the process of getting the product on your

shelves that the small

food producer should expect.

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7. What are some food products that currently are not available to you that

you would like to feature

in your store? (Ex. fresh apple cider, bakery items, local farm products, etc.)

8.a. Do you identify Tennessee grown or processed products in your store in

some way?

Yes:______ No: ______

b. If yes, what method do you use to identify the products?

_______ a specific section in the store ______ individual

identification_______both

c. If no, would you consider identifying Tennessee products? Yes:______

No: ______

9.a. Are you familiar with the “Pick Tennessee Products” logo (seen at

right)?

Yes: _____

No:_____

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b. Do you feel the use of this logo increases the sale of Tennessee products?

Yes: _____

No:______

c. How does the inclusion of the “Pick Tennessee Products” logo on a

product label affect your

willingness to carry the product?

_______ more willing _______ no change _______ less willing

10. If you were counseling an entrepreneur on how to get a product in your

store, what advice would

you give him/her?

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ADDED

VALUE

Please provide the following demographic information.

1. What is the city and ZIP Code for your store? City:_______________

ZIP Code:_________

2. Which of the following best describes your position/role in the store?

_____ store owner_____ store manager_____ dept. manager _____ other

(describe) __________

3. Which of the following best describes your age? (optional)

___ under 20___ 20 to 30 ___ 31 to 40 ___ 41 to 50 ___ 51 to 60 ___ 61 to

70

___ over 70

4. What is your gender? (optional)Female:________ Male: _________

5. How long have you been employed in your present position at the store?

___________________

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Funding for this project is provided in part by the United States Department

of Agriculture, the

Tennessee Department of Agriculture and The University of Tennessee.

This study is being conducted by Rob Holland and Anne Dalton with The

University of Tennessee

Center for Profitable Agriculture. If you have questions, contact them at

865-974-3824 or by e-mail

through the CPA Web site at <www.utextension.cpa.utk.edu>. The mailing

address for the CPA is

307 Morgan Hall, Knoxville, Tennessee, 37996-4521.

The Agricultural Extension Service offers its programs to all eligible persons

regardless of race,

religion, color, national origin, sex, age, disability or veteran status and is an

Equal Opportunity Employer.

COOPERATIVE EXTENSION WORK IN AGRICULTURE AND HOME

ECONOMICS The University of

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Tennessee Institute of Agriculture, U.S. Department of Agriculture,

and county governments cooperating in furtherance of Acts of May 8 and

June 30, 1914.

Agricultural Extension Service, Charles L. Norman, Dean

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The Agricultural Extension Service offers its programs to all eligible persons

regardless of race,

religion, color, national origin, sex, age, disability or veteran status and is an

Equal Opportunity

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Employer. COOPERATIVE EXTENSION WORK IN AGRICULTURE

AND HOME ECONOMICS The

University of Tennessee Institute of Agriculture, U.S. Department of

Agriculture,

and county governments cooperating in furtherance of Acts of May 8 and

June 30, 1914.

Agricultural Extension Service, Charles L. Norman, Dean

PB1719-800-11/02

R12-4010-005-001-03

Table 2: The Percent of Stores That Use Specific Sources of FoodProducts and the Percent of Food Acquired through Each Source97.8Wholesalers76.04.3Large, National0.2Manufacturers77.0Direct-Store-22.0Delivery Vendors38.0

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Direct from a Small 1.8Food Producers(includingfarmers andfood entrepreneurs)Percent of StoresThat Acquire F

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