Unnati  Stores  

Situational  Analysis  Progressive  Corporation  (PC)  initiated  Unnati  to  increase  the  productivity  of  farmers,  as  increased   incomes   will   lead   to   increase   of   rural   household’s   purchasing   power.   PC  relied  on  the  concept  of  trust  and  relationship-­‐building  to  promote  Unnati  as  brand.    Their   first  store  at  Patti  allowed  the   farmers  to  order  soil   tests  and  on  the  basis  of  he  results  obtained,   fertilizers  were  advised  to  the  farmers.  Further,   it  was  demonstrated  that  by  using  the  methods  advised  by  Unnati  yield  turned  out  to  be  much  higher  than  the  normal.    Their  store  at  Taran  Taran  was  partitioned  into  two  floors  with  one  being  used  to  sell  agri   products   and   other   for   non-­‐agri   products.   The   store   used   multiple   promotional  activities   for   agri   products   like   field   visits,   expert   meetings   etc   and   like   redemption  scheme,  lucky  draw,  scratch  card  etc  for  non-­‐agri  products.  They  used  mother-­‐daughter  model  as  its  supply  chain  model,  wherein  there  were  stores  called   hubs   that   served   larger   catchment   areas   and   there   were   smaller   stores   called  spokes  which   served  much   smaller   catchment   areas.   The   Taran   Taran   store   acted   as  hub  while  store  at  Patti  was  it’s  spoke.  PC  had  setup  distribution  centers  to  take  care  of  needs  of  both  hub  and  spoke  but  in  case  of  emergency  even  a  hub  can  serve  a  spoke.  Unnati   had   developed   in-­‐house   IT   package   to   optimize   hub   and   spoke   model   but   it  hadn’t  been  rolled  out  properly  and  store  level  records  were  still  recorded  manually.  The  major  competitors  were  Haryali  Kissan  Bazaar  (DCM  Sriram  Consolidated  Limited),  Chaupal  Sagar  (ITC  Limited),  Godrej  Adhar,  and  Tata  Kisan  Sansar.  Haryali  Kissan  Bazaar  focused  on  agri  products  alone  and  relied  on  self-­‐serve  model  to  sell   their   products.   Chaupal   Sagar   on   other   hand   was   supposed   to   serve   as   a   high  quality,   low-­‐cost   channel   for   rural   India.   ITC   offered   a   wide   range   of   both   agri   and  non-­‐agri   products   along   with   other   facilities   like   restaurants,   ATMs,   fuel   pumps   etc.  Godrej  Adhar  had  a  very  good  distribution  network  due  to  its  parent  organization  and  also  followed  a  hub  and  spoke  model.  Tata  Kisan  Sagar  dealt  in  agri-­‐products  only.    

Problem  Statement  PC   wants   to   open   1200   Unnati   stores   by   2012   and   achieve   operational   break-­‐even  quickly  by  increasing  store  traffic  as  well  as  average  purchase  per  customer.  

Options    • Split-­‐up  of  agri  and  non-­‐agri  products  • Distribution  Strategies:  Status  quo,  improved  hub  and  spoke  • Economical   Strategies:   Cut   back   on   non-­‐agri   sections   which   have   very   low  

footfall  and  low  sales  volumes,  provide  credit  facilities  through  credit  agencies  • Promotional  Strategies:  Cross  agri  and  non-­‐agri  products  promotional  schemes  

Evaluation  Criteria  • Margins  • Fixed  cost  

Evaluation  of  Options  Though  agri  products  have  lower  margin  approx.  10%  in  comparison  to  about  20%  for  non-­‐agri   products,   the   main   focus   should   be   on   agri   products   as   it   connects   with  company’s  vision  to  better  rural  households  and  will  allow  the  company  in  future  to  tap  into  resulting  higher  incomes  with  their  non-­‐agri  products.  The  fixed  cost  for  consumer  durables  like  Refrigerators,  TVs  etc.  is  high  while  sales  are  seasonal  and  will  vary  from  region  to  region  depending  on  economic  status  of  that  particular  region.  Margins   from   hub   and   spoke  model   can   be   increased   if   optimized   distribution   takes  place  using  IT  system  to  track  stocks.  As  far  as  the  fixed  cost  of  distribution  channels  are  concerned  it’s  because  of  hub’s  larger  area  and  staff  and  can  be  brought  down  if  some  of  the  sections  from  non-­‐agri  products  are  let  go.  Additionally  number  of  spokes  per  hub  can  be  increased  over  time  to  penetrate  a  region  more  deeply.  Consumer  durables  margin  can  be  brought  into  the  picture  if  a  credit  agency  provides  credit  to   loyal  customers.  But  the  fixed  price  as  discussed  above  will  go  up  because  of  larger  area  and  staff  requirements.  To   increase  the  overall  margins  we  need  the  consumers  engaging   for  agri  products   to  engage   for   non-­‐agri   products   as   well   and   this   can   be   achieved   if   such   promotional  activities  are  used  wherein  agri  product  customers  get  some  redemption  or  discount  on  non-­‐agri  products.  This  will  have  no  effect  on  fixed  cost.  

Recommendations  Consumer  durables  should  be  part  of  the  offered  products  at  stores  only  if   it  has  been  found   through   data   available   that   people   have   the   required   purchasing   power   either  with  or  without  credit  facilities.  As  the  Unnati  network  grows,  they  should  switch  to  IT  controlled   transaction   system   as   this   will   result   in   more   optimized   distribution.  Cross-­‐promotional  offers  should  exist  to  synergistically  increase  the  footfall  in  agri  and  non-­‐agri  product  sections.  Also  the  local  regional  considerations  should  be  kept  in  mind  while  deciding  on  promotional  offers,  to  better  connect  with  the  customer.  

Action  Plan  They  distribution  of  hubs  and  spokes  be  properly  decided  using  surveys  similar  to  ones  given  in  Exhibit  9.  Over  next  3  years  800  stores  could  be  started  with  next  400  (mostly  as  spokes)  coming  up  in  another  3  years.  This  will  help  us  in  achieving  the  break-­‐even  in  faster   way.   The   IT   system,   which   took   backseat,   should   be   revived   and   immediate  implementation  should  be  started.  Also  the  above  recommendation  of  providing  credit  facility   could   be   worked   out   by   using   a   partner   agency   that   could   provide   credit   on  special  schemes  to  rural  population.