1.

Executive Summary
Organized retail had hit a boom during the past decade but at the twilight of
the decade most of the ambitious plans of the retail czars to penetrate into
the hinterland of the Indian economy had to be dwindled (stalwarts like
Spencer’s Retail had closed down around 250 shops) primarily due to the
financial tsunami and also due to lack of customer attrition from their
unorganized sector’s peers. Many of the retailers have had their fingers burnt
owing to the nuances of shop lifting( Shoppers Stop had its bottom line slip
into the red). In this paper we would present a unique blend of man power
and technology which would help to significantly lower the cost structure of
the retailers hence provide their goods at lower prices, mitigate the levels of
shop lifting and compete with the archaic kirana stores ubiquitously.

The Real E-Shoppe would be a startup retail store which to be based at

Kolkata to give the kirana stores a feel of organized modern retail and
sell each and every product at prices lower than its maximum retail
price without going for the “SPECIAL OFFERS” as ubiquitously available
in modern retail outlets. Financing would come partly from its
promoter(s), raising debt and remaining raised by dilution of equity to
the venture capitalists. The dividend would be paid on a quarterly basis
on outstanding equity.

The Real E-Shoppe would be incorporated as a PLC. This would shield

the investors from the issues of personal liability and double taxation.
The investors would be treated as share holders in the venture and
therefore would not be liable more than their personal investments in
the venture. The promoter(s) of the store would contribute partly from
their personal savings and partly through debt raised towards the
venture. With an aggressive marketing and innovative approach
towards shopping would make The Real E-Shoppe grow steadily and
capture substantial market share in the years to come.

With financing in place The Real E-Shoppe would be able to start and
maintain its operations through a period of one year. Through its
innovative, low cost structure the store would cater the needs of the
“AAM ADMI” who can aspire but have to think twice before stepping
into a world class shopping mall for buying their daily ration. With
success of its first store The Real E-Shoppe would foray into other
untested waters and even into the hinterland of the Indian economy. It
aspires to open more than 100 by the end of the first eight years of
flagging its operations off.
 Columns 1, 4, 7= Total sales; columns 2, 5, 8= operating margin;
columns 3, 6, 9= net profit

2.Company Summary
2.1 Goals
The Real E-Shoppe would one day be one of India’s foremost retail
chains. It would foray into the hinterland of India and make a sizable
presence there. Owing to its low cost structure and innovative
approach it would be able to sustain its stores in the hinterland of India
which many of the current retail czars have failed to.

2.2 History
The history is yet to be created.

2.3 Current status

The company is currently on the drawing boards and the promoter(s)
plans to flag its operations off in the middle of the year 2011.

2.4 Strategy
The Real E-Shoppe uses a strategy of total market service. Our
promise is in our location and the products we sell, the people we
attract, and the atmosphere we create.
 We present a store that is pleasant to shop with and has probably the
cheapest products across all segments of food and FMCG products. It
provides such innovative services which were never seen before in the
entire retail industry. It guarantees the least enervating; the easiest,
the fastest and the most enigmatic shopping experience any shopper
has ever come across.
Strategic Assumptions:
1. Every person with income limitations or on fixed incomes is a
potential customer.
2. Marketing to these segments of the population will lead to an
expansion in overall market growth.

2.5 Objective
1. To attain operating profit within 2nd year of flagging off operations.
2. To attain a healthy net profit within the 3 years of flagging off
operations.
3. To make The Real E-Shoppe amongst the foremost food, FMCG and
mobile phone retailing brands in the country.
4. To have the lowest cost structure in the entire retailing industry and
to involve people from the unorganized sector in running the
operations of the store.

2.6 Mission
The Real E-Shoppe would provide a variety of food, FMCG items and
mobile phones at prices lower than its MRP without going into the
“SPECIAL OFFERS” as ubiquitously popularized by modern retail.
Employees of the store(s) will also be treated in a professional manner
with a rewarding work environment and fair compensation. The Real E-
Shoppe wants each customer to feel as though he/she has gotten Fifth
Avenue treatment at a discount retailing store.

3. Products and services

3.1 Products
The Real E- Shoppe would be retailing almost all popular variants of
raw food including vegetables, pulses, atta, maida and all popular
variants of FMCG products at discounted prices from the market.
Mobile phones also present an attractive selling proposition with
demand for variety and cost competitiveness on the rise. It would
be creating in house brands of two categories i.e. in the premium
segment for our customers with fat wallets and medium segment
brands for the “AAM ADMI”. The brands would actually be created
across the consumer perishables and involve some consumer
durables.

3.2 Services
The services would be unique in nature. Once a customer steps into
the store he/she would be handed over a token which is inscribed upon
with a customer code. Once he wishes to purchase any product he would
just have to enter the code(written on the token) in the Mobile Warehouse
Automation device and punch in the bar code this information would in
turn go to a central information database and when he is done shopping
he can directly go to the counter where he can say so. The instruction
would be passed on to the inventory manger who in turn would pack the
goods and the customer can go for the payment once his purchased
goods have arrived which would be informed to him via a electronic
screen. Once he has come to the shop for the first time he would be
provided with a customer ID which he can use in all his further
transactions. Once he has been a regular customer for a period of six
month he can avail 0% interest credit facility and special discounts would
be provided to them who buys the entire months ration from the shop.

There would be tie-up(s) with leading SMS portals. This service is

dedicated to our busy customer who doesn’t have the time to spend at
our store. Hence he can place his order from a remote location via SMS
and mention the time of his arrival and his goods would be packaged by
then. But here a con is that he must be our earlier customer having his
identification code received when he first visited the store and he would
have to shell out in a special pricing scheme for this service.

3.3 Current stage of development

All the above services are currently on the drawing boards.
 3.4 Competitive Advantages
As per our research suggests all the above mentioned services does
not exists at any retail outlets of the country cumulatively. The
services offered would provide an easy and yet enjoyable shopping
experience for our customers. The gizmo fanatic youth of today
would relish the unique shopping experience of the store(s).

4. Market Analysis
Indian retail industry is approximately worth US$365 billion and only
5-6% of this has been tapped by the organized retail segment. So,
this presents us with ample opportunity up for grabs. India is
currently positioned as the leading destination for retail investment.
With stalwarts in retail like Wal-Mart and Tesco landing into the
Indian shores and around US$ 17 billion worth investment taking
place even vindicates the claim even further. With average age of
Indian population at 25 years is going to further enhance the
shopping experience for the gizmo fanatic youth. A shopping
revolution is ushering in India where, a large population between
20-34 age groups in the urban regions is boosting demand by 11.1
percent in 2004-05 to an Rs 23,308 purchasing power. This has
resulted in huge international retail investment and a more liberal
FDI. The mobile phone retailing segment is a very attractive selling
proposition with average usage of mobile phones around 1.2 years
the customers visits the stores for buying the handsets once every
year.

4.1 Competitive Environment

With many Indian biggies like Pantaloons Retail, Aditya Birla Group
and foreign stalwarts like Wal-Mart, Tesco etc. already in the fray, a
cut throat competition is evident.

4.2 Target market needs and

characteristics
Middle class accounts for around 26% of the Indian population or
around 300 million people. With the average GDP growth rate of
 around 7% over the past 5 years and slating to continue to around
2025 the figure of 300 million is on a rise and would be around 523
million in 2025. Hence this presents us with ample opportunity to be
exploited from. Firstly to go by some of the success stories in the
Indian business space presents us with an important lesson to be
learnt i.e. pricing has to right no matter if you compromise a bit on
quality. Secondly, with the employee utilization rate of Indian
companies touching 80-85% which is amongst the highest in the
world leaves aside minimum leisure time for the bourgeois hence a
time saving yet convenient shopping format is essential and The
Real E-Shoppe presents the consumer with all that.
3.Management Team

5.1 Key individuals

As The Real E-Shoppe is a start-up venture so its promoter(s) would
hold all the key positions of responsibility. This business is the brain
child of Kaushtav Das and hence he would oversee the finance,
operations and strategies of the company. He would be a qualified
Chemical Engineer from National Institute of Technology, Durgapur
in May 2011. While the marketing, human resource and
communications would be headed by Abhinandan Sahoo who would
be a qualified Electrical Engineer from National Institute of
Technology, Durgapur in May 2011.Though both the individuals are
not qualified in the fields pertaining to their responsibility in the
business but have studied extensively regarding their areas of
responsibility. Both hailing from the same institute has good
understanding between them and has earlier worked in a team in
various inter-college competitions and has won accolades.

5.2 Personnel Needs

Each store would be having four full time employees having
responsibilities of store manager, cashier, inventory manager and
gatekeeper. Remaining 4 to 5 semiliterate people would be appointed.
These people would be involved in maintaining the inventory of the
store(s) and also pack the goods ordered by the customers. Since the
store employs an innovative shopping technique, hence it would appoint
students on a part-time basis to enlighten the customers towards the
shopping technique of the store.
 Personnel costs
Year 1 Year 2 Year 3
Cashier 42000 168000 336000
Store Manager 120000 480000 960000
Inventory Manager 108000 432000 864000
Part Timers 30000 60000 120000
Workers 144000 576000 1152000
Main Inventory Manager ----- 120000 240000
Inventory Workers ------ 192000 384000
Security Guard 48000 196000 392000
Total employees (full time) 6 30 60
Total employee cost 594000 2104000 4448000

5.3 Organizational Structure

As The Real E-Shoppe is a startup venture hence its promoter(s)
would hold the above mentioned portfolio of responsibility. Each
store would be overseen by a store manager under whom a cashier,
an inventory manager and security personnel would be appointed.
The inventory manager would be having the responsibility of
managing the inventory adjacent to the store. The logistics part
would be handled by a warehouse manager under whom again
semiliterate people would be appointed.

4.Operating Strategies

6.1 Marketing Strategies

The first set of customers of the store would be acquired through
advertisement in the printed media and announcing attractive
discount scheme. The company is having the advantage of never-
seen-before shopping techniques and it would use it to promote its
stores. Before the opening of its first store it would advertise on the
newspaper stating the fact about the uniqueness of the store. The
curiosity of the human psyche would entice a few customers from
the hoi-polloi to visit our store. This technique would be used to
foray into newer regional markets in the future. Kolkata people have
a penchant for “Tollywood” movie stars (and their appearance fees
being as low as Rs. 25000/-) and are flocked by people at their
presence and the store would use this as an advantage by inviting
these stars to inaugurate its showrooms. This would attract its initial
set of customers. All the brand building exercise and further
promotion would be done through the audio and the printed media
periodically. In addition to this the company shall rely on word-of-
mouth to be its strongest form of advertising by winning over its
customers through its fantabulous service.

6.2Personnel
As we are a start up so we would always have the constraint of
funds. Here we plan to take up an innovative approach to hire our
personnel. Since our stores would be smaller in size we plan to hire
our personnel. In the first year since the number of stores would be
one hence its promoters would assume the responsibility of
inventory manager and store manager respectively. All the
strategies given underneath are for 2nd year onwards for the
recruitment of the above-mentioned posts.
i) Cashier: We plan to hire cashier who is 10+2 passed and are
scouting for jobs. They would first be given 3 months of
internship whereby they would be paid a fraction of the salary
they would receive later. We plan to use the printed media to
advertise the job openings in our company.
ii) Inventory manager & Store manager: We plan to recruit
fresher(s) with minimum of bachelor’s degree in commerce
for this job. Hence we would visit campuses of degree
colleges which would permit our scale of pay.
iii) Security guards: Would be sourced from various security
agencies.
iv) Workers: Would be sourced from the huge pool of people
available locally.

6.2Administrative Strategies
Each store would be headed by a store manager. With the
responsibility of overseeing the activities of the store including
decoration, accounting and keeping track of the core processes
 of the store. Under the store manager would be a having the
inventory manager and cashier as direct reporters. The
inventory manager and cashier would in turn report the
dynamics of the inventory and the total transactions via paper
or plastic money. The manager would have the obligation of
reporting the daily stores transactions to the promoter(s) who
would head the organization. The inventory manager would
have the IT infrastructure to keep track of the inventory
dynamics continually. The promoters would be responsible to
design the graphics pertaining to the promotional activity of the
store(s).

6.3 Financial Strategies

The company would adopt a prudent approach towards its
financial practices.

1. Initially growth will be at a sustainable rate; cash flows

steady.
2. Marketing costs will remain below 15% of sales.
3. The company will invest residual profits into financial
markets which will in turn create our corpus for our
aggressive expansion plans in the future and help us build
our in house brands.
4. Future cash investments will use NOV projections to
achieve maximum return with limited risk.
5. The staff cost is low as majority of the employees are
lesser literate individuals and hail from the unorganized
sector and the benefits not being paid to part timers.
6. It would enter into a revenue sharing agreement with the
concerned transporter such that payment is on the basis
of cash flow and not fixed which would reduce the
company’s fixed costs.

7. Critical Risks involving the business

7.1 Lack of working capital

Being a start-up and not having enough financial backing it is quite
possible that our company has to face inadequacy of working
capital. We would try to raise capital by dilution of equity or by
 debt funding. Even the promoter(s) might assume some additional
responsibility to keep the boat afloat.

7.2 Sourcing and warehousing of the

saleable items
As the company runs the discounting model of business so sourcing
the items at the lowest possible price is critical. But sourcing the
items directly from the manufacturers would not be possible and it
has to be sourced from a distributor which would in turn put
pressure on the margins. The company’s low staff cost is partly
going to reverse this. The most critical issue that needs to be
addressed is sourcing and warehousing of consumer perishables.
As due to lack of warehousing and disruption in the logistical
systems can rot the items and cause monetary loss to the company.
The company would hire special freezer transportation truck in
order to transport vegetables from the source to the stores.

7.3Competition from its peers

With their financial muscles the stalwarts of retail might sell their
products at prices competitive to ours to put us out of business. But
owing to the company’s innovative array of services we hope to
stay rooted into the ground.

8. Cash Flow Statement (Projections)

Year 1:

Year 2:

The positive figures indicate the cash inflow and negative figures cash
outflow

Year 3, 4& 5:
Annualized cash flow statement
 Columns 1, 2 = Year 3; Columns 3, 4=Year 4; Columns 5, 6 =
Year 5

9. Income Statement(Projections)
Year 1(Monthly income statement):

Year 2(Monthly income statement):

Year 3, 4& 5:
Annualized income statement:

10. Balance Sheet Projection:

Year 1:
Items Assets Liability
Debt from
Banks ------------ Rs. 1000000/-
Bills Payable ----------- Rs.200000/-
Bills receivable Rs. 400000/- ---------------
Furniture Rs. 200000/- ---------------
Interest cost --------------- Rs. 80000/-
Inventory Rs.200000/- --------------
Profit/Loss -Rs.200000/- ---------------
Cash in hand Rs. 400000/- ---------------
Depreciation -Rs.16000/- ----------------
Total Rs.984000/- Rs. 1280000

Year 2:
Items Assets Liability
Debt from
Banks ------------ Rs. 800000/-
Bills Payable ----------- Rs.400000/-
Bills receivable Rs. 600000/- ---------------
Furniture Rs. 400000/- ---------------
Interest cost --------------- Rs. 64000/-
Inventory Rs.400000/- --------------
Profit/Loss -Rs.100000/- ---------------
Cash in hand Rs. 500000/- ---------------
Depreciation -Rs.24000/- ----------------
Equity Rs.5000000/- ---------------
Total Rs.67760000/- Rs. 1264000/-

Year 3:
Items Assets Liability
Debt from
Banks ------------ Rs. 600000/-
Bills Payable ----------- Rs.1000000/-
Bills receivable Rs. 700000/- ---------------
Furniture Rs. 800000/- ---------------
Interest cost --------------- Rs. 56000/-
Inventory Rs.400000/- --------------
Profit/Loss -Rs.100000/- ---------------
Cash in hand Rs. 800000/- ---------------
Depreciation -Rs.36000/- ----------------
Equity Rs.5000000/- ---------------
Total Rs.75640000/- Rs. 1264000/-
11. Funds Required
The company would be leasing properties second year onwards to
fuel its expansion plans and building its logistics network to
establish a cheap and efficient delivery model. The company would
also use certain portion of its funds towards brand building and
marketing exercises.

i. Marketing- Rs. 1000000/-

ii.Property leasing- Rs. 3000000/-
iii.Furnishing & Decorations - Rs. 1000000/-
iv.Logistics Infrastructure Building- Rs. 1000000/-
v.Product and Stock Building- Rs.3000000/-
vi.Signing contract with peasants - Rs. 100000/-
vii.Warehousing – Rs. 1000000/-
Total – Rs. 1, 01, 00, 000/-
12. Offering
The company would like to pitch for Rs.1, 01, 00, 000/- in return of 20%
equity in the company. The investors can assume advisory role in the
company and cannot interfere in the day-to-day running of the company. The
company can nominate one representative to oversee the progress made by
the company. The company would be providing the investors monthly
performance chart of the sales and the income generated. As mentioned in
the break even analysis that the company would be breaking even within the
first 18 months of flagging off its operations. So, by the 2nd year the company
would be a profitable one. Keeping our aggressive investment plan in view
the company would be posting healthy numbers the first 5 years. Therefore
roughly valuing the company at around Rs. 16, 00, 00,000/- at the end of 5
years and around Rs. 9, 00, 00, 000/- at the end of three years. Thus valuing
the investors stake at around Rs. 1, 80, 00, 000/- at the end of 3 years and at
around Rs. 3, 20, 00, 000/- at the end of 5 years. Hence the investors get a
return of 30 %( annualized) and around 47 %( annualized) at the end of five
years. The retail sector being an expanding sector the investors would find
viable options at the end of three years. Provided that the financial health of
the promoters of the company would be sound then they would buy back
substantial stake from the investors and the company being an innovative
one with its services one in its kind would become an attractive buy owing to
its efficient business model.