Unnati

Stores
Situational Analysis
Progressive Corporation (PC) initiated Unnati to increase the productivity of farmers, as
increased incomes will lead to increase of rural households 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 its 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
hadnt 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
companys 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 its because of hubs 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.