Prefeasibility Report

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various
sources and is based on certain assumptions. Although, due care and diligence has been
taken to compile this document, the contained information may vary due to any change
in any of the concerned factors, and the actual results may differ substantially from the
presented information. Researcher does not assume any liability for any financial or
other loss resulting from this memorandum in consequence of undertaking this activity.

1
Prefeasibility Report

EXECTIVE SUMMARY

Retail Hyper Markets business is emerging as one of the most profitable business
ventures in Pakistan as it provides all the basic merchandise under one roof. The
structure of Pakistan’s economy has changed from a mainly agricultural base to a service
base. A Hyper Market is a retail establishment which specializes in satisfying a wide
range of the consumer's personal and residential durable products needs; and at the
same time offering the consumer a choice multiple merchandise lines, at variable price
points, in all product categories.

This feasibility report has been especially prepared for a Mini Market in Rahim Yar Khan
District. Rahim Yar Khan is a very popular and prosperous district of Punjab. The district
has a total area of 11,880 square kilometers (4,590 sq mi) with 22 km2 City Area, and a
population of approximately 3.5 Million people. The people of the city are highly
educated and professional. A growing trend of spending money on life styles, dressing,
fashion and food has been observed among the people.
The proposed Mini Market (HYPERMART) requires an area of approx 3,540 sq. ft. it is
recommended that Mini Market should be started at owned place rather on rented
premises. Location of the Market is important factor with any retail organization.
Spending time and money wisely in the process of site selection is of primary importance.
In this pre feasibility study it has been assumed that the proposed Mini Market is
opened in that area where there are 3,000 house hold are present and their
monthly spending on an average is Rs. 6,000.
The proposed locations for HYPERMART Mini Market are Abbasia Town, Business Colony,
Shahi Road, Sheikh Zayed Road, Hospital Road and Gulmerg Road Rahim Yar Khan.
The total cost for establishing this Mini Market in the proposed areas is estimated
Rs. 28,583,000 with owned property and Rs. 14,073,000 with rented premises.

2
Prefeasibility Report

INTRODUCTION

Project Brief

The proposed Mini Market will provide variety of goods ranges from grocery to
garments and alike to customers under one roof. The proposed project is a single floor
Retail Market on an area of approximately 3,540 sq. ft. The project will offer following
broad categories of goods to its customers:
• Groceries and food items
• Baby garments and baby products
• Ladies Shoes and Garments
• Crockery and plastic items
• Soaps detergents and chemicals
• Cosmetics and artificial Jewellry
• Ice-cream and beverages
• Stationery, greeting cards and gifts
• Watches and clocks
• Electronics/electrical products
• General items
• Bakery Items
• Kids Toys
• Ladies Bags
• Computer Accessories
• Jewellery and Leather Stuff.

Opportunity Rationale

In Pakistan concept of Super Market has gained popularity in late eighties after the
emergence of Utility Stores by the government. Currently there is new trend and large
investment has been made in Super Markets by few multinational companies i.e. Metro,
Macro, Cosmo Cash & Carry, etc. However in small size Mini Market, private sector
made it one of the successful businesses in Pakistan. Public has liked this concept due to
the availability of all basic utilities under one roof which saves their time about which
people are more conscious these days. The factors that make this project viable in
Pakistan are:
• Easy access to wholesale markets
• Plentiful availability of resources/salesman
• No process/transformation involv
• Variety of goods under one roof
3
Prefeasibility Report

• Margin for innovation

• Easy diversification towards new product mix
• High margin on baby garments, Cosmetics,
Jewellary and bags etc.

Project Capacity and Cost

The proposed Mini Market will have an area of 3,540 sq. ft. having covered/indoor
shopping facilities. The store will operate for 12 to 16 hours from morning to midnight.
Operating time depend on localities requirements.

Project investment

Sr.# Description Rs.

1. Capital Cost 28,583,000 ( with Owned Premises)
2. Capital Cost 14,073,000 ( With Rented Premises)
Working capital/Cash in Hand 8,812,000

4
Prefeasibility Report

Table 1: Major Industry Players

Name Locations
Lahore
PACE Gulberg, Model Town, M.M.Alam Road
Value Mart Gulberg, Allama Iqbal Town etc
Decent Wahdat Rd., Johar Town
Akbari store Allama Iqbal Town, Jain Mandar
H Karim Bukhsh Gulberg, The Mall, DHA
Pot Pouri Fortress, DHA etc
Metro Thokar Niaz Baig
Macro Ravi Road, Model Town Link Road
Best Mart Shadman
Al Fatah Liberty Gulberg
Naimat Khana The Mall
CSD Stores Cavalry Ground
Raheem Store Allama Iqbal Town
Rawalpindi/Islamabad
Macro Islamabad
CSD Chaklala Cantt, Lalkurti
Herald’s Behria Town Rwp
City Mart Satellite Town Rwp, Islamabad
D. Watson Sadder, Gulraiz Colony, Commercial
Market

W Wilson Sadder, Gulraiz Colony, Commercial

Market
Sargodha
Al-Rehman Trade Center University Road
Taj Mehal Departmental Store Shaheen Park
Taj Mehal Departmental Store Umer Pakistan
Faisalabad
Bambino Super Store D Ground
City Mega Mart D Ground
S&B Super Market People Colony
Family Mart D Ground

5
Prefeasibility Report

Although in Pakistan the retail business is not providing employment at a large scale
directly, but indirectly it is contributing in the employment growth. As more and
more retail outlets are opening and consumer buying has shifted towards
packaged/branded products. Companies are coming with top quality products and with
the increase in production level the employment also increases.

Legal issues regarding industry

In order to fulfill its liabilities under Income Tax Ordinance, 2001 and Sales Tax Act,
1990, a sole proprietor, firm or company doing only retail business as hyper market shall
obtain NTN and Sales tax registration number from concerned departments.
Under Sales Tax Act, 1990, a retailer whose annual turnover from supplies, whatsoever
taxable or otherwise, made in any tax period during the last twelve months ending any
tax period if exceeds rupees five million are required to register with sales tax
department.
A registered retailer shall issue invoice and charge and collect sales tax at the rate of
three percent (two percent sales tax and one percent income tax) of the value of taxable
supplies at the time of supplies thereof, which shall be paid on monthly basis with return
by the 15th day of the month following the tax period in which supplies are made.
Retailers shall not be entitled to adjustment of any input tax or claim refund of sales tax
or income tax. However, one third of tax paid by the company shall be adjustable against
the final income tax liability.
For the year 2008-09 rate of tax for a small company is 20% of taxable income,
while 35% income tax rate shall be applicable on all other companies. For the year
2008-2009, income up to Rs100, 000/- of a retailer (sole proprietor and firm whose
supplies are exempt from sales tax) in a year is exempt from income tax. Income
exceeding Rs.100, 000/- shall be charged to tax in various slabs ranging from 0.50% to
25%.

6
Prefeasibility Report

SWOT ANALYSIS

A SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or business venture. Strengths and
weaknesses are internal to the company. Opportunities and threats originate from
outside the company. A SWOT analysis is usually performed early in the project
development process, and helps organizations evaluate the environmental factors and
internal situation facing a project.

Strengths and opportunities

• Easy availability of resources(manpower/salesmen)
• Growing population
• Expanding towns
• Status symbol to shop from big stores
• Popularity of variety shopping under single roof
• No specialized/technical knowledge required for entrepreneur
• High margin
• No direct competitor in Rahim Yar Khan
• Well established middle class with a growing trend of branded
shopping.

Weaknesses and threats

• Heavy taxes in the form of sales tax and income tax on retail business
• Credibility factor in the initial phase, as suppliers do not give credit to newly
entrants
• Opening of large scale chain stores like Metro, Macro, Cosmo Cash & Carry etc.
• Power shortage/ High Electricity tariffs
• Security Threats
• Political instability

7
Prefeasibility Report

PROJECT PROFILE

Proposed Business Legal Status

Legal status is recommended to be a sole proprietorship/partnership because it requires

less legal requirement to start with than a company. Similarly a lower income tax
rate of tax is applicable to sole proprietorship than that of companies

Product Mix
The store will offer the following broad categories of goods to its customer:

Table 2: Product Mix Chart

Category of item Proportion Avg. Gross Margin

Groceries and food items 28% 15%
Baby garments and baby products 16% 35%
Crockery and plastic items 6% 30%
Soaps detergents and chemicals 8% 10%
Cosmetics and artificial Jewellery 5% 30%
Ice cream and Beverages 5% 10%
Stationery and greeting cards/gifts 4% 20%
Watches and Clocks 1% 30%
Electronic and electrical appliances 4% 30%
General items+ toys + bags etc 6% 30%
Bakery Items 5% 20%
Computer Accessories 6% 35%
Ladies Bags + Other Items 6% 35%
TOTAL 100%

8
Prefeasibility Report

Proposed Location
Location of the market is of primary concern with any retail organization. Spending time
and money wisely in the process of site selection is of primary importance.
This Mini Market should be centrally and conveniently located within a developing or a
newly developed residential town of the Rahim Yar Khan.

The proposed location for this mini markets is suggested in the following areas of Rahim
Yar Khan City.

 Abbasia Town RYK

 Sheikh Zayed Road RYK
 Shahi Road RYK
 Business Colony RYK
 Hospital Road RYK
 Gulmerg Road RYK

Abbasia Town is the preferred location for this market. Iqbal Complex would be a great
choice if to select a rented premise. Total space required for this market is 3, 540 sq .ft. or
13 Marla.

Key success factors/Marketing Strategies

Retail business is full of opportunities for success, but that success is reserved for
those who are prepared to commit themselves to everlasting changes.

Marketing/ Sales Strategies

• Customer card system can be one of the best strategies for the retention
ofexisting customer and developing new customers. Card System maintains
database of customer which can be later on used for permanent promotional and
marketing activities. Customer Card System is one of the best CRM practices used
globally.
• To obtain a good average of profits it is necessary to provide state of art facilities
customers.There should be regular and sustained marketing through fliers
distribution and Cable TV.
• The store should have an ample space for customer car parking. It is advisable to
maintain a parking space whereby around 15-20 cars can be parked
• The staff hired should be well mannered and well trained in dealing with the
customers.

9
Prefeasibility Report

Customers free gift schemes and surprise gift, valuable customer dinner can be
additional success factors.

• Know customers’ needs.

• Introduce home delivery services free of cost for shopping of more than
Rs.4, 000/-.
• Frequent clearance sales

Pricing Strategies

Every retailer has a basic philosophy towards pricing their product. What is
important is that they create and stick to a strategy for pricing so as to convey a clear
message to the consumer. A low price strategy is a great toll to attract a large numbers of
customers. Though, profit margin at the start would be low, but high sales can increase
the overall profit.
Some valuable pricing strategies are as follows;
• Provides the consumer with an incentive to become a repeat customer by
Offering a future discount.
• Frequent clearance sales
• Include a gift with purchase, buy one get one free.
• Feature your discounted prices predominantly.

Market layout and presentation

• Today’s successful retailer is the one making the most profitable use of every square
foot of space in the store and in the warehouse. Because space is costly, retailers
need to take a strategic approach to its use. Floor patterns, location of merchandise,
amounts of merchandise and the appropriate displays are critical in determining
space.
• The proposed Mini Market should be air-conditioned. Goods should be properly
arranged in shelves categorically having ample passage between the shelves for
service trolleys and customers. There should be proper arrangement of lightening.

10
Prefeasibility Report

Computerize Accounting and Data Entry

The computer is an invaluable aid in processing the large number of transactions and vast
amounts of information involved in managing a retail operation. The amount of data
needed for merchandise planning would require hundreds of man-hours to produce,
whereas a well-designed computer system can perform the task in seconds. Software for
inventory and sales recording and management should be used to have updated data at
all the times. The software for a retail business management is easily available from
different companies and cost around Rs. 30,000/-

MARKET INFORMATION
Market Potential

The market for retail industry in Pakistan has been developing steadily over the last
decade and a mushroom growth of large stores observed in all big cities. An enormous
potential is available for a big market in the Rahim Yar Khan, as its population is increasing
and new shopping trends are being emerging among the residents of the city.

Target Customers

The target customer for this market is the population/family units of the city. Students,
professionals, young buyer group and business class are the main targeted customers.

Resource Merchandise

Pakistan is one of those countries where abundance of grocery merchandise is available in

wholesale markets of every city. Suppliers normally hesitate to supply goods on credit to
new stores but after confidence building process a reasonable credit period of 15 to
30 days is available to purchasers. The major wholesale markets Lahore and Rawalpindi
are:
• Shahalam Market/Rang Mahal , Lahore
• Akbari Mandi, Lahore
• Hall Road , Lahore
• Urdu Bazar, Lahore
• Abid Market Temple Road, Lahore
• Moochi Gate, Lahore
• Anwari Gate Rawalpindi
• Raja Bazaar, Rawalpindi
• Nankari Bazar, Rawalpindi
11
Prefeasibility Report

More over most of the multi-national and national companies supply their products
along with other equipments like refrigerators directly to the retail markets. These
companies also reserve/rented space in the big markets for their products display with an
agreement of after sales payment and can increase sales revenue of the market.

ELECTRIC AND OTHER EQUIPMENT REQUIREMENT

Following is the detail of equipment required for this project.

Table 3: Detail of Equipment

No.
Sr. of Cost per unit Total Cost
Description
No. Units Rs. Rs.
1 Split Air Conditioners (2 Tons) 7 50,00 350,000
2 Cash Drawer and Bar Code 4 020,00 80,000
Readers 0
3 Computers + Barcode Readers 4 30,00 120,000
4 Software (sales and stock 1 030,00 30,000
management multi users) 0
5 Printer 2 20,00 40,000
6 Fax machine, Telephone 1 016,00 16,000
connections 0
7 Signboard 1 60,00 60,000
8 Motor cycle with delivery cabin 3 0
50,00 150,000
9 Electric Fittings and installation 0 300,000
10 Generator 15 KW 1 500,00 500,000
11 Service Trolleys 15 0 5,00 75,000
12 UPS 2 0
20,0 40,000
13 C.C.TV Cameras & Security system 00 300,000
14 Others 150,000
TOTAL 2,211,000

12
Prefeasibility Report

LAND AND BUILDING REQUIREMENT

Land Requirement

The proposed Mini Market requires an area of approx 3,540 sq. ft. It is recommended
that market should be started at owned place rather on rented premises. The main
investment in this business is of land and building, which is very high due to very
expensive land in the proposed locations and high construction cost. The cost of
commercial land in the proposed locations/towns of Rahim Yar Khan will be ranging from
Rs. 9,100,000 to Rs. 10,400,000.
In this pre feasibility the cost of 3,540 sq. ft. (13 Marla) land is taken Rs. 10.4 million if
market is to start at owned premises.
Following table shows the covered area requirement for a departmental store:

Table 4: Area Utilization

Description Area in sq. ft.
Owner’s Office 120
Accounts & Admin. Office 120
Warehouse 300
Display/shopping area/Till 2,600
Parking Space 400
TOTAL 3,540

Area (sq. ft.) Cost (Rs/Sq. ft.) Total Cost Rs.

3,540 1,500 5,310,000

Rent cost

If the required property acquired on rent in the proposed areas of the city, it will cost
around Rs. 200,000 to Rs. 250,000 per month depending upon the exact location/town of
the city.

Utilities requirement

The necessary utilities are Electricity, telephone and water. A three-phase

commercial electricity connection is required. At least two telephone connections are
required; one solely used for home delivery service calls.

13
Prefeasibility Report

HUMAN RESOURCE REQUIREMENT

Skilled salesmen are easily available in the local market at competitive wage rates.
Number of workers required for each department is given below:

Table 5: Human resource required

Salary/month Annual salary

Positions Number
(Rs.) (Rs.)
Store manager 1 25,000 300,000
Salesmen∗ 10 12,000 1,440,000
Purchase Officer 1 20,000 240,000
Asst. Purchase Officer 1 15,000 180,000
Cashiers* 4 10,000 480,000
Helpers/cleaners* 4 7,000 336,000
Accounts Officer 1 20,000 240,000
Asst. Account Officer 1 15,000 180,000
Security Guards* 2 10,000 240,000
Total 23 3,636,000

______________________________________________________________________________________

∗
These people will work in two shifts: 4 Salesmen work in the morning, 6 will work in the
evening; 2 Cashier & Helpers/Cleaners in morning, 2 in evening; 1 security guard in morning
and 1 in evening shift will work.

14
Prefeasibility Report

PROJECT DETAIL

Table 6: Project Economics

Capital Investment Rs.

Land 10,400,000
Building/Infrastructure 5,310,000
Equipments 2,211,000
Pre-Operating Cost 650,000
Shelves, Counters, Display & Setting 1,200,000
Total Capital Investment 19,771,000

Working Capital
Initial Stock 7,000,000
Cash in hand needed for three month expenses (Admin, etc.) 1,812,000
Total Working Capital 8,812,000

Total Investment 28,583,000

The Total Investment for this project is Rs. 28,583,000/- if to start this Market at own
property. As it requires purchasing of the land and construction of the building.
If to start this Market at rented property, the project cost will be as under;

Total Investment : 28,583,000

Less: Land Cost : (10,400,000)
Less: Construction Cost : (5,310,000)
__________
Grand Total : 12,873,000
Add: 6 Months advance rent : 1,200,000
__________
Total : 14,073,000

Payback Period (yrs) 2.6

15
Prefeasibility Report

KEY ASSUMPTIONS

Operating Assumptions

Hours operational per day 16 hours

Days operational per year 360 days
Stock inventory remain in store
No. of days
Category of item
Groceries and food items 7
Baby garments and baby products 30
Crockery and plastic items 30
Soaps detergents and chemicals 15
Cosmetics and artificial jewellery 30
Ice cream and Beverages 7
Stationery and greeting cards/gifts 30
Watches and Clocks 30
Electronic and electrical appliances 30
General items 30
Bakery Items 3
Economy Related Assumptions
Electricity/Fuel cost growth rate 10%
Salaries growth rate 10%
Tax rates 24%
Cash Flow Assumptions
Accounts receivable (average) 0 days
Accounts payable (average) 15 days
Expense Assumptions
Telephone Expenses (% of Revenue) 0.3%
Repair and maintenance (% of Equipment & Building) 0.5%
Entertainment Expenses (% of Revenue) 0.5%
Capacity Utilization Growth Rate 10%
Advertisement (% of Revenue) 1%
Electricity growth rate 10%
Traveling and conveyance (% of Revenue) 0.2%

16
Prefeasibility Report

Legal & Audit Fee 0.1%

Electricity 3%
Sales Commission 0.5%
Miscellaneous exp. 1%
Sales Incentives & Others 0.5%
Motorcycle Delivery Expenses (% of Revenue) 0.2%
Printing and stationery (% of Revenue) 0.1%
Revenue price growth rate 6%
Purchase price growth rate 6%
Sales/Revenue Growth Rate 10%
Rent Growth Rate 10%

Financials Assumptions

Profit Calculation.

Profit has been calculated on the basis of the assumptions that 200 customers will visit the
market daily with an average buying of Rs.2, 000/.each customer. According to this calculation
maximum 1st year daily sales for this market is 200 x 2000 = Rs. 400, 000/. However, form 1 st
year, 50% of the total sale has been taken with an average growth rate of 10% annually in a 10
years projected life period of the project.
Average profit margin calculated is 23.70%. A 10 % growth rate in all the expenses has also been
assumed.

---------------------------------------------------------

17