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FOOD RETAILING IN KARNATAKA – ACASE OF
SUPERMARKET
Thesis submitted to the
University of Agricultural Sciences, Dharwad
in partial fulfillment of the requirements for the
Degree of
DOCTOR OF PHILOSOPHY
In
AGRIBUSINESS MANAGEMENT
By
RAMAPPA K. B.
DEPARTMENT OF AGRICULTURAL MARKETING,
CO-OPERATION AND AGRIBUSINESS MANAGEMENT
COLLEGE OF AGRICULTURE
UNIVERSITY OF AGRICULTURAL SCIENCES,
DHARWAD - 580 005
JUNE , 2007

ADVISORY COMMITTEE
DHARWAD (H. S. S. KHAN)
MARCH, 2007 MAJOR ADVISOR
Approved by :
Chairman :
__________________________
(H.S.S. KHAN)
Members : 1. _________________________
(H.S.VIJAYKUMAR)
2. _________________________
(H. BASAVARAJ)
3. _________________________
(VILAS KULKARNI)
4. _________________________
(A. R. S. BHAT)

CONTENTS
Chapter No. Title
I INTRODUCTION
II REVIEW OF LITERATURE
III METHODOLOGY
IV RESULTS
V DISCUSSION
VI SUMMARY AND POLICY IMPLICATIONS
VII REFERENCES
APPENDICES

Table
No.
LIST OF TABLES
Title
4.1 Documentation of Supermarkets in the Study Area
4.2 Investment Pattern in Supermarkets
4.3 Purchasing Pattern of Supermarkets Across Karnataka
4.4 Monthly Average Quantity and Value of Products Procurement in
Bangalore Supermarkets
4.5 Monthly Average Quantity and Value of Products procurement in Mysore
Supermarkets
4.6 Monthly Average Quantity and Value of Products Procurement in
Mangalore Supermarkets
4.7 Monthly Average Quantity and Value of Products procurement in
Belgaum Supermarkets
4.8 Monthly Average Quantity and Value of Products Procurement in Hubli-
Dharwad Supermarkets
4.9 Overall Monthly Average Quantity and Value of Products Procurement in
Supermarkets
4.10 Average Monthly Costs Incurred in Procurement of Commodities by
Supermarkets in Bangalore City
4.11 Average Monthly Costs Incurred in Procurement of Commodities by
Supermarkets in Mysore City
4.12 Average Monthly Costs Incurred in Procurement of Commodities by
Supermarkets in Mangalore City
4.13 Average Monthly Costs Incurred in Procurement of Commodities by
Supermarkets in Belgaum City
4.14 Average Monthly Costs Incurred in Procurement of Commodities by
Supermarkets in Hubli-Dharwad City
4.15 Overall Average Monthly Costs Incurred in Procurement of Commodities
by Supermarkets
4.16 Commodity-wise Monthly Costs Incurred in Procurement of Commodities
by Supermarkets in Karnataka
4.17 City-wise Monthly Costs Incurred in Procurement of Commodities by
Supermarkets in Karnataka
4.18 Costs of Inventory and Preparing the Products for Sale in Bangalore
Supermarkets
4.19 Costs of Inventory and Preparing the Products for Sale in Mysore
Supermarkets
4.20 Costs of Inventory and Preparing the Products for Sale in Mangalore
Supermarkets
4.21
Costs of Inventory and Preparing the Products for Sale in Belgaum
Supermarkets

4.22 Costs of Inventory and Preparing the Products for Sale in Hubli-Dharwad
Supermarkets
4.23 Overall Costs of Inventory and Preparing the Products for Sale in
Supermarkets
4.24 Commodity-wise cost of inventory and Preparing the Product for Sale in
Supermarkets
4.25 Average City-wise Costs of Inventory and Preparing the Products for Sale
in Supermarkets
4.26 Extent of Activities Undertaken in Preparation of the Product for Sale in
Supermarkets
4.27 Value Addition in Supermarkets for the Selected Products
4.28 Financial Performance of Supermarkets During the Year 2006-07
4.29 Ranking of the Factors Considered by Supermarketers in Pricing the
Products in Supermarkets
4.30 Methods of Pricing Followed in Supermarkets
4.31 Variables with relatively higher factor loadings on nine dimensions on the
problems of supermarketers in Karnataka
4.32 Aggregation of clusters of variables influencing consumers to purchase
food products in supermarketers

LIST OF FIGURES
Fig. No. Title
1. Organizational Structure of Supermarkets in Chain
2.
Organizational Structure of Small Supermarkets (Not in Chain)
LIST OF APPENDICES
Appendix No. Title
1 Ranking of the Factors Considered by Supermarketers in Pricing the
Products in Supermarkets
2 Component matrix of different dimensions on the problems of
supermarketers
3 Extent of variation explained by different dimensions on the problems
of supermarketers in Karnataka
4 Dendogram showing the aggregation of clusters of variables
influencing consumers to purchase food products in supermarkets
using Complete Linkage method
5 Clusters Classification and Case wise Statistics Based on Discriminant
Analysis
6 Proximity Matrix of Squared Euclidean Distance for the Clusters
Classification

I. INTRODUCTION
Food is defined as any substance taken into the body for the purpose of providing
nourishment. The food industry is the complex, global collective of diverse businesses that
together supply much of the food energy consumed by the world population. With population
around the world concentrating in urban areas, food buying is increasingly removed from all
aspects of food production.
Food accounts for the largest share of consumer spending. Food and food products
account for about 53 per cent of the value of final private consumption. This share is
significantly higher than in developed economies, where food and food products account for
about 20 per cent of consumer spending. Significant spending on food and increasing
out-of-home food consumption represent opportunities for food retailers and food-service
companies (www.tata.com) to cater to their needs.
Retail, according to concise Oxford English Dictionary, is the ‘sale of goods to the
public for use or consumption rather than for resale’. Retailing is derived from the French
word ‘retailer’ meaning ‘breaking bulk’ and breaking bulk quantities into smaller saleable units.
Usually, a retailer buys goods or products in larger quantities from manufacturers or
importers, either directly or through a wholesaler and then sells individual items in small
quantities to general public or the end users.
This is relatively a recent development, taking place mainly over the last 50 years.
The supermarket is a defining retail element of the food industry, where tens of thousands of
products are gathered in one location, in continuous, year-round supply. Supermarkets were
first established in the U.S. during the 1930s as no-frills retail stores offering low prices. In the
1940s and '50s they became the major food marketing channel in the U.S.; the 1950s also
saw them spread through much of Europe. Their growth is part of a trend in developed
countries toward reducing cost and simplifying marketing. In the 1960s supermarkets began
appearing in developing countries in the Middle East, Asia, and Latin America, where they
appealed to individuals who had the necessary buying power and food storage facilities.
The world over retail sector has been growing rapidly with increasing sophistication
and modernization of the life-style of households and individuals and with increasing
globalization of trade. The retail sector has strong backward and forward linkages with other
sectors like agriculture and industry through stimulating demand for goods and through mass
marketing, packaging, storage and transport. Moreover, it creates considerable direct and
indirect employment in the economy. Also, the consumers have benefited in terms of wide
range of products available in a market.
The retail sector is broadly classified in to two groups; Organized and Unorganized
retail sector. The organized sector is mainly characterized by typically large number of
retailers, greater enforcement of taxation mechanisms and better labour law monitoring
systems. It is not just a stocking and selling, but is more about efficient supply chain
management, developing vendor relationships, quality customer service, efficient
merchandising and timely promotional campaigns. On the other hand the unorganized retail
market is characterized by typically small retailers, more prone to tax evasion and lack of
labour law supervision. This market is more common in developing countries.
Global Scenario:
Retail has played a major role world over in increasing their activity across a wide
range of consumer goods and services. The impact can be seen in countries like U.S.A.,
U.K., Mexico, Thailand and more recently China. Economies of countries like Singapore,
Malaysia, Hong Kong, Sri Lanka and Dubai are also heavily assisted by the retail sector.
Globally, retailing is a big business. Its turnover is fast marching to $ 6.6 trillion. The
retail industry in America employs more than 22 million people and generates more than three
trillion US dollars in retail sale annually (www.epwrf.res.in). According to the India Retail
Report 2005~Images-KSA Technopark, the retail sales was found to be the highest in
developed countries like U.S.A. and U.K., wherein 85 per cent of the retail sector was
constituted by organized retailing due to 100 per cent Foreign Direct Investment (FDI) and its
contribution of nine per cent to GDP and more than 10 per cent employment in these

countries (www.imagesretail.com/india_retail_report.htm). The share of organized retail is
more so in case of developed countries due to the busy life schedule and lack of time for
shopping, high literacy rate, exposure to media, greater availability and penetration of variety
of consumer goods into the interiors of the country and better shopping experience. Whereas,
the share of organized retail outlets in developing countries was very less, it was 17 per cent
in China and very meager of about three per cent in India because of the poor literacy rate,
lack of exposure to media, non-availability and low penetration of consumer goods to rural
areas of the country and lack of shopping experiences.
There are many Multi National Companies (MNCs) operating in the retail business
throughout the world. The big four champions in 2004 were Wal-Mart, Carrefour, Home Depot
and Target. Except Carrefour, which was hailed from France, all these top champions were
from U.S.A. The combined sales was $ 438 billion and were growing at the rate of 10 per cent
per annum, there growth comes from putting small stores out of business. This is happening
in Europe and Asia. The Big Box and Hypermarket are operating everywhere. However,
Germany based Metro is operating in 27 countries all over the world including India (KSA
Technopark).
The traditional forms of independently owned small business and co-operative have
lost significant market share in developed countries and the retail sector in these countries is
now characterized by large multiple chains run by powerful and sophisticated organizations.
In global, the recently existing retail formats are Hypermarkets, Supermarkets, Mass
merchandisers, Discounters, Convenience stores, Specialty stores and Mom-and-pops. The
evolving formats with their dealing category of goods and the examples of the type are shown
below:
Hypermarkets – These are mainly located out of town covering an area over 40,000 Sq. ft aim
at the monthly bulk shoppers. These markets have spacious parking lots and sell a variety of
products such as electronic, clothing, durables and so on apart from groceries.
Supermarkets – It mainly based on the classical self-service system. Its area varies from
4,000 to 20,000 Sq. ft. They mainly focus on one of the primary conditions of grocery,
household goods, personal care etc.
Mass Merchandisers – The mass merchandisers have cross country chain operations. They
have centralized sourcing hub, spiked distribution and sell almost everything at competitive
prices.
Discounters – Aimed mainly at bargain buyers, they are different from supermarket. They
offer less choice in each category; give discounts, cheap costs and inventories at lower level.
Convenience stores – They are located at convenient points like petrol stations that keep
open day and night and sometimes do odd jobs for time starved customers (clothes, laundry,
medicine prescription, pick up). They occupy a small area, usually less than 2,000 Sq. ft.
Specialty stores – These are moving towards ‘consultative shopping’; where a salesman is
well trained in offering specialized advice to customers before they purchase any commodity.
Mom-and-Pops – Traditional formats, these are very small (less than 1000 Sq. ft), and family
owned corner shops.
Indian Scenario:
Retailing is one of the largest industry in India and second largest employer after
agriculture. The retailing industry provides employment to over 18 million people. One out of
every 25 families in India is engaged in the business of retailing. Ownership and management
are predominantly family controlled. However, in sharp contrast to developed countries, unit
average size of retail outlet in India is very small. It is the tenth largest economy in the world
based on GDP and its growth is forecasted at 7.5 per cent over 2005-2007. The Indian retail
sector is growing at Compound Average Growth rate (CAGR) of 30 per cent over the next five
years. However, the share of modern organized retail sector is likely to grow from its current
three percent to 15-20 per cent over the next decade. Ongoing retail boom is expected to
translate into next eight million jobs over five to six years. The country is rated as fifth most
attractive emerging retail sector and ranked second in a Global Retail Development Index of
30 developing countries as drawn up by A.T. Kearney.

Unlike most other countries, Indian retail sector is highly fragmented and bulk of the
business is in the unorganized sector (97 per cent) like local ‘wet’ market vendors, roadside
pushcart sellers or tiny kirana (grocery) stores. In India, the majority of food consumption is
still at home. Nevertheless, out-of-home food consumption is increasing. Traditional local
markets and small-scale retailing continue to dominate India’s food retail sector. There are an
estimated 12 million retail outlets, of which almost seven million sell food and grocery
products. The vast majority of these are small kiosks (17 per cent), general provision stores
(14 per cent) and grocery stores (called kirana; 56 per cent of all rural retail outlets) run by a
single trader and his family. With more than 71 per cent of the population living in small
villages and engaged in agriculture, most of Indians still do their food shopping at small-scale
vendors in the local village, or at large-scale weekly markets which are often serving several
villages in one area, where small individual vendors trade. In the towns and cities, most
consumers do their food shopping at the local neighbourhood, independent small retailers,
kiosks and street hawkers. Servants in high income households usually undertake this task
(Anonymous, 2005).
Organized retailing accounts for only three per cent in India, whereas it is 85 per cent
in USA and U.K., 75 percent in Taiwan, 55 percent in Malaysia, 35 per cent in Korea and 20
per cent in China. The growth of retail sector in the country is tremendous both in urban and
rural areas. Organized food retailing is a relatively new phenomenon in India, with small
Western-style supermarkets only starting to appear since 1990s. The country has witnessed a
retail revolution in recent years. Significant development has been taking place in urban areas
in the form of organized retailing - mega stores or malls more so in the south of the country in
the major cities of Bangalore, Chennai and Hyderabad, as well as New Delhi and Mumbai in
the North. It is expected that the tier II cities would take another five years to absorb modern
retailing opportunities. Moreover, the case for Indian retailers to explore rural markets is also
strong due to the size of rural population and agricultural income growth in last couple of
years. The major formats being followed for organized food retailing in India are
supermarkets, discount stores, fresh product outlets, specialty stores, convenience stores and
off price retailers.
The organized food retailing sector in India is on the verge of a boom and expected to
undergo further change with prospective new domestic and global foreign entrants and the
takeover or exit of some existing participants. The domestic corporate houses including
Calcutta based Spencer’s and RPG group, Chennai based Subhiksha and Niligiri’s,
Hyderabad based Trinethra Group (since 1971), Bangalore based Fabmall, the joint venture
between Calcutta’s RPG group and the UK’s Jardine Matheson Group’s Hong-Kong based
subsidiary Dairy Farm International’s (now owned) Foodworld supermarket chain, Tatas,
Reliance, ITC Group, Lohias-promoted Indo Rama, Mumbai-based RK Hospitality, Kishore
Biyani with his Big Bazaar etc., with its hypermarket and supermarket chains are already in
process. The globally fourth ranked Germany based Metro AG (with two Metro Cash and
Carry wholesale stores opened in Bangalore so far since 2002) and the South African owned
Shoprite Group in partnership with a local investor (with one Shoprite hypermarket opened in
Mumbai in late 2004) have already started operation in India. In addition, the big retailers
such as Tesco (UK) and Carrefour (France) have indicated their plans to enter India once the
Indian Foreign Investment Regulations permit. On November 28, 2006 Wal-Mart, the world’s
biggest retailer announced plans to enter India in partnership with Sunil Mittal’s Bharati
Enterprises, making a direct entry into the rapidly growing Indian retail sector (Anonymous,
2006).
International attention is now increasingly focused on the rapidly growing Indian food
retail market. With the removal of quantitative restrictions on imports, Indian consumers can
have access to food from around the world. Market analysts believe that hypermarket will
determine the future of organized food retailing over the short to medium term. Traditional
grocers are also gradually redefining themselves by increasing floor space and introducing
self-service format and value added services such as credit and home delivery (Anonymous,
2004).
Karnataka Scenario:
The study conducted by the Rabo India Finance Pvt. Ltd. says that South Indian
states of Tamil Nadu, Andhra Pradesh and Karnataka have taken a lead role in establishing

modern food outlets. The growth of organized retailing has shown particular vigour in Chennai
and Bangalore where an estimated 40 per cent of their grocery requirements were met
through modern retail formats. The study pointed out that media exposure; nuclear families
and emancipation of women are some of the important demographic reasons for the shift in
the decision-making variables from price. The study also estimated that organized food retail
sector is set to expand over ten folds in the next five years to approximately Rs. 75 billion
($1.6 billion). The estimate was based on the assumption that 6 million households would
spend Rs. 1000/ per month through organized retail.
Karnataka is one of the leading states in organized retailing in India as there are more
than ten organized retailers (firms) with more than 100 outlets including Metro AG operating in
Bangalore city alone due to increasing urbanization and expanding service sectors like
software, banking, insurance and Business Process Outsourcing (BPO), which has taken a
metropolitan city status more recently has led to increase in income of the consumers. Apart
from Bangalore, cities such as Mysore, Mangalore, Hubli-Dharwad and Belgaum in Karnataka
are also growing rapidly in terms of urbanization, income and organized retailing with local
food marketers as they are converting unorganized retail outlets into organized form because
of strong demand for convenience products; and better educated consumers concerned
about health, nutrition, food safety, and the environment.
As income rose and shoppers sought both convenience and new tastes and
stimulation, supermarkets were able to expand the products offered. The global economy has
changed, consumer demand has shifted, and retailers operating system today are infused
with far more technology than was the case in the past. It was observed that lot of progress
have been achieved in the food retailing in the past decade through organized food stores
such as supermarkets, discount stores, fresh product outlets, specialty stores, convenience
stores and off price retailers. But still there is a lot of scope for the food retailing. The state is
experiencing rapid structural change with the emergence of huge retail firms with massive
buying power and concomitantly concentration in the manufacturing sector. Hence, an effort
was made in the state to study the entire business aspects of organized food retailing in
general and supermarkets in particular. In addition, consumers study was also undertaken to
know the factors to be considered while purchasing their food products in food retail outlets.
The specific objectives of the study were as follows:
1. To document the supermarkets existing in the study area
2. To study the Organizational structure in supermarkets.
3. To evaluate the investment pattern in supermarkets.
4. To evaluate the financial management of supermarkets.
5. To study the procurement management in supermarkets
6. To study the inventory management and its costs.
7. To study the management of processing/value addition in supermarkets.
8. To ascertain the methods of pricing in supermarkets
9. To ascertain the constraints /problems faced by the retailers.
10. To identify the factors influencing the consumers to purchase the food products in
food supermarkets/ food retail outlets.
The above said objectives are very much relevant from the viewpoint of investors in
the food retailing industry and they helps in providing best services to the consumers at
competitive prices. Although few studies were conducted on the food retailing, there were no
studies, which cover the above aspects of food retailing business and constraints faced by the
supermarketers in Karnataka.
Limitation of the study
The study was purely based on the data given by the owners/executives of the food
retailing companies/outlets who are generally suspicious of the motives of any investigation
because of fear of taxation and competition. In addition, due to non-availability of time series
data with respect to the business performance indicators over a period of time, only recent

year’s data (2006-07) was used to analyse the performance. Therefore, the investigation was
confronted with various drawbacks in ascertaining the data. In case of companies having
chain of outlets/units, only one unit/outlet data was used to assess the overall objectives of
the study. Hence, greater care was taken to collect the data as accurately as possible.
Presentation of the study
The entire study has been presented in seven chapters. In the first chapter, the
importance and the current status of the present study was highlighted. The specific
objectives of the study as well as limitations of the study have also been indicated.
Chapter II deals with the review of the relevant research studies connected with the
objectives.
Chapter III outlines briefly the main features of the study area and the study outlets.
The nature and sources from which relevant data have been collected and the various
statistical tools and techniques employed in the study for evaluating the objectives were
included.
Chapter IV is devoted to the analysis of the data through a variety of tables into which
relevant details have been compressed and summarized under appropriate heads and
presented in the tables.
Chapter V provides the casual relationship between certain variables and the
outcome which they produced.
Chapter VI briefs the summary of the main along with the policy implications that
emerged from the findings of the study.
Chapter VII, the final chapter list the references cited while undertaking the research.

II. REVIEW OF LITERATURE
In this chapter, an effort has been made to critically review the literature of the past
research work relevance to the present study. Since, the studies related to food processing
and food retailing in the country are relatively few, the available literature on the related
subject has been reviewed and presented under the sections namely
2.1 Documentation in food industries
2.2 Organizational structure and investment pattern in agro-industries
2.3 Procurement management in food industries
2.4 Inventory management and its costs in food industries
2.5 Processing/Value addition in food retailing
2.6 Financial management in food industries
2.7 Factors considered and methods of price-formation in food retailing
2.8 Constraints and measures to solve the problems faced by the food retailers.
2.9 Factors influencing the consumers to purchase the food products in food retail
outlets.
2.1 DOCUMENTATION IN FOOD INDUSTRIES
Dudinov (1999) documented the practices of small enterprises operating in the food
sector in the USA, Germany and France with the aim of identifying factors contributing to their
success that could be used in developing this sector in Russia. The main types of small
enterprise operating in each of these countries were described. In the USA, these were
trading companies, wholesale-retail firms, small trading enterprises and cooperative societies.
In Germany enterprises owned by a single owner dominate; small retail enterprises account
for approximately 60% of turnover in the German food market. In France, food retailing was
dominated by "self-service", which accounts for two thirds of enterprises in this sector.
Hypermarkets and supermarkets accounted for 42% of food sales, super stores 9% and
convenience stores 12%.
Nikolov and Hughes (1999) in their study to explore the role of publicly-financed
Agricultural Market Information Services (AMIS) organizations, both in developed Western
economies (UK, Germany and USA) and in economies in transition (Poland, Czech Republic,
Romania and Russia); and, taking the case of Bulgaria, to question whether agricultural
market information services have fully performed the functions that they were designed for.
The study reported that the price and trade liberalization have always been regarded as
essential components of reform packages implemented in economies in transition. An integral
component of any price and trade liberalization policy package in agriculture, typically, has
been a programme to improve market information through establishing AMIS. From an
economic perspective, the importance of AMIS relates to their function in augmenting market
integration through improving transparency in agricultural markets.
Frick and Groenewald (1999) opined that the necessary data on agriculture must be
available for public and private decision-makers in the agricultural sector to use agricultural
information for decision-making, solve problems or increase their knowledge. As a result of
the deregulation of the agricultural marketing sector in South Africa, the supply of these data
decreased. Also, the needs for data on agriculture of the various decision-makers, i.e. the
policy-makers, researchers, agricultural service industries as well as the farmers and
extension officers, changed. Since information systems are based on the needs of the
decision-makers, the need for data on agriculture should be determined before either existing
methodologies are improved or new methodologies are introduced to increase the supply of
data on agriculture in South Africa.
Atkinson et al. (2000) reported that the formulation of information and communication
management strategies would facilitate the development of small-scale food processing
enterprises in African, Caribbean and Pacific countries. The specific aim was to conduct a
critical review of the small-scale food processing sector in Mozambique, South Africa and

Zambia which would highlight constraints relating to information and communication
management issues. The report notes that improving the flow of information to small-scale
food processors is crucial to their future success. The main generic recommendations were:
(1) development of a regional network for information exchange; (2) establishment and
development of Business Support Centers; and (3) development of an information support
system for small-scale food processing enterprises at the national level.
Virichev (2000) reported that in an attempt to stabilize the food market and prices, the
Moscow administration set up a city reserve of basic commodities and an ordering system for
fruit and vegetables. In 1999, purchases included 680 000 tons of meat and meat products,
500 000 tons of sugar, 1 200 000 tons of grain, and large quantities of other essentials,
enough to ensure supplies for Moscow. The supplies were funded from the budget, there
were additional non-budget sources, and interregional cooperation was actively pursued.
Nevertheless, the national financial crisis and the drop in harvests in some areas
subsequently put considerable pressure on the system, compounded by the sharp increase in
imported foods, which in turn further depressed domestic agricultural production. A major
problem is the large number of middlemen, who have led to an unjustified increase in prices
and prevented the establishment of a price-monitoring system. Appreciating that the key to a
stable food supply is support for domestic growers, it was proposed that by 2010 a total of 25
wholesale food markets (WFM), with the necessary infrastructure, should be set in 2 stages,
some based on existing sites, some new. An information programme formed an important
component of the programme. Consideration is currently being given to normative and
legislative documentation designed to safeguard the operations of the WFM.
Perkins (2001) reviewed the state of the retail grocery market in Europe in 2001. It
comments that although the food retailing sector was falling as a percentage of overall retail
sales across Europe, this was because of greater amounts of disposable income being spent
on non-essential services and goods. It also reflects on previous assertions that the arrival of
Wal-Mart in Europe would begin a wave of consolidation. It goes on to discuss the mergers
that have taken place recently and also the other types of joint ventures and alliances that
have emerged. It views Wal-Mart as a potential predator in the major European markets.
Lindgreen et al. (2004) examined the extent to which companies in the Dutch food
retailing sector were using the World Wide Web and its associated technologies to conduct
their business. It analysed the commercial Web sites of Dutch food retail companies
(numbering 34 in all) to determine which commerce processes were being supported online in
this sector. The results of the research provided insights to academics on the adoption of
electronic commerce in a particular industry sector and to food retail managers on their
competitors' usage of the World Wide Web. The findings show that, generally, support for
electronic commerce processes and sub-processes was merely 16% of the considered
sample. Most retailers used Internet only as a medium of communication, although others
have set up commercial Web sites that provide higher customer support. Several subprocesses
appear to be supported such as core logistics, online search of products and price
information display and determination. With the exception of search, there was practically no
online customization possible in the processes. A high correlation was observed between
search, valuation, and authentication on the one hand and support for online payment on the
other hand. Lastly, there was no significant difference between regional/national retailers or
firm size, especially for the search and valuation processes.
Anders (2005) reported that due to increasing concentration and a rapidly changing
competitive environment in many food markets, it was expected that farmers and processors
suffer from the exertion of retail market power. This might be the case particularly on those
regional markets where small-scale marketing structures dominate. Given this background,
this study analysed the simultaneous exertion of retailers' market power in the regional output
and input markets of a segment of the German meat market. Based on the production-theory
approach proposed by Gohin and Guyomard (Journal of Agricultural Economics (2000) 51(2),
181-195) the model parameterizes the retail industry's oligopoly and oligopsony equilibria.
Standard market power measures like Lerner indexes were computed, and selected
elasticities of factor supply and industry demand were provided. Results suggested that the
hypothesis of perfect competition and price-taking behaviour clearly has to be rejected.
However, estimates of conjectural elasticities indicate retailers' upstream and downstream
market power in regional meat marketing is limited.

Eastwood et al. (2005) study revealed that successful food retailing depends to a
significant degree on providing a positive shopping environment for consumers. The
SERVQUAL format was one way of gathering information about shoppers' ideal and actual
ratings of an outlet's characteristics. Implementation of the methodology was shown to be an
effective tool for a retailer to identify strengths and weaknesses with respect to patrons'
evaluations of outlet characteristics. Six green grocers were selected to reflect the diversity of
outlets in Tennessee, and a survey of 1118 consumers in the selected outlets was conducted
in the spring of 2000. Results indicated that the consumer ratings vary by feature group for
ideal, actual, and actual minus ideal subgroup scores. The information could be used to
generate better store-specific strategies to meet consumer expectations.
2.2 ORGANIZATIONAL STRUCTURE AND INVESTMENT
PATTERN IN AGRO-INDUSTRIES
Muralidharan (1981) compared the establishment costs of three processing units
namely Sugar, gur and khandsari units in Mandya district of Karnataka. He found that
establishment cost of the three units to be in the order of Rs. 4, 40, 28, 322.03 lakhs for sugar
units, Rs. 46, 329.83 lakhs for gur unit and Rs. 9, 16, 722.38 lakhs for khandsari unit.
Ipte and Borude (1982) studied on the economics of marketing and processing of
cashew nut in Ratnagiri/ Sindhurdurga districts of Maharashtra state observed that capital
investment in different groups of factories. It was Rs. 18, 54,710 lakhs of which 12.96% was
fixed capital. The important items of fixed capital were investments on building and roasting
machinery, while the items of working capital were raw nuts, wages, and salaries, fuel,
containers, packing and packaging. The capital investment was lowest Rs. 5, 20, 611 lakhs in
small factories and highest Rs. 71, 69, 548 lakhs in large size factories. It was also found that
there was positive relationship between the size of the factory and capital invested.
Nagesh (1990) in his study on investment in production and marketing of cashew in
Karnataka, indicated that the capital investment was the highest in building (72.81%) followed
by machinery and equipments (15.42%) and land (11.77%) at an overall level of the units.
Further, it was observed that the processing units utilized only 55.80% of their capacity.
Kalse et al. (1996) found that the initial investment for the establishment of Oil
industries, dhal mills and cotton ginning industries was Rs. 3.19, 4.81 and 5.63 lakh
respectively. The cost of machinery was the major item contributing 61.43 & 59.12 per cent in
dhal mill and cotton ginning industry respectively. The average capacity utilization of Oil
industry, dhal mill & cotton ginning industry was only 41.67, 71.20 and 47.79 per cent,
respectively
Sakia and Talukdar (1996) studied the economic potentialities of commercial
processing firms at farm level for major spices in Nagon district of Assam. It was observed
that the average capital investments in commercial processing units were Rs. 1.20 lakh, Rs.
0.94 lakh and Rs. 0.78 lakh and investment in machinery and equipment shared the highest
followed by opportunity cost of own land.
Srinivasan (1997) studied the organization and management effectiveness of
regulated market committee; he observed more or less uniform organizational structure of
regulated markets in Tamil Nadu. In Thirukoilur regulated market alone the post of junior
superintendent existed. However, the number of posts in each cadre and the number of posts
filled up varies directly with the quantum of arrivals.
Ramandev (1998) observed the management appraisal of Cashew processing
industry in Uttara Kannada district of Karnataka. He found the line organization type of
structure in cashew processing industry, which is simple and clear cut responsibility and
authority with fast and easy feed back from the employees. The discipline among employees
maintained easily and effectively. Similarly, their salary expenditure increased with increase in
size of the unit.
Efremenko (2000) presented an overview of the main aspects of organizational
structure that currently exist in the Belarussian agricultural sector. Prospects for the
development of new organizational and legal forms of commercial enterprises in the
agricultural sector were considered, taking into account the impact of the new Civil Code of
the Republic of Belarus. It was suggested that a new structure for "agribusiness" could

gradually be established, and this would embrace a whole range of ownership and
management types, including corporations (open and closed joint stock companies, and
limited liability companies), partnerships, cooperatives (production and consumer) and
individual ownership (unitary enterprises, and daughter or subordinate companies).
Mane (2000a) observed that both small and large starch units followed the line
organization type of structure because of less number of activities and high investment in
these industries. This is also easy to develop a sense of belonging to the organization,
communication is fast and easy and feedback from the employees can be easily obtained and
immediate corrective measures can be applied.
Ushachev (2000) reported that the crisis in the agro-industrial complex (AIC) was
attributed to a large extent to the absence of control of the socioeconomic processes
occurring in it due to several reasons: the organizational structure of the AIC had allowed to
disintegrate; many of the state's control functions have split among numerous ministries and
departments; and relevant officials were unprepared for the conditions of market economy.
The strategy of the measures required to rectify the situation involved: formulation of clear-cut
objectives; step-by-step planning of the control system; and a time scale to ensure the
measures are carried out. Practical implementation of this programme was discussed with
specific proposals, including: establishment of a government council to coordinate and
develop the AIC; elimination of all forms of duplication among departments responsible for the
AIC; making the Ministry of Agriculture responsible for inter- and intradepartmental
agricultural questions; establishment of an official agency for state property within the AIC;
ensuring a vertical governmental executive authority in the AIC system, at both regional and
federal levels; strengthening of regional administrative organizations; gradual conversion of
integrated, joint-stock type structures to cooperative forms; and development of a special
federal programme for a single AIC management system.
Izvekov (2000) observed the switch from a centralized to a market economy in Russia
has led to a change in the structure of the food distribution network and the rise of the
wholesaler as the link between producer and retailer. An analysis was made of the wholesale
sector, with particular reference to its role in shaping the operating system employed. With
regard to Russian conditions, the organizational structure and management system of the
MERKA fruit and vegetable company, set up in Moscow in 1992, was described. A private
company, it had a 2-tier structure: one embraces the commercial director, the chief engineer
and accounts department, while the other operates the commercial trading operations. Its
modus operandi was said to permit it to undercut its rivals' prices by 10-15%, not least by
operating through regular foreign importers, an important factor in view of the current import
levels of 80% of all fruits and vegetables.
Kozachuk (2001) reported that any management practices existing in Russian
enterprises were inappropriate for operating in market conditions. There was a clear need for
management functions to be extended, and for new methods and approaches to
management that are suitable for different ownership types to be developed. The process of
managing a trading enterprise should be based on market principles and modern
management methodologies. Key ideas in western management theory were considered, and
used as the basis for different models of organizational structure in trading enterprises. These
models include: the functional structure, where positions are grouped according to their main
functional area; the divisional structure, where positions are grouped by similarity of products
or services; and hybrid structures, which incorporate elements of both functional and
divisional structures. Different management styles were also considered, specifically the
directive and democratic styles. It was stressed that the choice of management style
influenced by the economic situation and functional characteristics of any given trading
enterprise.
Hasert (2001) conducted an analysis of the competitiveness of milk production,
considering the unique condition of the eastern provinces of Germany. Based on experiences
and comparing statistical data of the territory, key factors for profit were concentration,
specialization and strict management of expenditures. Author suggested the optimal farm size
to be 300-600 cows per farm. According to the income and of the specific inputs, the
profitability threshold was 7000 kg/cow. The precondition for successful economical
functioning was a management which was professional, had strict management of
expenditures and was highly motivated. In this organizational structure, there was a chance

and the potential of profitable milk production based on employed workers, and was
competitive to farming systems based on family ownership.
Wilson and Thompson (2003) analysed the organizational structure of the fresh
produce industry in the western USA, Florida, and Mexico, operating in a competitive
environment. It used the data obtained from interviews with 83 grower-shippers in 1995-96.
Traditional views and models of perishable food suppliers fail to capture the fundamental role
of time integration in firm-level organization. A two-phase research design of major grower
(shipper firms of lettuce, tomatoes, and melons) reveals a diverse distribution of firms across
the time integration continuum. Most firms used more than one microclimate to extend
product availability. Decision makers were encouraged to understand the implications of
these temporally integrated organizations on agricultural and trade policy.
Feher (2004) focused on efforts to reform the government structures, in particular the
ministries of agriculture, in the transition countries of Central and Eastern Europe in light of
their EU accession. To guide the necessary reforms in the public sector, several governments
adopted a medium-term strategy for public sector reforms. An integral part of the strategy was
functional analysis that would help to re-orient ministries of agriculture to carry out their policy,
regulatory and service delivery responsibilities cost-effectively, with full transparency to the
government, and with sensitivity and courtesy to the public. The study makes comprehensive
recommendations for the abolition, rationalization, privatization and transfer of functions within
the agriculture sector, together with recommendations on how remaining and new functions
could be structured in effective organizational units for both the medium and long term. The
benefits of the functional review were to streamline decision making and implementation, and
strengthen the accountability of subsidiary institutions.
2.3 PROCUREMENT MANAGEMENT IN FOOD INDUSTRIES
Natarajan (1990) observed that the major cost in milk production was cattle feed
(20%). He suggested that Agricultural Price Commission in consultation with Economic
Ministries and Planning Commission to recommend, from time to time to the procurement and
support prices of milk and milk products as done for other agricultural commodities. In
addition, he reported that for better performance of Dairy Co-operative Societies (DCS), four
factors were important viz., high milk utilization, better milk marketing, distribution of cattle
feed and credit for buying and technical assistance to milk producers through co-operatives.
Balasubramanian and Prema (1996) in their study on processing and trading of
cashew nuts in India observed that the total processing and raw material costs accounted for
about 70%, labour charges 10.5%, purchase taxes 5%, freight and handling charges 5%,
packing cost 4.5% and remaining 5% was contributed by costs of power, fuel, depreciation
and overheads all put together.
Bouvier-parton-P (1998) in his study on contractual forms between retailers and their
suppliers in the food sector reported that vertical integration and contractual relations are the
two main features of the French food-retailing sector. The economic weights of these are
more or less similar. However, in the long run it seems that (a) the contractual side is more
important than the integrated one and that (b) contractual forms related to high quality tend
now to be dominant.
Woods et al. (2000) examined the supply chain concept for horticultural products
which were characterized by perishability, heterogeneity and lags in production response to
market signals, producer’s profits are vulnerable to quantity, timing of supply and product
specification. Many supply chains in smaller industries were loose, fragmented, interwoven,
unstable and unique. Hence, he suggested the firms operating in within these environments
needs an astute understanding of the chains, the hierarchy of channel members and their
relative position. Effective business strategies for individual firms and supply chains need to
be developed and redeveloped to accommodate the dynamic nature of horticulture.
Lehtinen et al. (2002) in their study on contract manufacturing in Finnish food
industry, found that in the future, direct deliveries from the contract manufacturer to retail
stores will increase, the delivery times will shorten and thus, more flexibility is needed from
the contract manufacturer.

Weindlmaier et al. (2002) conducted a survey in the Bavarian (Germany) food
industry (with 153 respondents). The study shows that from the point of view of the
processors, in the near future quality management system in agricultural firm might be a prerequisite
to deliver raw materials to the food industry.
Lindgreen and Hingley (2003) discussed the measures taken by Tesco Food Company in
setting up effective guidelines for managing its relationships with neat suppliers. These
guidelines make it possible for serious food scares and to address consumers concern over
animal welfare and environmental issues. Specific initiatives include different animals, feeds
and medicinal policies and schemes have been implemented by both Tesco and the meat
suppliers. The benefits of Tesco’s approach to its suppliers and consumers are considered
and included the ability to deliver higher value products.
Narayana Reddy (2004) in his study reported that most (61%) of the retailers get their
requirements from wholesalers, 15% from the large and other retailers. Over 17% of the
selected retailers get their goods from more than one source, but a small percentage of
retailers get some of their requirements from producers. From the side of the terms of supply
67% of retailers get their requirements by paying cash. Only 13% of the retailers get their
requirements on credit and 19% get credit partly from the suppliers. Apart from this, the study
also shows that the organized retailers/hyper malls and super marketers get wholesales’
margin plus concession as they buy in bulk and are also the producers.
Anonymous (2006) reported that in USA food retailing, labor was the largest single
marketing cost, accounting for half the industry’s expenses beyond the farm. Food retailers
employ more than 3.5 million workers. The industry’s next highest costs were for packaging
(8.0 percent), and transportation and energy (a combined 7.5 percent). Recent trends such as
high energy costs and the rising demand for more convenient packaging have increased all
these expenses.
2.4 INVENTORY MANAGEMENT AND ITS COSTS IN FOOD
INDUSTRIES
Blayney and Weimar (1991) analysed four general alternatives to the current US
dairy programme, each with the objectives of avoiding large milk surpluses were studied by
USDA. These were: (1) a target price/deficiency payment programme; (2) a reclassification
plan, commonly called the Class IV plan; (3) two-tier pricing; and (4) milk marketing diversion.
Using a rating system to evaluate each proposed programme's effect on production, use,
prices, farm receipts, retail value, and government cost, it was concluded that the current
programme measured up well against the options studied. Although the current programme
did not guarantee producers a profit, it provided the market signals individuals need to make
decisions and acted as a price floor to stabilize downswings in prices.
Farsad and LeBruto (2003) reported that the consequences of overstocking items or
understocking were undesirable. Overstocks absorb money and invite waste. Understocks
risk disappointing customers with unavailable menu items or add to food costs by requiring
emergency runs to the cash and carry. Through analysis of daily item use and an application
of risk, managers could calculate when to reorder; that is, when there is sufficient stock to
cover typical demand until the next delivery. To account for unexpected demand, some safety
stock must be included (by calculating the standard deviation of each day's use for the past
time period, say, a week, and factoring that with the Z score of the service-level probability
that management is willing to absorb). By factoring the lead time (delivery and food-prep), the
standard deviation of the usage, and the acceptable probability of a stockout, managers can
use a formula to determine precisely when to reorder.
McCool (1996) study described the challenges that make inventory management a
problematic issue for in-flight caterers' financial management practices. In-flight kitchens are a
logistics operation, and effective inventory management and detailed product usage controls
were essential for overall cost control. They were most efficiently operated as large
production food factories with assembly line production of passenger trays. The different
requirements of individual airlines, which may have an account with the caterer, add
considerably to the caterer's costs and must be reflected in the pricing offered to the airlines.

A pricing system was developed which eliminates product food cost as the basis of pricing
and which places new emphasis on actual labour requirements to produce, package, store,
and distribute the products and menu items selected by each airline.
Chandrashekaran (1999) in his estimation of storage costs for a multi crores, multi
product and multi-location firm found that there existed three different systems of storage
namely company owned, company leased and dealer owned ware-housing facilities. Of these
three different facilities, he found that dealer owned system to be the cheapest and the
company owned system to be the costliest facility.
Ashraf Ali (2000) in his study on business performance of co-operative oil mills
observed that the interest on capital locked in carrying the inventory, store maintenance and
storage costs and material losses were the major components in the overall cost of the
inventory management for both large and medium scale units.
Lichtenberg and Zilberman (2000) developed a model to examine storage technology
choices in the inventory management of commodities that are relatively highly perishables,
and their impacts on resource allocation, prices, the environment, and the economic welfare
of consumers or producers. The model was used to derive the socially optimal level of
spoilage reducing input use and to examine the effects of alternative policies for addressing
environmental damage on supply, market equilibrium and consumer and producer incomes. It
was shown that storage technology choices affect total output as well as the temporal
distribution of supply, consumption, and prices.
Vickener et al. (2002) found that investment in supply chain management technology
in US food industry was extensive, particularly so in the restaurant or food–away-from–home
(FAFH) sub sector. From 1980 to 1995, inventory turns in the restaurant sub sector have
effectively doubled, increasing from 26 to 51. This means FAFH inventories were entirely
replenished once a week, down from the 14 days supply maintained two decades ago. Over
the same period, total market capitalization grew at a compounded annual growth rate of 17%
from $ 5 to $53 billion. Based on the co-integration model estimated, they found that for every
one unit increase in inventory turnover, market capitalization increased by $479 million in the
FAFH industry over the analysis period. Thus, the equity capital market places a premium on
the efficient management of inventories in the food system and rewards those firms that
develop, adopt and implement supply chain technologies.
Nein PiChu and Roan ShiiWen (2004) reported that as computers are more and more
widely used in livestock production and farmers manufacturing their own feeds were growing
more popular in Taiwan. This study was conducted to design a package which included
simple feed formulation and ingredient inventory management to meet the farmers' needs,
and to provide them with a more effective management regime of the feed ingredients. This
system was written in Microsoft Visual Basic 6.0 programming language and Microsoft
Access database. The system was divided into four modules in terms of inputting basic data,
formulation calculation, inventory management, and printing report. The inventory
management system could facilitate the managers in monitoring the inventory to make the
most effective adjustment and usage of the ingredients. The managers could, therefore, load
their ingredients at the right time to avoid wastage and to reduce their ingredient costs. This
system could be executed on Windows operation system and enable the farmers to consider
their livestock growth condition to make it as a calculation tool to formulate animal feeds
rapidly.
2.5 PROCESSING / VALUE ADDITION IN FOOD RETAILING
Singh et al. (1994) in a study on economics of marketing and processing of pulses in
Banda district (Uttar Pradesh) observed that per quintal cost of processing of arhar, gram,
and lentil was Rs. 831.67, Rs. 823.47 and Rs. 752.05, respectively.
Katz and Boland (2000) study revealed that US premium Beef Ltd, a Cooperative
partnership between all segments of the beef industry value chain was affording each
segment on interest in the key stages of beef production and processing, as well as equal
share of the financial risks and rewards. This value added strategy was accomplished through
vertical integration and adding a quality-based pricing structure to more closely link beef
producers and consumers.

Beverland (2001) analysed the level of brand awareness within the New Zealand
market for ZESPRI kiwi fruit, the effectiveness of this branding strategy employed by kiwi fruit
New Zealand since it creates value to this fruit, and the implications of this findings for
agribusiness in general using the data collected from surveys of kiwi fruit consumers (n=106)
outside three major super market chains in Auckland, New Zealand. The results suggested
that the level of brand awareness for ZESPRI is low among consumers. It is indicated that
brand awareness could be increased through a relationship marketing programme involving
targeted marketing and supply chain management.
Mahesh and Nagaraja (2002) reported that the value addition of cashew (Anacardium
occidentale) kernel baby bits (CKBB) was attempted by coating with cane sugar, honey and
salt. Optimum coating occurs at 100 degrees C for 5 min at 70% concentration for cane sugar
and honey, and 5% for salt. Sweetened (70%) and vanillin (0.1%) flavoured CKBB are the
most preferred. De-fatting of CKBB enhances the per cent coating. Coating of cashew kernels
of different grades with cane sugar at 70% is dependent on the surface area. Cashew apple
juice could be coated on the CKBB. Acceptability of cashew apple juice coated baby bits (BB)
improves with the addition of cane sugar at 70% concentration. Permitted colours and cane
sugar compete with each other during coating.
Madhuri and Kamini Devi (2003) found that in watermelon, the rind constituted 33%
of the whole fruit weight. Value added preserved products like pickles, tutti fruity, vadiyams
and cheese were prepared using the white portion of watermelon rind. The quality of products
in terms of physical parameters was evaluated. All products were subjected to sensory
evaluation test using a panel of 20 judges. Results showed that mean sensory scores for
product attributes were high. There was no change in mean scores after one month storage.
Santhosh Kumar et al. (2003) in examined the Indian research efforts in vegetable
crops, new niches for vegetable production, and the impact of pest management research. It
was indicated that the ongoing research programmes on vegetables addressing many
emerging challenges, there is a wide scope for innovative improvements and a sharper focus
on vegetable processing, value addition and quality control.
Subasinghe (2003) studied the different innovations used by food processors to add
value to aquaculture products such as shrimps, in order to survive in a highly competitive
market environment. Some of these innovations were focused on the packaging and
presentation of the shrimps, whereas others focused on pre-processing/processing, such as
peeling, preparation of breaded products, application of batters, and production of other
shrimp-based products.
Arora et al. (2004) found that vegetable washing is an important primary process unit
operation for value addition of the produce at farm level. Washing is used not only to remove
field soil, dust, pesticides, but also the surface microbial load. Carrots, potatoes and spinach
were washed mechanically in a rotary vegetable washing machine at varying speed and time
and then evaluated for their quality. The microbiological washing efficiency, which is
calculated by observing the total viable count of the surface of the vegetables before and after
washing ranged between 96.5-99.8% as compared to recommended 80% indicating the
adequacy of the vegetable washing machine.
Kaveri and Bindhu (2004) showed the effect of substituting 50% of the pulse fraction
of 10 Indian recipes (adai, pessarattu, plain dosai, masal vadai, seeyam, mysore bonda,
kandharappam, dhokla, maladu and moong dhal halwa) with whole or defatted soyabean flour
on quality and nutritive value. The results showed that all recipes substituted with whole
soyabean flour had higher carbohydrate and calorie contents than traditional and defatted
soyabean flour-substituted recipes. Calcium, phosphorus, iron and protein contents were
higher in substituted than traditional recipes. The flavour, taste and degree of liking of whole
soyabean flour-substituted and traditional recipes were almost similar. It was concluded that
whole soyabean flour could be included in the daily diet by incorporating in recipes at 50%
level.
Ramakrishnaiah et al. (2004) attempted to study the technology package developed
to retrieve the cotyledon material from the dhal mill by-products containing about 50%
cotyledon material amounting to one million tonne and also refining the same to an
acceptable/desired level. The technology consists of de-stoning, size separation, and air
classification followed by refining and thermal stabilization of edible material. About 30-35% of

the cotyledon material was recovered from the by-products from the commercial dhal mills
and used in the preparation of traditional pulse based products. It could be substituted in
pulse-based products such as vada, rasam/sambar and papads upto about 50%. Adoption of
this technology by dhal millers in the country would result in the recovery of about 5 lakh
tonnes of cotyledon material valued at Rs. 500, which could contribute to the economic
upliftment of the industry.
2.6 FACTORS CONSIDERED AND METHODS OF PRICE-
FORMATION IN FOOD RETAILING
Gautam Bhattacharya and Simons (1999)study revealed that the persistence of low
quality was explained with rational, strategic behaviour of producers and consumers of
experience goods in informal markets, where quality was revealed after purchase, price was
determined by bargaining, and renegotiation of price does not necessarily follow after quality
is improved by the seller. Starting from a given contract between a buyer and a seller at a
given price that has been reached through costly bargaining, assume that after the existing
quality was revealed, the seller comes across a project (possibly adoption of better
technology), which will enhance existing quality. If the project is efficient, it will always be
adopted by any formal market structure.
Rosecky and King (2000) said that the accepted economic theory suggests the prices
of commonly available products in competitive markets are likely to be approximately the
same. If monopoly prices can be extracted, the resulting profits attract competitors into the
market. In his study, he examined the prevailing prices in detail for a large number of
commonly available supermarket products in France, the United Kingdom, and the USA. The
results of this study show that some products have very similar or the same prices and other
products have different pricing pattern.
Santiago et al. (2000) conducted a pilot sample survey in 1997 to study the structural
features of the foodstuff wholesale market in Sao Paulo city, Brazil. The usual pricing process
in this market was simply achieved by adding a markup to the costs. However, some
wholesalers obtain price information from other wholesalers, especially those established far
from the main wholesale areas. Wholesalers are used to buying products from farmers
(particularly non-manufactured foodstuffs like potato, onion and eggs), from jobbers or other
wholesalers (maize and garlic), from the jobbers and industries (rice), from industries and
other wholesalers (beans, meat, sugar, coffee and wheat flour). Most wholesalers sell to
retailers, but some also sell to other wholesalers, to restaurants, to industries and even to
consumers.
Todorova (2000) presented a method of price determination, which was based on
comparisons of prices, technical and trade parameters of competitive products in the case of
greenhouse tomatoes from Bulgaria and Turkey. The price of Bulgarian greenhouse tomatoes
was determined to be 2.65 leva, i.e. 32.4% higher than that of the Turkish ones.
Herrmann et al. (2001) explained theoretical aspects of pricing and consumer
behaviour and to analyse them with reference to groups of breakfast products, using German
data from September 1996 to June 1999. The results indicated major significance of special
offers; on average, out of 20 groups of foods, one product in each group was offered at a
discount every two weeks. Special offers had very marked effects on sales, which in some
cases rose by 274%. Demand was greatest for products with a long storage life, such as
coffee. It appears likely that consumers bought some items only during special offer periods.
There was very strong consumer reaction to price changes for jams and breakfast cereals. An
active pricing policy thus represents a central marketing instrument in food retailing; this was
consistent with strong consumer reaction to price changes. It does not confirm the textbook
statement that price elasticity of demand for food products is low. It does, however, diverge
between types of retail outlet and product types, Nevertheless consumer reaction was very
strong.
Ramadhani (2002) study suggests that there was a substantial amount of trading and
consumption of the fruits in both rural and urban areas of Zimbabwe. The marketing system
was characterized by lack of production, as all fruits were collected from the natural forests.
There were numerous collectors and retailers but few wholesalers. There was also no
sophisticated product differentiation. There was a lack of an adequate price formation

mechanism as prices were based on information from neighbours, knowledge of previous
seasons and total cost incurred by traders.
Yu ChihChing and Connor’s (2002) Newmark was one of the two price-concentration
studies of US grocery retailing that has failed to find a positive relationship. They examined
four possible sources of experimental error in this study, based on a sample of US
metropolitan areas in 1987-88. The most important source of error was the failure to exclude
non competing grocery retailers in the construction of the concentration measure. The
relationship was also sensitive to controlling for a subgroup of observations from one state, to
alternative data sources, and functional form. When these changes were made, concentration
was found to be positively associated with the cost of groceries across cities. The relationship
was significant despite a small nonrandom sample of cities and unscientifically sampled
prices.
Buzas (2003) paper presents the results of price analyses done in the course of food
retail activity investigation. He viewed from a theoretical-economic approach, the consumer
price contains the costs of production, processing and trading, as well as the profit share
related to these activities. In practice, particularly in the food sector, this kind of linear
accumulation has rarely succeeded. In the case of foods, due to a decrease in consumption
and vertical competition, not only the profit share, but often some of the costs could not be
made good in the selling price. This failure has an impact on agricultural producers and the
food industry, whereas in commerce, profit could be realized easier. In the formation of a food
consumer price there are diverse practices in use from the simple markup pricing method to
the complex marketing strategies-based price-forming.
Bacchi and Alves (2004) analysed the price formation process of retail crystal sugar
in the center-southern region of Brazil, considering the different segments of its
commercialization chain. The analysis was carried out over the May 1998-December 2002
period. Results indicated that producer and retail prices of crystal sugar have expressive
relations in the short and long run. Income was not proven very important in the explanation
of the crystal sugar price in the retail market. This was expected due to the small share of the
product in the expenses of families.
Herrmann and Moser (2004) examined how far psychological pricing plays a role in
grocery retailing and whether it contributes to price rigidity of branded foods in Germany. The
empirical analysis was based on scanner data of weekly prices for 20 branded foods across
38 stores in Germany for 144 weeks in the period 1996-99. The analysis shows that
psychological pricing points were extremely important in German food retailing. Prices ending
at digit 9 were by far the most important. Moreover, there was often a strong concentration in
pricing on only a few psychological prices. The analysis also shows that psychological pricing
seems to be one major determinant of price rigidity in German grocery retailing. Prices of
branded foods were surprisingly sticky given the high variability of agricultural commodity
prices in food retailing. Apparently, prices do not change much (apart from sales) and if they
do, they tend to move from one psychological price to the next.
McLaughlin (2004) in his study explained the major factors that contribute to the
complicated price formation process, as several levels, of fresh fruit and vegetables in the US
were marketing channels, market structure changes, pricing techniques and promotional
impacts, retail responses to supply changes, and price versus value.
Carman and Sexton (2005) study analysed the retail milk pricing by supermarkets
and marketing margin behaviour for four fluid milk products in nine large metropolitan markets
in the Western United States. Multiple empirical approaches are utilized to investigate retailer
pricing behaviour, and, on balance, these methods provide significant evidence of
noncompetitive price behaviour in each of the markets. Correlations of retail price changes
indicate considerable pricing independence among retailers across cities, while rankings of
retail prices by milk product provide significant evidence that prices were not based primarily
on costs, as would be true if pricing were competitive. Estimated retail price responses to
farm price changes are consistent with monopoly pricing behaviour for several of the milk
products in several of the markets.

2.7 FINANCIAL MANAGEMENT IN FOOD INDUSTRIES
Mohammed Ali (1992) used financial ratios to analyze, the performance of fruits and
vegetables processing units under private and public sector. The study revealed that the
solvency position of the private sector was found to be lower, but for public sector it was high.
The liquidity ratios in general have revealed that the private sector unit is better position than
public sector. The profitability ratios have indicated the more efficient utilization of fixed assets
as well as owned funds by private sector unit. The turns over ratios were also low in case of
public sector unit when compared to private sector unit.
Arora and Zebul Nisha (1996) in their study on rural food processing in Rampur
district of UP concluded that even with a low level of operation rural food processing
complexes are making profits. Their annual net returns, operating profit to revenue ratio, net
profit to revenue ratio, operating ratio and operating efficiency are 23.70, 25.03, 41.81, 34.49
and 58.18, respectively. The working capital intensity, operating profit to capital employed, net
profit to capital employed and interest coverage ratios of 51.16, 68.38, 57.01 and 5.90,
respectively, prove their financial soundness.
Devaraja (2000) study examined the performance of the Horticultural Producers
Cooperative Marketing and Processing Society Limited in Karnataka, India, during the period
1958/59-1995/96. Physical and financial indicators of performance such as membership, retail
outlets, share capital, owned funds, total assets, long-term investments, fixed assets, working
capital, total liabilities, and sales, were analysed. Results show that there were substantial
increases both in physical and financial indicators over the period of study.
Mane (2000 b) reported that the larger units were more efficient than the small unit. It
may be because of economies of scale in operation and management. Solvency position of
large unit was somewhat less sound but well within the acceptable norms. Both units were
having good financial strength.
Marton (2000) analysed the extent of foreign involvement in the Hungarian food
industry financial and economic characteristics of large companies with majority foreign
ownership operating in this sector. It was found that the foreign-owned companies accounted
for 51.7% of total sales in the Hungarian food industry in 1997, compared with 23.7% in the
United Kingdom and just 7.7% in Finland. Of the top ten companies operating in the
Hungarian food and tobacco sector (ranked by turnover), only one, Babolna Rt, was 100%
Hungarian-owned, while five of these top ten companies were 100% foreign-owned (namely
Cereol Rt, Unilever Kft (food division), Coca-Cola Amatil Kft, Nestle Hungaria Kft, and Egri
Dohanygyr Kft).
Khan et al. (2001) study assessed the costs, returns, and profitability of meat retailing
in Peshawar, Pakistan, using primary data collected in the beginning of year 2000 from 80
meat retailers through a pre-tested interview schedule. Analysis of the data shows that the
total costs per month amounts to Rs. 130 763.74. Meat retailing is a profitable enterprise, with
net revenue per month amounting to Rs. 8613.66.
Konieczka (2002) reported the Profitability, liquidity, the level of debt and efficiency
data for a number of small (assets up to 20 million zloty), medium (20-40 mil. zloty) and large
(over 40.0 mil. zloty) Polish sugar companies were analysed for the period 1996-2000 in order
to establish potential advantages of industry restructuring. The results revealed generally
weakening financial indicators for the period; funding and cash flow problems were most
obvious in the smallest companies, suggesting that restructuring in favour of large sugar
concerns with stronger market representation and lower unit costs would bring economic
advantages.
Gustafson (2003) study revealed that in Fargo, USA, on an average, both food
manufacturing and food retailing small businesses had positive financial characteristics.
Although, they were only marginally profitable and liquid, they were highly solvent. Accounts
receivable and inventory comprise nearly half of food manufacturers' total assets and a third
of food retailers' assets. By most financial measures, food retailers were statistically smaller
than food manufacturers. Both food manufacturers and food retailers utilized computers,
primarily for accounting/book keeping, inventory management, and administration. Primary
financial services used were for transactions and trade credit. Nearly three-fourths of food
manufacturing and one-half of food retailing supply purchases involve trade credit from a

large number of trade credit suppliers, on average. Both firm types have higher credit risks
and were tardy with repayment of trade credit.
2.8 CONSTRAINTS AND MEASURES TO SOLVE THE
PROBLEMS FACED BY THE FOOD RETAILERS
Connor et al. (1999) reviewed the economic literature on empirical studies of
competition in the US food-retailing industry, with special attention to a few studies that
attempt to cope with new forms of horizontal and vertical competition. With the end of the
'supermarket revolution' in the 1970s, new forms of horizontal, vertical, and geographic
competition have appeared to challenge the supremacy of the supermarket format. New retail
formats like warehouse stores, super centers, and fast-food outlets appear to affect local retail
supermarket prices. Slotting allowances, coupons, and electronic data gathering have
intensified retailer-manufacturer rivalry. Foreign direct investment offers the promise of new
European-style management styles in US grocery retailing.
Anonymous (2000) found that the US food retailing industry has undergone
unprecedented consolidation and structural change in recent years. Large retailers have
purchased almost 3500 supermarkets since 1996, representing annual grocery store sales of
more than $67/thin/000 million. The nationwide share of sales for the four largest retailers
increased from nearly 16% in 1992 to almost 29% in 1998. Widespread consolidation in the
grocery industry could have implications for consumers and food market suppliers such as
grower-shippers and wholesalers. Some consumers fear that fewer food retailers will
eventually mean higher grocery prices and less variety. Suppliers worry those fewer but larger
buyers could force prices lower for products and services that food retailer’s purchase.
Retailers were likely to continue consolidating in order to maintain profitability as competition
for the consumer food dollar increases.
Rudolph et al. (2000) in their study suggested that the food retailers risk a loss of
image or even a loss of the customer if they do not learn to react effectively to failures and
improve their service strategy.
Aalto Setala (2002) examined the empirical relationship between economies of scale,
concentration, and market power in Finish food retailing. The impact of both local
concentration and industry-wide concentration (which can be interpreted as multimarket
contact) was taken into account in the evaluation of grocery retail competitiveness. Data were
obtained from observations from 1994, 1995, and 1997. The results show that the main factor
affecting market power was the size of the retail firm. Larger share grocery retailers, for both
the local and the national markets, carried higher mark-ups. At the same time, no firm-level
scale economies were found from these larger firms. He concluded from these findings that
the main purpose of large grocery retail mergers was to gain market power not efficiency.
Nageshwar Rao and Bramhanandan (2003) in their study on problems of retail
traders in Guntur district of Andhra Pradesh found that increasing salary, other incentives and
working hours were major problems from the employees’ side. Rent on building was a
problem of retail traders (62%) since they were facing many problems from the building owner
side like high rent, frequent repairs and demand for more good-will. Apart from these retailers
(44%) also had faced many problems on media like high rates, inadequate information and
coverage of area and timing problems.
Fischer (2004) examined the problems involved in the management of international
marketing activities of food products from the company perspective. It indicated that the major
obstacles encountered in the management of international marketing were higher transaction
costs and risks relative to home market business activities. More specifically, for food
products there were 6 main problem areas, which arise from the literature: education and
training of export staff (including foreign language skills and knowledge of foreign business
partners' mentality); trade fair activities; special food product logistics and marketing
problems; trade terms, export documentation and billing, and foreign exchange risk
management; provision of foreign market information; and government assistance. Results
from a questionnaire-based survey of companies from Germany (in November 1998) and
Australia (in July 1999) engaging in exporting and/or importing of food products suggested
that staff education or training and logistics were the most important factors affecting success
in international markets. Implications of this study were that agribusinesses must give special

attention to staff recruitment and training and to the mastering of food product logistics if they
want to compete successfully internationally.
Muller et al. (2004) study revealed that the different meanings of quality for the
products, insufficient technical resources, badly coordinated working processes and low
consumer demand for organic products were identified as weaknesses of the supply chain
systems in Germany, Switzerland and in Netherlands. Many of the success factors for
improving quality, such as a common goal and control of the participants, intensive
communication, exchange of knowledge and information and an informal leader of the chain
were also characteristic for network structures in general. In Switzerland, success of the
system in place was based both on a clear position of the food retailing sector as an informal
leader and on structures that encourage trust and ensure a stable balance of power between
actors. In the Netherlands, in turn, the traditionally professional production and the general
preference for personal contacts and dialogue were identified as the specific advantages of
the existing structures.
2.9 FACTORS INFLUENCING THE CONSUMERS TO
PURCHASE THE FOOD PRODUCTS IN FOOD RETAIL
OUTLETS
Rees (1992) in his study revealed that factors influencing the consumer’s choice of
food are complex, and must be added to variables such as flavour, texture, appearance,
advertising etc. Demographic and household role changes and the introduction of microwave
ovens have produced changes in eating habits, a reduction in traditional cooking,
fragmentation of family means and an increase in ‘snacking’. The vigorous sale of chilled and
other prepared foods is related to the large numbers of working wives and single people, who
require and value convenience. Developments in retailing with concentration of 80% of food
sales in supermarkets, is also important. Consumers are responding to messages about
safety and healthy eating they are concerned about the way in which food is produced and
want safe, ‘natural’, high quality food at an appropriate price.
Kainth (1994) in his study on “Consumption of Apples: Consumer’s Towards View
Pattern and Determinants” used ranking techniques to understand consumer preference for
apples in different income groups. He also used linear multi-variate regression to analyze the
factors affecting apple consumption.
Ragavan (1994) reported that quality, regular availability, price, accuracy in weighing
and billing, range of vegetables and accessibility as the factors in the order of importance
which had influenced purchase of vegetables by respondents from modern retail outlet.
Sundar (1997) study revealed that the Grocery Department of Saravana Bava
Cooperative Supermarket, Cuddalore was enjoying favourable images of consumers in the
attributes such as equality of price, behaviour of sales persons, moving space, location,
correctness of weight, packaging of goods, number of sales persons and convenient
shopping hours. At the same time, the image is weak in the attributes such as quality of
goods, availability of range of products, variety of goods, acceptance of returns, credit facility,
door delivery and in sales promotional measures.
Devlin et al. (2003) conducted a study on means-end chain analysis of the food
sector and explored the extent to which the findings made can be used to inform the retail
positioning strategy of food retailers in the UK, using data obtained from 15 respondents.
Using means-end theory as the theoretical underpinning of the study, the study employed
laddering methodology to identify the linkages between food retail store attributes and
personal values. The findings of the study presented a more personally relevant
representation of consumer's perceptual orientations towards food retail store image. At the
attribute level "good quality products", "good reputation", "store has additional services", and
"value for money", are most sought after. These were linked to the consequences "feel good"
and to "save time". Overall, the findings support previous value driven research, concluding
that "happiness" and "quality of life" were the most strived for personal values.
Cavard and Moreau (2003) undertook a survey among 2000 French consumers in
2002 to study their behaviour regarding the purchase of fruit and vegetables. It first appraised
purchasing frequency; the weekly purchase being prevalent. Regarding places of purchase,

supermarkets come first, followed closely by markets. In terms of modes of purchase, the self
service with assisted weighing was the preferred option. Consumer expectations concern
better control of labelling and quality on the selling place, with an indication of consumed-by
date. The main consumers, the old-aged people, appear, however, to be less concerned with
this additional information.
Michels et al. (2003) study revealed that almost all food retailers in Germany sold
organic products, fresh ones being estimated at 45% of the turnover. Surveys indicated that
49.7% of households bought fresh products, principally vegetables, at least once between
April and December 2002. Vegetables, fruit, potatoes, and eggs were the main categories on
offer in supermarket-type outlets; specialist whole food shops and producers' direct marketing
enterprises carried a wider range of produce including meat. Some 77% of turnover by the
larger retailers was from sales to regular purchasers. Average frequency of purchasing,
however, was not over 5 times in 9 months. Younger customers tended to buy from specialist
outlets rather than supermarkets.
Manivannan and Raghunanthan (2004) observed that there was no close relationship
between the age, sex, education, occupation and extend of utilizing departmental stores
where as income alone had shown a close relationship with the extent of utilizing
departmental store at 1 % significant level, which shows that there was a close relationship
between income and extent of utilizing department stores.
Kinsey et al. (2004) in his study identified seven forces that have converged to create
a demand-driven food system in the USA are (1) more diverse consumer characteristics and
tastes; (2) the universal product code (bar code) and all the information technology that
followed; (3) Wal-Mart (biggest food retailer in the world), the early adopter of information
technology and the mother of efficient supply chain management; (4) efficient consumer
response, a defensive response to Wal-Mart’s expansion; (5) Concentration of retail
ownerships; (6) global concentration of food processing and manufacturing; and (7) new
business models.
Haese et al. (2005) study revealed that since late 1990s, the number of supermarkets
in South Africa has been steadily growing. Due to a more effective and efficient management
and procurement system, the supermarkets can benefit from economics of scale and sell food
at a relative low price. In their study they presented a case study of two villages in the
Transkei area of South Africa. In these poor rural communities, the majority of households
now buy their main food items from supermarkets rather than from local shops and farmers.
While presenting an important step towards livelihood development and food security, these
supermarkets also form a strong competitor for local agricultural sales. The supermarkets
provide many food items at lower prices. With an increase in income, the households look for
variety and exoticism in their food products, and will most likely find this in the supermarkets,
rather than the local stores.

III. METHODOLOGY
This chapter presents the climatic and economic feature of the study area, nature and
source of data collected, analytical tools and techniques employed to evaluate the objectives
of the present study. The details are presented under the following headings.
3.1 Description of the study area
3.2 Sampling design
3.3 Selection of the products
3.4 Nature and sources of data
3.5 Analytical tools and techniques employed
3.6 Definition of terms and concepts used in the study
3.1 DESCRIPTION OF THE STUDY AREA
The state of Karnataka is situated on a tableland where the Western and Eastern
Ghat ranges converge into the Nilgiri hill complex, and is confined roughly within 11.5 degree
North and 18.5 degree North latitudes and 74 degree East and 78.5 degree East longitude.
The State is bounded by Maharashtra and Goa States in the North and North-West; by the
Arabian Sea in the West; by Kerala and Tamil Nadu States in the South and by Andhra
Pradesh in the East. The State extends to about 750 km from North to South and about 400
km from East to West, and covers an area of about 1,91,791 sq.km. It accounts for 5.83
percent of the total area of the country (32.88 lakh sq.km) and ranks eighth among major
states of the country in terms of both geographical area (1.92 lakh kms) and population of
5.27 crore (2001 Census).
Karnataka is one of the leading states in the country in terms of economic
development and its Per Capita Income during 2002-03 was Rs. 21696. The State's GDP at
constant prices (2002-03) was Rs.72, 399 crore accounts for 5.5 per cent of the national
GDP. The State has witnessed a healthy 6.5 per cent CAGR in the GSDP for the ten year
period 1994-2003, being the highest among the leading States in the country. The State is
largely service oriented and income from the sector contributes to half the State's GDP with
the agricultural and the industrial sector contributing to nearly 25 per cent each. The major
manufacturing oriented industries in the State include Sugar, Paper and Cement industries.
Among the service oriented sectors, Karnataka leads the ‘Indian Biotechnology Industry’. IT is
another thriving industry in the State, concentrated in and around Bangalore, the ‘silicone
valley of India’. The state prides having a strong infrastructure and the number of national and
state highways make inter-city and town communication easily accessible. Karnataka also
has a strong railway and airport network. It is a preferred destination for investments and the
Karnataka Udyog Mitra is a single contact point for all investors who wish to invest in the
State.
Karnataka is also one of the leading states in organized retailing in India as there are
more than ten organized retailers (firms) with more than 100 outlets including Metro AG
operating in Bangalore city alone due to increasing urbanization and expanding service
sectors like software, banking, insurance and Business Process Outsourcing (BPO), which
has taken a metropolitan city status more recently has led to increased income of the
consumers. Apart from Bangalore, cities such as Mysore, Mangalore, Hubli-Dharwad and
Belgaum in Karnataka are also growing rapidly in terms of urbanization, income and
organized retailing with local food marketers as they are converting unorganized retail outlets
into organized form because of strong demand for convenience products; and better
educated consumers concerned about health, nutrition, food safety, and the environment.
Since, majority of modern retailing formats like supermarkets are existing in these cities only,
these five cities in Karnataka were purposively selected for the study.
Bangalore city situated at an altitude of 920 meters above sea level, it is the principal
administrative, cultural, commercial and industrial centre of the state. The city, which is
spread over an area of 2190 square kilometers, enjoys a pleasant and equable climate
throughout the year due to its elevation (1000m). It is also blessed with a large number of

lakes and parks within the city. Today, Bangalore is the fastest growing city in Asia with a
burgeoning population of more than four million. The literacy rate of the city was 86.58
percent (http://en.wikipedia.org). Its tree-lined streets and abundant greenery have led to it
being called the 'Garden City' of India. However, since local entrepreneurs and the technology
giant Texas Instruments discovered its potential as a high-tech city in the early 1980s,
Bangalore has seen a major technology boom. It is now home to more than 250 high-tech
companies including homegrown giants like Wipro and Infosys. Consequently, now Bangalore
is called the 'Silicon Valley' of India. There are more than ten organized retailers (firms) with
more than 100 outlets including Metro AG operating in Bangalore city alone. The super
marketers like Foodworld, Niligiri’s, Trinethra, Subhiksha and Spencer’s are the major players
operating with their chain of outlets in Bangalore.
The twin cities of Hubli-Dharwad are located at a distance of around 430 kms from
Bangalore the capital of Karnataka state. The climate is hot and wet during the summer and
rainy seasons and pleasant during winter. Dharwad is the administrative capital of the
Dharwad district and Hubli serves as the commerce center. Dharwad is a quiet, pleasant, and
fast growing city in the northern part of Karnataka. Together with Hubli, which is a city twentytwo
kilometers away, Dharwad forms a twin city. These cities covers an area of 202.4 Sq Kms
with the urban population of 7, 86,018 (http://en.wikipedia.org). Hubli-Dharwad is known for its
prestigious educational institutions. Dharwad is perhaps best known for its "Pedhas", a sweet
made out of milk, and is a must-buy for any tourist visiting the city. Today, Dharwad has
grown beyond its borders, with industries dotting both its northern and southern boundaries.
In years ahead, it promises to be a beehive of commercial activity. The location of the city on
the NH4 makes it equidistant from two of the most industrialised centers in the country -
Bangalore, the capital of Karnataka state and Pune the 2nd most industrialised city in
Maharashtra. Most of the retail sector in these cities is characterized by large traditional forms
of independently owned small business which occupied a significant market share. Recently,
Hubli based BDK Group of Companies entered to modern retailing by opening two
supermarkets outlets (in 2001) at Hubli and few local retailers also modernizing their stores in
the form of supermarkets.
Mangalore is an important city in Karnataka and is situated on the west coast. After
integration the city is developing fast in all directions viz. in the field of education, industry and
commerce. Mangalore is located at 12°-52’N latitude and 74°-49’E longitude. The city is
located in the confluence of Nethravathi and Gurupura rivers. It is bound in the east by the
Western Ghats and in the west by the Arabian Sea. Three National Highways viz., NH-17
linking Panvel and Kanyakumari, NH-48 linking Mangalore and Bangalore, NH-13 linking
Mangalore and Solapur pass through the city. A domestic Airport is located at Bajpe, which is
15 km from city connecting it to Mumbai and Bangalore. Mangalore is also linked by rail to all
major cities of India and is also having all weather harbors. Mangalore is headquarters of
Dakshina Kannda District, the largest urban coastal center of Karnataka and the fourth largest
city of the state covering an area of 132.45 sq km with the urban population of 4, 19,306
(http://en.wikipedia.org). The city is an administrative, commercial, educational, and industrial
center. An all weather port is located in Mangalore and is the only major port of Karnataka.
Major Banks of the India are originated from this town. It is also famous for educational
institutions. Only in this millennium, some of the organized retailers entered this city with
modern retail formats. Foodworld is in operation since, 2002.
Belgaum is one of the fastest growing cities in the northwest part of Karnataka. The
district of Belgaum borders Maharashtra and Goa. Belgaum is accessible via air from Bombay
and Bangalore. Belgaum is famous for the sweets and locally made ice cream. Belgaum is
also home to several divisions of the Indian Armed Forces. The Commando School of the
Indian Army is also situated in Belgaum. The Indian Air Force has a big airbase near
Belgaum. As of 2001 Census, the city had an area of 94.08 Sq Kms with population of 3,
99,653. The city had an average literacy rate of 78 per cent, higher than national average of
65 per cent (http://en.wikipedia.org). There were no organized retailers in this city but few
local retailers recently converting their old stores into modern formats.
Mysore city was the capital of the old royal Mysore province. To the people of India
the word Mysore is synonymous with Sandalwood, silk and fine inlay-work using ivory.
Mysore is also the home of many well regarded musicians and artists. It is the fastest growing
city in Karnataka next to Bangalore. The city spread over an area of 128.42 Sq Kms with

urban population of 7.8 Lakh (http://en.wikipedia.org). Being a traditional city, there were no
organized retailers till 2001, but recently because of its booming economic growth, few
organized retailers like Foodworld and Niligiri’s have entered this city with their supermarkets
and many local retailers are also converting their old stores into the modern formats (like
supermarkets).
3.2 SAMPLING DESIGN
To fulfill the objectives related to the supermarkets operations of the study a
multistage random sampling technique was used. In the initial stage, Karnataka state was
selected as it is one of the leading states in organized retailing in India. At the second stage,
five cities across Karnataka such as Bangalore, Hubli-Dharwad, Mangalore, Belgaum and
Mysore were selected as the majority of organized retailers were existed in these areas.
Recently, most of the local retailers in these areas also modernizing their stores in the form of
modern formats like supermarkets. In the last stage, three supermarkets (one outlet/ branch)
from each city were selected randomly, so, that the total sample size selected for the study
were 15. Among the number of supermarkets existing in these areas, only three
supermarketers who were agreed to provide the data are selected. However, supermarkets
which were in operation for at least two successive years were selected and their
performances were studied for the last financial year 2006-07.
In addition, since, it is decided to select 150 consumers in total, the total consumers
were distributed equally for each city, so that the ten consumers for each outlet were selected
randomly for studying the factors influencing the consumers to purchase food products in
supermarkets.
3.3 SELECTION OF PRODUCTS
Since it is difficult to study the overall operations in all the products, only two products
from each agricultural commodity groups like rice and wheat in cereals, tur and green gram in
pulses, dry chilly and mustard which are bought and sold in small quantities, banana and
apple in fruits and finally tomato and onion in vegetables were selected based on their volume
of sales in supermarkets. Thinking to include items from each agriculture commodity groups
two items from each group were selected. However, it is exception in case of Hubli-Dharwad
because of no sale of fruits and vegetables in any of the supermarkets operating in the area.
3.4 NATURE AND SOURCES OF DATA
The detailed information required for the study was collected from both primary and
secondary sources in order to accomplish the various objectives of the study and are
illustrated with their heads as follows.
A) PRIMARY DATA
The primary data on roles and responsibilities of each individuals in the hierarchy and
the pattern of investments like fixed and working capital were collected in detail to know the
investment pattern and organizational structures of the supermarkets. The data on financial
management aspects like different assets and liabilities, owned fund, inventory, working
capitals, sales and returns were collected from their records like Balance sheet, Profit and
Loss account and Trade account were collected to know the financial status of these
supermarkets. The information on procurement aspects like channels of procurement of raw
materials, quantity procured costs of procurement and inventory aspects like quantity and
value of different inventories maintained at different stages and their cost of carrying were
collected to understand the procurement and inventory management in these markets. The
information on stages involved in processing, cost incurred in processing and the value
addition per unit of each selected products in different categories such as foodgrains, pulses,
fruits, vegetables and spice products, and the various price determination methods adopted
by these supermarketers were collected from the concerned authorities of super marketers to
evaluate management of processing and price determination. Similarly, the data on problems
faced by the supermarketers such as causes for loss in retail business, sources of finance,
infrastructure problems, problems from the government authorities etc., were also collected
from the concerned authorities of these selected supermarkets.

Apart from these, to study the factors influencing the consumers to purchase food
products from the supermarkets/food retail outlets, the information regarding the socioeconomic
factors like age, education, occupation, income, family size, family type, religion
etc., product factors like price, quality, packaging, labeling and other factors like range of
products, convenience, location, credit, home delivery, parking facility, service quality and
schemes and offers etc., were collected from the randomly selected consumers from each
supermarkets using the pre-tested schedule through the personal interview method.
B) SECONDARY DATA
The secondary data on area, population and education status of the selected cities
were collected from the respective Municipal Corporations.
3.5 ANALYTICAL TECHNIQUES EMPLOYED
In order to analyse the objectives of the study, the data collected were subjected to
analysis through appropriate techniques as follows:
3.5.1 Tabular analysis
3.5.2 Financial ratio analysis
3.5.3 Factor/cluster analysis
3.5.4 Principal Component Analysis
3.5.5 Garrett’s Ranking Technique
3.5.1 Tabular Analysis
The data collected were presented in tabular form to facilitate easy comparisons. The
investment pattern, hierarchical levels of organization in supermarket outlets, cost of
procurement, inventory costs, value addition and problems faced by the retailers were
presented in the form of tabular analysis. The data was summarized with the help of statistical
tools like averages and percentages to obtain meaningful inferences.
3.5.2 Financial ratio analysis
The financial ratio analysis technique was considered to be a most useful tool in
evaluating the performance of the supermarkets and they mainly point out the relative
importance of the selected items. The financial statements used in this study correspond to
the financial year of the supermarkets April to March of 2006-07. In this study, the ratio
analysis technique has been heavily relied upon, to test the solvency, liquidity, profitability,
turnover and sales of the supermarkets. The ratios used for the analysis are described below.
3.5.2.1 Test of Solvency
The solvency ratios would indicate the ability of the supermarkets to meet its medium
and long term obligations and they would also provide a basis for measuring the leverage
effect on the supermarkets. To meet the solvency position of the supermarkets, ratios such as
total liabilities to owned funds and fixed assets to owned funds were employed.
a. Total liabilities to owned funds ratio
The ratio reflects the total commitments which the supermarkets owed to the creditors
in relation to the owned funds of the supermarkets. This ratio is computed using the equation
given below. Total liabilities
Total liabilities to owned funds ratio = ……………………………
Owned funds
The total liabilities referred to all the items under liability column of balance sheet
except the net profits, subsidies and owned funds. The paid-up share capital, depreciation
fund, reserve funds and net profits were included under the owned funds of the supermarkets.
b. Fixed assets to owned funds ratio
This ratio would indicate the extent of owned funds invested in fixed assets. Ratio
was obtained using following equation.

Fixed assets
Fixed assets to owned funds ratio = …………………
Owned funds
Fixed assets included the value of sites, buildings, furnitures, fixtures, vehicles, etc.
3.5.2.2 Test of liquidity
This measures the ability of the supermarkets to meet immediate maturing
obligations. These ratios also called balance sheet ratios. Ratio of liquid assets to total
assets, current ratio and acid test ratio were employed to measure the liquidity position of the
supermarkets.
a. Liquid assets to totals assets ratio
This ratio shows the liquidity performance of the supermarkets. It indicates the
position of the total assets maintained in liquid form which would help the supermarket to
meet its immediate maturing obligations.
Liquid assets
Ratio of liquid assets to totals assets ratio= ………………....
Total assets
Liquid assets included cash in hand, cash at bank, short term deposits, value of
closing stock adjusting heads due to, sundry debtors, deposits with banks etc. The total
assets included all the items under the assets column of the balance sheet, viz., sum of
current assets and fixed assets.
b. Current ratio
The ratio would measure the number of units of current assets owned by the
supermarkets to meet each of the short term obligations. It is given by the following equation.
Current assets
Current ratio= ……………………..
Current liabilities
If the ratio was more than one, it suggested that current assets of the supermarkets
were adequate to pay off all current liabilities. If it was one, they were just sufficient and if less
than one, the supermarkets could be unable to pay current dues when asked for. A current
ratio of roughly two was considered to be satisfactory level. Current liability was obtained by
deducting long term loans and long term deposits from the total liabilities.
3.5.2.3 Test of profitability
The profitability ratios would provide a fairly sound method of diagnosis of the
financial status of the supermarkets and overall efficiency of the supermarkets. These ratios
compared the returns over the amount sunk into the business by the supermarkets. Thus,
these ratios indicated the profitability of sales and investments made in the business. The
ratios employed for the study are discussed below.
a. Ratio of net profit to total assets
This ratio would indicate the earning capacity of the total assets of the supermarkets.
It was computed as follows.
Net profits
Net profits to total assets = ……………………….
Total assets
An increase in the ratio over the years showed improvement in the overall
efficiency of the supermarkets. Net profits included the amount of income received by the
supermarket after meeting all its expenses at the end of the year.

. Net profits to owned funds ratio
This ratio showed the extent of profitability in relation to investments of owned funds
of the supermarkets. It was calculated by the equation given below.
Net profits
Net profits to owned funds ratio = ………………………
Owned funds
c. Net profits to total sales ratio
This ratio is also known as net profit margin. It was determined by relating the net
income after taxes to the net sales for the period. The ratio was calculated as under.
Net profits
Net profits to sales ratio = ……………………………
Total sales
A higher ratio indicated the higher overall efficiency of the business of the
supermarkets and fuller utilization of its total resources and vice-versa.
d. Net profit margin (per cent)
The net profit margin was determined by relating the net income after taxes to the
gross returns for the period and is expressed in terms of per cent.
Net profits
Net profits to sales ratio = …………………… × 100
Gross returns
3.5.2.4 Tests of turnover
The ratios which were quite important to this study, but did not come under any of the
above categories of tests are presented below.
a. Working capital turnover ratio
This ratio was employed to assess the efficiency of the total working capital employed
by the supermarkets in their business and was calculated as under.
Total sales
Working capital turnover ratio = ……………………………
Total working capital
The higher the turnover, greater would be the efficiency and larger the rate of
profitability.
b. Fixed assets turnover ratio
Fixed assets turnover ratio was used to test the sales turnover of fixed assets. It
indicates the efficiency in utilizing the fixed assets. This ratio was computed as follows.
Total sales
Working capital turnover ratio =……………….……………………
Total working capital
Higher the fixed assets turnover ratio, higher would be the efficiency of the
supermarkets (outlets) in utilization of fixed assets to generate sales.
3.5.2.5 Factor/Principal Component Analysis
The technique of factor analysis, which is a multivariate statistical technique, was
employed to ascertain the major problems faced by the supermarkets in the business of food
retailing. Factor analysis was used in data reduction by identifying a small number of factors,
which explain most of the variance observed in a much larger number of variables. In this

study, principal component analysis was used because it has some advantages than other
techniques (Patil, 2004). In principal component analysis, a set of original variables is
transformed into a new set of uncorrelated variables called principal components. The new
variables are linear functions of the original variables. The objective is to find out only a few
components, which account for most of the variation in the original set of data. The principal
component (Pi) is determined as follows.
Pi = a1jZ1 + a2jZ2 + a3j Z3 + …… + anjZn
Where,
P i = 1 to n, are new uncorrelated components,
aij = i = 1 to n, and j = 1 to n, the Z coefficients are factor loadings,
Zi = 1 to n, are observed variables as standardized by dividing (X1-Xn) by its
standard deviation (σx).
Each component makes a maximum contribution in descending order to the sum of
the variance of the variables. Normally, the first principal component contributes a maximum
to their total variance; the second principal component contributes to the residual variance
and so on. The sum of the variance of all the principal components is equal to the sum of the
variance of the original variables. Sum of square of factor loadings (a 2
1j + a 2
2j + a 2
3j + …… +
a 2
nj) is called variance explained by factor (j). This is also known as Eigen value (λ). The
percentage contribution of Pi in the total variance of original variables (Xi) is given by,
Pi = λ/n x 100 (n = number of variables)
The principal component analysis was carried out by using SPSS 10 statistical
package. After the data were fed into it, the package provided output such as correlation
matrix, initial factor matrix and rotated factor matrix. Initial factor matrix generally fails to be
meaningfully interpretable. Therefore, rotated factor matrix was used for identification of
factors. Varimax rotation (an orthogonal method), the most common rotation method was
used for rotation. This method tries to produce factors that are as simple as possible by
maximizing the variance of the loadings across the items within factors. This leads to high
loadings becoming higher and lower loadings declining. For the selection of factors eigen
values more than one are taken into account. Identification of and naming of any factor would
be a subjective conclusion. Generally, the heavy loaded key variables would be considered
as basis for identification and naming of dimension. In order to assign some meaning to factor
solution a minimum level of significance for factor loading was 0.5 was taken. Higher the
value of factor loading of the variable on a particular factor, greater would be the association
with that factor.
In principal component analysis 38 variables were considered to be the major
problems affecting the food retailing business in Karnataka. Indicators were identified after
careful investigation of the earlier studies and consultation with the higher authorities of the
supermarkets. The selected problems are presented in Table 3.1.
3.5.6 Cluster Analysis of Variables
Classification of characteristics into meaningful sets of clustering is an important
procedure in all the social and biological sciences. The cluster analysis is a formal
multivariate statistical procedure. It is a simple form of correlation analysis and it provides a
measure of similarity among different independent variables. This analysis starts with a data
set containing information about population based on the sample of entities and attempts to
reorganize these entities into relatively homogeneous groups.
The cluster analysis of variables was adopted to analyze the scores obtained from
the opinion survey of consumers in order to know the factors influencing the consumers to
purchase food products in supermarkets. Clusters were formed using the minimum distance
(maximum similarity) method, also known as complete linkage method. Initially, each variable
was considered as a separate cluster then the two most similar variables were grouped to
form a cluster. The amalgamation process was continued in a step wise fashion/method until
a single cluster was formed to contain all the variables.

Table 3.1: Selected Problems of Retailers in Food Retailing Business of Karnataka
Sl No. Problems of Retailers Code
I. Infrastructural problems
1 Land & building P1
2 Transportation P2
3 Storage P3
4 Electricity P4
5 Insurance P5
6 II. Location of the site P6
III. Employees Problems
7 Trained employees P7
8 Un trained employees P8
9 Agencies P9
IV. Source of finance
10 Banks P10
11 Govt. schemes P11
V. Media problems
12 Rate P12
13 Coverage of area P13
14 Timing P14
15 Information P15
VI. Causes of loss in retail business
16 Financial resource P16
17 Experience P17
18 Location P18
VII. Impact of WTO
19 Competition P19
20 Price of the product P20
21 Margin P21
Contd…..

VIII. VAT
22 Charges P22
23 Opinion P23
IX. Problems from the Govt. authorities
24 Tax charges P24
25 Laws P25
26 Bribes P26
27 Procedures P27
X. Problems from the wholesalers
28 Price variation P28
29 Delivery P29
30 Market information P30
31 Credit facility P31
32 Damage of products P32
33 Margin P33
XI. Problems from the customers
34 Bargain P34
35 Credit facility P35
36 Discounts & Offers P36
37 Demand for new products P37
38 Repayment P38
The so classified clusters were subjected to test the correctness of the groups’
classification using Discriminant analysis. This analysis helps us to know the relative
importance of different variables in regard to their power to discriminate between the groups.
The case-wise statistics derived from the discriminate analysis and the proximity matrix of
Squared Euclidean Distance for the cluster classifications were presented in Appendix-V and
Appendix- VI, respectively.
The selected variables/factors influencing the consumers to purchase food products
in supermarkets are presented in Table 3.2.
3.5.7 Garrett’s Ranking Technique
Garrett’s ranking technique was used to rank the factors considered by the retailers in
pricing the products at the supermarkets.
For this purpose twelve factors were first identified as important ones considered by a
majority of retailers in their business. These factors were identified in consultation with the
higher authorities of the supermarket firms and also from the past research reviews. The
factors considered by the retailers in pricing the products were nature of products, market
forces (Supply & Demand), product life, competition, long-term pricing, market segmentation,
quality of the products, relative prices of the producers, price should not be high, price should
convenience prospective consumers, price shall ensure profitability and availability of the
products. The selected retailers were asked to rank the above factors from one to twelve. In

Table 3.2: Variables Influencing the Consumers to Purchase Food Products from the
Supermarkets
Sl No. Factors Code
1 Convenient location of the supermarket F1
2 Range of products available F2
3 Convenient for purchase F3
4 Availability of quality products F4
5 Reasonable prices F5
6 Parking facility F6
7 Payment methods (Cash, Cheques or Credit cards) F7
8 Shopping is seen as enjoyable F8
9 Attractive packing F9
10 Interest in eating foreign foods F10
11 Schemes & Offers F11
12 Better service to customers F12
13 Home delivery F13
14 Save time of shopping F14
15 New food products market development F15
16 Working women and convenience F16
17 Concern about health, welfare and the environment F17
18 Peer group influence F18
19 Range of brands F19
20 Attractive Advertising F20
21 Store image F21
22 Behaviour of the employees F22
23 Freshness of the products F23
24 Labeling (Composition of ingredients) F24
25 Product warranty F25
26 Good quality products F26
27 Fresh fruits and vegetables F27
28 Fresh bakery products F28
29 Frequency of visits F29
30 Amount spare F30

this analysis, rank one meant most important factor. In the next stage, rank assigned to each
factors by each individual was converted into per cent position using the following formula.
Per cent position = 100 (Rij-0.5)/Nj)
Where, Rij stands for the i th factor (i= 1,2,……..12) by the j th individual (j = 1, 2,
…….15) and Nj stands for the number of factors ranked by j th individual. Once the per cent
positions were found, scores were determined for each per cent position by referring Garrett’s
table. Then, the scores for each factor were summed over the number of retailers who ranked
that factor. In this way, total scores were arrived at for each of the twelve factors, and mean
scores were calculated by dividing the total score by the number of retailers/supermarkets,
who gave ranks. Final overall ranking of the twelve factors was done by assigning rank 1, 2,
3, ….etc in the descending order of the mean scores.
3.6 DEFINITION OF TERMS AND CONCEPTS USED IN THE
STUDY
3.6.1 Capital investment
a. Fixed capital
The items included under the foxed capital are the cost of land, building, machinery
and equipments and other fixtures.
b. Working capital
The working capital includes cost of raw materials, utilities (like power, oil and water
charges), processing material (cloth bags, tags, labels) cost, wages, salaries, company
overheads (repair and maintenance cost) and administrative overheads (stationeries
expenses, office communication), interest on working capital, chemical cost, license fee, cost
of processing, and advertisement expenses.
c. Investment on building
This included investment on building for processing/value addition, storage, office and
drying yard.
d. Investment on machinery and equipments
Under this, investment made on display cases, floral cases, display walk-in-freezers,
Hot-food display cases, Ice machines, packing machine, weighing machines etc.
e. Investment on other fixtures
It includes investment on fan, tube lights, furniture, and computers in the
supermarkets (outlets).
f. Investment on infrastructure
It includes investment on power generator, trolleys and transport vehicles.
3.6.2 Procurement
a. Procurement cost of products
It was computed by adding the items of commission charges to organizers, transport
and loading/unloading charges.
b. Inventory
It is defined as usable but idle resource at different stages.
c. Raw material
It means that the products brought by the retailers is processed but not packed.

d. Finished product
After processing/value addition products are kept in cloth bags/polythene bags or
wrapping boxes and sealed.
e. Cost of carrying inventory
This is expressed in rupees per item held in stock per unit time. It is worked out by
adding the items of storage cost and interest on carrying inventory.
f. Storage cost
It includes the rental charges of the warehouse and maintenance charges where in
the products are stored.
g. Maintenance charges
In this variable cost of insecticides, white washing and cleaning were included.
h. Interest on carrying inventory
It is worked at the rate of 12.5 per cent at the value of products stored for number of
months.
3.6.3 Processing/value addition
I. Stages of processing/value addition
a. Pre cleaning: It refers to the removal of particles such as pieces of trash, stones, clods,
removal of foreign materials, other products etc larger in size than desirable products
from threshed products lot. Incase of fruits and vegetables, it is the washing of fruits and
vegetables to remove dusts, removal of decayed etc.
b. Conditioning: It refers to operations such as shelling, debarking etc., for basic cleaning of
fruits and vegetables.
c. Grading: It refers to the actual cleaning and grading of products based on the quality
preferences.
d. Treating: It refers to the application of fungicide, insecticide or combination of both, to
products so as to disinfect them from seed borne or soil borne pathogenic organisms and
storage insects.
e. Bagging and weighing: It refers to filling of products in bags/ polythene bags to an exact
weight.
f. Labelling and stitching: It refers to attaching labels, certificates, tags on the products bags
and sewing the seed bags.
II. Value addition
It is calculated by subtracting the purchase value of one quintal of any product from
the sale value of finished product.
III. Cost of processing/value addition
This was computed by adding the costs incurred on power, supervision charges
during processing, chemicals, packing materials (cloth/polythene bag, tags, labels, gunny
bags) and labour charges.
3.6.4 Marketing
a. Retailers: He is the one who sells company’s individual products/items in small quantities to
the ultimate consumers.
b. Cost of marketing: It is calculated by adding commission charges, outward transport
charges and advertisement expenses.

c. Outward transport charge: This is the charge incurred by the company in transporting the
products from warehouse to retailing outlets.
d. Commission charges: It is the charge paid to the intermediaries/commission agent while
buying groceries from market. This varies from commodities to commodities.
e. Advertisement expenses: These are the expenses incurred in selling the company’s
products. This is calculated by adding the cost of the items (Banners, Wall posters,
Pamphlets, Advertising through medias like TV, radio etc) spent for promoting the
sales.
f. Sales realisation: It is calculated by adding the sale value of main products.
3.6.5 Pricing Methods
I. Cost based pricing methods: In this case no account is taken for market requirements but
set of amount is added to the costs. The draw back of this method is that if cost
increases, the price of the product must also increase.
a. Absorption cost pricing – Large departmental stores follow this kind of pricing methods. The
price of each product is dependent on how many costs it creates.
b. Target pricing - A target price is made and then costs are adjusted.
II. Market based pricing methods: depends on accurate analysis of the market and consumer
requirements.
a. Penetration pricing – This method is used for new products wanting to gain market share.
The product is priced low to get a hold in the market.
b. Market skimming – for new innovative product, first few months higher prices were charged
as there is a little competition and the product is popular because of it is new.
c. Loss leader pricing – charging below cost price to try and attract customers (in
supermarkets)
d. Psychological pricing – hitting price points that are significant. Ex: Rs. 999.99 sounds better
than Rs. 1000.
e. Discounting pricing – Offering lower prices for a set time period to try and boost sales and
sell off unwanted stock.
III. Competition based pricing methods
a. Going rate or market pricing – Charging the same as the competitors or the market leader.
b. Destroyer or destructor pricing – Charging below average to drive out competition.

IV. RESULTS
In consistence with the objectives of the study, the necessary data collected from
various sources were analyzed and interpreted and the results of such analysis are presented
in this chapter under the following headings.
4.1 Documentation of supermarkets
4.2 Investment pattern in supermarkets
4.3 Organizational structure in supermarkets
4.4 Procurement management in supermarkets
4.5 Inventory management and its costs in supermarkets
4.6 Processing /Value addition in supermarkets
4.7 Financial management in supermarkets
4.8 Factors considered and methods of price-formation in supermarkets
4.9 Problems faced by the food retailers
4.10 Factors influencing the consumers to purchase the food products in supermarkets.
4.1 DOCUMENTATION OF SUPERMARKETS
Since food retailing is relatively a recent development and supermarkets have been
defining retail element of the food industry, an effort was made in this section to collect and
document existing supermarkets in selected cities across Karnataka. As on today (2006), the
names of existing supermarkets, number of outlets and address of their head offices are
presented in Table 4.1.
It was evident from the Table 4.1 that the majority of multi outlet forms of organized
food retailing firms were found only in cities like Bangalore and Mysore and recently formed
un-organized form of outlets were observed in Mangalore, Belgaum and Hubli-Dharwad.
However, the highest number of outlets accounted by Shubhiksha (40) followed by Foodworld
(33), Fabmall (23), S*mart (18), Namdhari’s Fresh (14) and Niligiri Dairy Farm Ltd (12) were
found in Bangalore city. The other supermarkets existing in the city were Spencer’s, Food
Bazaar, Ahar supermarkets, Monday 2 Sunday, Farm Line supermarkets, M.K Retail Co.
Super Mart, Ruba traders etc. All these firms had their Head Offices at Bangalore only.
In Mysore city, except few firms like Loyal World (which had 4 outlets), Fabmall, M.K
Hussain & Sons and Niligiri’s (2 outlets each); all other supermarkets had one outlets each.
The famous supermarkets in the city were Loyal World, Arihanth Super Bazaar, Mohan
Bhandar, Shivananda Supermarket, A-Z supermarket, and Food World. Among the existing
supermarkets in the city, few organized supermarketers like Food World, Niligiri’s,
Shubhiksha and Fabmall have their Head Offices at Bangalore.
Most of the supermarkets in Mangalore city were of un-organised and family owned.
Except two outlets owned by Baliga Stores Supermarket, all other supermarkets had one
outlets each in the city. The supermarkets like Andy’s supermarket, Apna Bazaar, Food
World, Niligiri’s and Food Bazaar were well known in the city. On the other hand, the
supermarkets like Jimmy’s Supermarket, Misbah Supermarket, Move N Pick, Noor Super
Bazaar Ruby’s Supermarket, Sadhar Bazaar etc were also playing their role in the business.
In Hubli-Dharwad and Belgaum cities, most of the local and traditional retailers were
recently converting their stores into modern style supermarkets. It was witnessed from the
Table 4.1 that Pick ‘n’ Pay, Sangram Food Basket, Day 2 Day, Needz Supermarket and
Eshan Super Shoppe were the only five supermarkets in Hubli-Dharwad city. However, Pick
‘n’ Pay and Sangram Food Basket had two outlets each in the city. The supermarkets
operating in the Belgaum city were Hans Raj Supermarket, Neena Supermarket, Quality
Supermarket, Rex Supermarket and Shoppers Paradise, which are all family owned.

Table 4.1: List of Supermarkets in the Study Area
City
Bangalore
Mysore
Name of the
Supermarkets
(No. of
Units)
Head Office
Shubhiksha 40 Indiranagar, Bangalore
Food World 33
Eswanth Industrial Estate, Hulimavu,
B’lre-76
Fab mall 23 Indiranagar, Bangalore-08
S*mart 18 Maruthi Nagar, Bangalore
Namdhari’s Fresh 14 Bidadi, Bangalore-09
Nilgiri Dairy Farm Ltd 12 Koramangala, Bangalore-29
Daily’s Super Market 8 Bangalore
Spencer & Co Ltd 7
Hulimavu, Bannerghatta Road, B’lre-
76
Food Bazaar 6
216-13 Suraj Towers, 27th Crs, 3rd
Blk, B’lre-11
Ahar Supermarkets 5 25 Havanoor Cle, 4th Stg, B’lre-79
Monday 2 Sunday 4
Krishnanagar Industrial Area, Hosur
Road, Bangalore-29
Farm Line Supermarkets 4 475 Sampige Rd, Bangalore-03
M.K.Retail Co.Super
Mart
2 548/B, CMH Rd, I Ngr, Bangalore-38
Mattsons Super Market 2 CMH Rd, I Ngr, Bangalore-38
Ruba Traders 2
59/2, 5th Mn, N S Palya, BTM, 2nd
Stg, B’lre-76
Veerasaiva Co-op
Society Ltd
1
742, Magadi Chord Rd, Vijaynagar,
B’lre-40
Misra Super Market 1 G1 2, Ma Ngr, Maruti Corner, B’lre-33
Needs Corner 1
370, 13th Crs, 30th Mn, 2nd Stg Bnsk,
B’lre-70
Our Shoppe 1 62 Raj Rd, 1N Blk, R Ngr, B’lre-10
Shop Right Super
Market
1
5th Mn, Subbanna Lyt Mallesh Palya,
B’lre-75
Value Mart 1 11 & 12 P&T Clny, B’lre-32
Loyal World 4 Temple road, V.V. Mohalla, Mysore
Fabmall 2 Indiranagar, Bangalore-08
M.K. Hussain & Sons 2 Mysore
Niligiri’s 2 Ballal Complex, K.M. Puram, Mysore
Arihanth Super Bazar 1
Hamilton Building, Ashok Road,
Mysore
A-Z Supermarket 1 Kuvempu Nagar, Mysore
Daily’s Super Market 1 Kuvempu Nagar, Mysore
Food World 1 Devraj Urs Road, Mysore
Mahesh Stores 1 Brindavan Extn, I Stage, Mysore
Mohan Bhandar 1 Sayyaji Road, Mysore
Shivam Provisions &
Stores
1 Brindavan Extn, I Stage, Mysore

Shivananda
Supermarket
1 Adipampa Road, V.V. Mohalla, Mysore
Shivanna Rice &
Provisions Stores
1 K.R. Hospital, Mysore
Subhiksha 1 Kuvempu Nagar, Mysore
Baliga Stores
Supermarket
2 Bejai, Mangalore-04
Ajwaa Super Market 1
Presidium Commercial Complex, Attavar,
Mangalore
Andy’s Supermarket 1 Emjays Complex, Balmatta, Mangalore-01
Apna Bazar 1 Varmanjur, Mangalore-28
Best Buy Bazar 1
Shanthi Vittal, Canara Bank Cross Road,
Mangalore
City Bazaar 1
Near Check Post, Permannur, Mangalore-
17
Family’s Supermarket 1
Essel Chambers, Karangalpady,
Mangalore-03
Food World 1 Lulu Centre, Falnir Road, Mangalore-02
Food Bazaar 1 Near KSRTC Bus Stand, Mangalore
Jimmy’s Supermarket 1
Pailands Plaza, Falnir Road, Mangalore-
01
Managalore
Kuduva’s Super
Shoppe
1 Bajpe Road, Surathkal, Mangalore-14
Misbah Supermarket 1
Misbah Impex Building, Falnir Road,
Mangalore-01
Move N Pick 1
Valencia Mansion, Valencia, Mangalore-
02
Niligiri’s 1 Mangalore
Noor Super Bazar 1 Pandeshwar, Mangalore
Panchami Super Bazar 1 Bejai, Church road, Mangalore-04
Ruby’s Supermarket 1 Anna Vista Building, Kadri, Mnagalore-02
Sadananda Super
Store
1 Surathkal, Mangalore-14
Sadhar Bazaar 1 Thokottu, Mangalore-20
Santhosh Supermarket 1 Lady hill, Mangalore
Shammos Shop N
Save Super Market
1
West Gate Centre, Pumpwell, Mangalore-
02
Velankanni Super
Market
1 Velankanni Towers., Mangalore-02
Pick ‘n’ Pay 2 Gokhul Road, Hubli
Sangam Food Basket 2 Keshwapur, Hubli
Hubli-
Dharwad
Day 2 Day
Supermarket
Needz Supermarket
1
1
Toll Naka, Hubli Road, Dharwad
Baidappanavar Nagar, Hubli
Eshan Super Shoppe 1
Kattimani Building, Deshpande Nagar,
Hubli
Belgaum
Hans Raj Supermarket 1 D.C. Compound, Belgaum
Neena Supermarket 1 Azim Nagar, Belgaum
Quality Supermarket 1 R.P.D Cross, Belgaum
Rex Supermarket 1 Club Road, Belgaum
Shoppers Paradise 1
1st Floor, Ashraya Empire, Deshmukh
Road,Tilakwadi, Belgaum, College Rd.

4.2 INVESTMENT PATTERN IN SUPERMARKETS
The average area of the supermarket outlets and their capital investment patterns are
presented in Table 4.2. It is observed from the table that the average area of the supermarket
was found to be more in Bangalore (4333.33 square feet) followed by Mysore (3133.33
square feet), Hubli-Dharwad (2833.33 square feet), Mangalore (1833.33 square feet) and
Belgaum (1200 square feet). The expenditure incurred on the establishment of supermarket
outlet is treated as fixed capital investment which includes land & building, machineries &
equipment, infrastructural facilities, other fixtures, salary to permanent employees and other
fixed capital.
It could be seen from the table that the overall total fixed costs per outlet was 78.42
lakh. Though, the fixed capital drastically varied from city to city, the highest of Rs. 258.30
lakh was found in Bangalore followed by Rs. 71.60 lakh in Hubli-Dharwad, Rs. 39.23 lakh in
Mysore, Rs. 18.81 lakh in Belgaum and Rs. 13.00 lakh in Mangalore, conversely, it accounts
for 30.01per cent of the total capital. Among different fixed capital, the proportion of land &
building alone accounts for 23.50per cent of the total capital and the remaining fixed capital
elements such as machineries & equipments, other fixtures and salary to permanent
employees accounts to 2.10per cent, 1.20per cent, 1.08per cent respectively, of the total
capital. Incase of working capital, raw materials were the prime costs, contributing about 67
per cent of the total working capital. The other working capital incurred in the establishment of
supermarkets were wages to casual labours, power charges, packaging material etc and their
share in the total capital was very meager (less than one per cent). However, at an overall
average level the total costs required to establish a supermarket in Karnataka was Rs. 261.33
lakh and the same in different cities such as Bangalore, Mysore, Hubli-Dharwad, Mangalore
and Belgaum were Rs. 762.061 lakh, Rs. 205.876 lakh, Rs. 173.191 lakh, Rs. 96.78 lakh and
Rs. 78.53 lakh, respectively.
4.3 ORGANIZATIONAL STRUCTURE OF SUPERMARKETS
Organizational structure involves arrangement of activities and assignments of
personnel to these activities in order to achieve the organizational goals. From a managerial
point of view the main concerns are ensuring effective communication and coordination. It is a
way by which various parts of an organization are tied together in coordinated manner and it
illustrates the various relationships among various levels of the hierarchy within the
organization as well as horizontal relationships among various aspects of the organizational
operations. A well planned organization structure results in better use of resources.
Such organization structure shows,
i) The pattern of authority and responsibility among organization members.
ii) The communication flow within the organization.
iii) The system of task differentiation and integration.
The type of organization structure would depend upon the type of organization itself
and its philosophy of operations. Basically there are six types of organization structures.
a) Line organization
b) Line and staff organization
c) Functional organization
d) The divisional organization
e) Project organization
f) Matrix organization
Though the study found that line, line and staff, and the functional categories of
organizational structures in multi outlet (chain of supermarkets) firms/companies, the line
organization was commonly followed in both multi outlet firms (chain of supermarkets) and
supermarkets not in chain.
Line organization: This is the clear and simplest form of organization and is the most common
among low investment companies. The authority is embedded in the hierarchical structure

Table 4.2: Investment Pattern in Supermarkets
Average Area of the Super market (Sq
ft)
Bangalore Mysore Mangalore Belgaum
Hubli-
Dharwad
Overall
4333.33 3133.33 1833.33 1200.00 2833.33 2666.67
(Rs. in Lakhs)
Fixed Capital
Land & Building 217.30 22.87 2.65 13.73 50.51 61.41 23.50
Machineries & Equipments 14.09 6.11 3.23 1.27 2.78 5.50 2.10
Infrastructures 4.72 2.00 1.83 0.90 1.40 2.17 0.83
Other Fixtures 6.11 2.55 2.12 1.45 3.42 3.13 1.20
Salary to Permanent Employees 5.89 2.53 1.85 1.34 2.52 2.82 1.08
Other Fixed Capital 10.19 3.17 1.31 0.12 10.98 3.39 1.30
Total FC 258.30 39.23 13.00 18.81 71.60 78.42 30.01
Working Capital
Raw Material Capital 487.63 159.40 78.87 56.62 92.90 175.09 67.00
Casual Wages 0.72 0.42 0.25 0.18 0.39 0.35 0.13
Power Charges 3.56 2.09 1.14 1.20 2.11 2.02 0.77
Packaging Material 3.27 1.53 1.12 0.68 1.64 1.64 0.63
Other Working Capital 9.25 3.22 2.40 1.05 4.55 3.81 1.46
Total Working Capital 503.76 166.65 83.78 59.73 101.59 182.91 69.99
Total Capital 762.06 205.88 96.77 78.53 173.19 261.33 100.00
Note: 1. other fixtures like almeras, good will and electrical installations
2. Other Fixed Capital includes - Borrowed capital, Interest on Borrowed capital, License fee, Insurance Premium etc.
3. Other Working Capital includes - Repair & Maintenance, Fuel charges, Borrowed working capital, Interest on working capital, Telephone
charges, Sales tax / VAT, Office maintenance, Building maintenance, Transport, Handling, Market fee, Advertisement etc.
%

and it flows in a direct line from the top of the managerial hierarchy down to the operative
levels of workers. It clearly identifies authority, responsibility and accountability at each level.
These relationships in the hierarchy connect the position and tasks of each level with those
above and below it. There is a clear unity of command so that the person at each level is
reasonably independent of any other person at the same level and is responsible only to the
person above him. Thereby, the communication is fast and easy feedback from the
employees is acted upon faster. The line personnel are directly involved in achieving the
objectives of the company.
Line and staff organization: In this type of organizational structures delineation of
organizational authority between management personnel (staff) having overall planning and
direction responsibilities and operational personnel (line) having direct job performance
responsibilities. Here staff is advisory to the line function.
Functional Organization: This type of organization structure is based on functional
performance, organizational departments created to fulfill organizational functions such as
marketing, finance, and personnel. This type of organization has characteristics of both line
and staff functions.
The organization structures of supermarkets in chain and supermarkets not in chain
are illustrated in Figure 1 and Figure 2.
4.3.1 Organizational structures of supermarkets in chain
In the hierarchy of these outlets/supermarkets, they have executive (Managing
Director (MD)/Chief Executive Officer (CEO)). The role of a Managing Director (MD) is to
design, develop and implement the strategic plan for their company in the most cost effective
and time efficient manner. He is responsible for both the day-to-day running of the company
and developing business plans for the long term future of the organization. In the
Supermarket firms, MD is assisted by General Managers (GM) of all the departments such as
Purchase, Marketing, finance and the systems.
The General Manager is also an executive who has overall responsibility for
managing both the revenue and cost elements of a particular department. This is often
referred to as Profit & Loss (P&L) responsibility. This means that General Managers usually
oversee most or all of the functions as well as the day-to-day operations of the particular
department. Frequently, He is also responsible for leading or coordinating the strategic
planning functions of the company. The GM (Purchase) is assisted by an Assistant General
Manager (AGM); he is in turn assisted by Purchase managers, Store managers, Supervisors
and labours in a hierarchy. The whole team is responsible for the complete purchase and
procurement of related materials for the company. The Purchasing managers, buyers, and
purchasing agents make up a key component of a firm’s supply chain. The responsibilities of
the GM (Marketing) and his team involve supervision, marketing, profitability and sales,
reporting, resale pricing, inventory, service maintenance and other duties as requested by
management. He is assisted by an AGM (Marketing), Shop managers, supervisors, cashiers,
attenders, sales representatives and watchmen in a top-down hierarchy. The GM (Finance)
assisted with AGM (Accounts) and Accountants is responsible for maintenance of overall
accounting and auditing aspects of the business. Finally, GM (System) looks after day to day
operations of the supermarkets and is responsible for developing process, systems, quality
and service standards. The flow chart of the organizational structure of supermarkets is
shown in Fig. 1.
4.3.2 Organizational structures of supermarkets not in chain
In these supermarkets, the Proprietor or the Manager is the head of the supermarket
and he will be the decision maker in the organization. He is usually assisted with Supervisors,
Cashiers, Sales representatives and watchmen in a hierarchical way. The manager himself
looks after purchasing, inventory and marketing activities. Some time, the supervisors are
attending for various activities like purchasing, processing, marketing and sales activities as
assigned by the manager. The organizational flow chart is shown in Fig. 2.

4.4 PROCUREMENT MANAGEMENT IN SUPERMARKETS
Procurement Management automates all procurement processes and enables any
organization to establish a collaborative working relationship with key suppliers. More efficient
and streamlined procurement activities reduce purchasing costs, eliminate unnecessary
transactions, and enable us to take advantage of strategic supplier relationships.
4.4.1 Existing procurement patterns
The existing purchasing pattern and the agency preferred by the supermarkets
across Karnataka are presented in Table 4.3. It was observed from the table that the
supermarkets followed centralized or store level purchasing pattern for procuring the selected
products. In Bangalore, cent per cent of the supermarkets followed centralized purchasing
pattern whereas in case of Mangalore and Belgaum, cent per cent preferred store level
purchasing. In Mysore, 66.67per cent preferred store level purchasing and 33.33per cent
have gone for centralized purchasing and the reverse was found in Hubli-Dharwad. Further, it
was noticed from the table that all the supermarkets purchased groceries through
Commission Agent/Market in all the cities but fruits and vegetables were purchased from
various sources. In addition to the own production and direct purchase from the farmers,
some of the supermarkets in Bangalore purchased fruits and vegetables from Commission
Agents also for resale at supermarkets but in Mysore and Mangalore these products were
purchased from Commission Agents only. No sale of fruits and vegetables was found in
Belgaum and Hubli-Dharwad supermarkets.
4.4.2 Monthly Average Quantity and Value of Procurement in Various
Supermarkets across Cities
4.4.2.1 Bangalore
The monthly average quantity and value of procurement of selected commodities by
supermarkets in Bangalore city are presented in Table 4.4. It was revealed from the table that
among grocery items, the average frequency of purchase was 4.67 in rice, wheat, green gram
and tur dal but it was 4.33 in chilli and 2.67 in mustard. Rice was procured in highest (10.46
quintals) quantity followed by tur dal (2.77 quintals), green gram (2.38 quintals), wheat (1.84
quintals), chilli (0.33 quintals) and mustard (0.24 quintals). All the groceries were procured
from the commission agents/market. The SMR (standard), SMR (premium) and SMR
(regular) varieties in rice, and Byadgi stem less variety of chilli were the major varieties in their
respective items procured in highest quantities. However, the total amount spent on these
items was found to be high in rice (Rs. 86,446.58) followed by green gram (Rs. 51,451.11),
tur dal (Rs. 42,543.19), wheat (Rs. 17,664.28), chilli (Rs. 10,375.28) and mustard (Rs.
1,603.34). The weighted average price per quintal was the highest in chilli (Rs. 7,238.57) and
lowest in rice (Rs. 1740.54) in grocery items.
Whereas incase of fruits and vegetables, tomato was procured was highest (2.93
quintals) quantity followed by onion (2.68 quintals) and banana (1.25 quintals each), and
apple (0.60 quintals). On an average, the frequency of purchase was 10 in case of tomato
and banana while it was 4.67 in onion and 8.33 in apple. In addition to commission agents
and direct procurement of tomato from farmers, own production was also detected in
Bangalore supermarkets. The maximum amount spent in procurement of apple.
4.4.2.2 Mysore
Table 4.5 represents the average quantity and value of products procurement of
commodities by supermarkets in Mysore city. The average monthly frequency of purchase
was four in rice, wheat, green gram, tur dal and chilli whereas it was 15 times in mustard.
Here the highest quantity of commodity procured by the supermarkets was in rice (7.48
quintals) followed by green gram (1.58 quintals), tur dal (1.38 quintals), wheat (1.03 quintals),
chilli (0.16 quintals) and mustard (0.12 quintals) in grocery items. In respect of total amount,
the maximum of Rs. 49,797.89 was observed in rice due to its high quantity procured and the
minimum was found in mustard (Rs. 583.33) as it was purchased in small quantity.
The maximum procurement in case of fruits and vegetables was found in banana (20
quintals) followed by tomato (12 quintals), onion (10 quintals) and apple (6 quintals) and the
total amounts to Rs. 33,120 for apple, Rs. 33,000 for banana, Rs. 6,700 for onion and Rs.

Fig.1: Organizational structure of super market in chain

Fig.2: Organizational Structure of small Supermarkets (Not in Chain)

Table 4.4: Monthly Average Quantity and Value of Products Procurement in Bangalore Supermarkets
Rice
Wheat
Green Gram
Tur Dal
Products Agency Purchase
Frequency
Qty
Purchased
/Trip (qtls)
Price/
Quintal
(Rs)
Total Quantity
(Qtls)
Total Amount
(Rs)
SMR (Premium) 4.67 2.29 1863.33 10.67 19875.56
SMR (Regular) 4.67 2.21 1762.33 10.33 18210.78
SMR (Std) 4.67 2.45 1647.67 11.42 18810.86
PBRice 4.67 0.34 1662.00 1.58 2631.50
Idli Rice 4.67 1.00 1299.00 4.67 6062.00
RBR Traders in APMC 4.67 0.41 1351.00 1.92 2589.42
Jeera Rice 4.67 0.43 2402.00 2.00 4804.00
Dosa rice 4.67 0.64 1256.67 3.00 3770.00
Basmati Rice 4.67 0.88 2373.67 4.08 9692.47
Total 10.64 49.67 86446.58
Weighted Average
1740.54
Punjab 4.67 1.23 1579.33 5.75 9081.17
Broken
Total
Traders in APMC
4.67 0.61
1.84
3029.33 2.83
8.58
8583.11
17664.28
Weighted Average
2057.97
GM whole 4.67 1.59 4640.00 7.42 34413.33
GM split
Total
Traders in APMC
4.67 0.79
2.38
4646.67 3.67
11.08
17037.78
51451.11
Weighted Average
4642.21
Premium 4.67 1.91 3421.67 8.92 30509.86
Regular
Total
Traders in APMC
4.67 0.86
2.77
3008.33 4.00
12.92
12033.33
42543.19
Weighted Average
3293.67
Contd…….

Chilli
Byadigi (with stem) 4.33 0.15 7158.33 0.67 4772.22
Guntur (stem less) 4.33 0.09 7833.33 0.38 3002.78
Guntur (with stem) Traders in APMC 4.33 0.09 6783.33 0.38 2600.28
Total 0.33 1.43 10375.28
Weighted Average
7238.57
Mustard Big Traders in APMC 2.67 0.24 2518.33 0.64 1603.34
Tomato
Tomato
Farmer 10.00 1.43 435.00 14.25 6198.75
Own prodn 10.00 1.50 375.00 15.00 5625.00
Total 2.93 29.25 11823.75
Weighted Average 404.23
Onion Onion Wholesale Market 4.67 2.68 728.33 12.50 9104.17
Banana Banana Wholesale Market 10.00 1.25 1800.00 12.50 22500.00
Apple Shimla Apple Wholesale Market 8.33 0.60 5350.00 5.00 26750.00
Note: Traders in APMC-Agricultural Produce Market Committee

Table 4.5: Monthly Average Quantity and Value of Products procurement in Mysore Supermarkets
Products Agency
Rice
Wheat
Purchase
Frequency
Qty
Purchased/Trip
(qtls)
Price/
Quintal (Rs)
Total
Quantity
(Qtls)
Total
Amount (Rs)
SMR (Premium) 4 1.25 1785.00 5.00 8925.00
SMR (Regular) 4 1.42 1733.33 5.67 9822.22
SMR (Std) 4 2.17 1621.67 8.67 14054.44
PBRice 4 0.25 1608.33 1.00 1608.33
Idli Rice 4 0.72 1256.67 2.87 3602.44
RBR Traders in APMC 4 0.25 1316.67 1.00 1316.67
Jeera Rice 4 0.25 2350.00 1.00 2350.00
Dosa rice 4 0.68 1248.33 2.73 3412.11
Basmati Rice 4 0.50 2353.33 2.00 4706.67
Total 7.48 29.93 49797.89
Weighted Average
1663.63
Punjab 4 0.75 1553.33 3.00 4660.00
Broken 4 0.28 3040.00 1.13 3445.33
Traders in APMC
Total 1.03 4.13 8105.33
Weighted Average
1960.97
Contd…..

Green
Gram
Tur Dal
Chilli
GM whole 4 0.83 4623.33 3.33 15411.11
GM split
Traders in APMC
4 0.75 4661.67 3.00 13985.00
Total 1.58 6.33 29396.11
Weighted Average
4641.49
Premium 4 0.80 3393.33 3.20 10858.67
Regular 4 0.58 3033.33 2.33 7077.78
Traders in APMC
Total 1.38 5.53 17936.44
Weighted Average
3241.53
Byadigi (with stem) 4 0.07 7220.00 0.27 1925.33
Guntur (stem less) 4 0.05 7815.00 0.20 1563.00
Guntur (with stem) Traders in APMC 4 0.04 6780.00 0.17 1175.20
Total 0.16 0.64 4663.53
Weighted Average
7286.77
Mustard Big Traders in APMC 15 0.12 2500.00 0.23 583.33
Tomato Tomato Wholesale Market 15 0.80 550.00 12.00 6600.00
Onion Onion Wholesale Market 4 2.50 670.00 10.00 6700.00
Banana Banana Wholesale Market 10 2.00 1650.00 20.00 33000.00
Apple Shimla Apple Wholesale Market 10 0.60 5520.00 6.00 33120.00
Note: Traders in APMC-Agricultural Produce Market Committee

6600 for tomato. The average frequency of purchase was 15 in tomato, 10 in banana and
apple, but four in onion.
4.4.2.3 Mangalore
The average monthly procurement of selected commodities by the supermarkets in
Mangalore city is shown in Table 4.6. It could be seen from the table that the maximum
quantity of grocery was purchased in rice (39.65 quintals amounts to Rs. 64,186.33) followed
by tur dal (6.82 quintals amounts to Rs. 21,105.08), green gram (5.63 quintals amounts to Rs.
25,071.11), wheat (2.48 quintals amounts to Rs. 4,996.94) chilli (0.69 quintals) and mustard
(0.15 quintals). The purchase frequency was 5.67 in rice, wheat, green gram, tur dal and
chilli. Mustard procured 2.33 times in a month.
In fruits and vegetables, there was no sale of apple noticed in Mangalore
supermarkets, however, more procurement quantity and total costs were observed in banana
(9 quintals & Rs. 14,700) followed by onion (5.5 quintals & Rs. 3932.50) and tomato (4.5
quintals & Rs. 2797.50). The unit costs were also in the same order, while the purchase
frequency was 10 in tomato and banana, and five in onion.
4.4.2.4 Belgaum
The purchase frequency of groceries in Belgaum was differed from commodity to
commodity (Table 4.7). However, the frequency observed was 4.39 in rice, 4.67 in wheat,
4.33 in green gram, 4.42 in tur dal, 4.33 in chilli and two in mustard. All these products were
procured from commission agents only. The table reveals that rice (13.95 quintals) was the
major commodity procured by the supermarkets followed by tur dal (4.25 quintals), wheat
(3.83 quintals), chilli (0.19 quintals) and mustard (0.09 quintals). While the estimated total
amount were Rs. 21,962.78, Rs. 12,562.50, Rs. 12,611.39, Rs. 6,974.31, Rs. 1,292 and Rs.
196.44 in case of rice, tur dal, green gram, wheat, chilli and mustard, respectively. No sale of
fruits and vegetables was noticed in Belgaum city supermarkets.
4.4.2.5 Hubli-Dharwad
Table 4.8 presents the average monthly costs incurred in procurement of
commodities by supermarkets in Hubli-Dharwad city. It could be seen from the table that rice
followed by green gram, tur dal, wheat, chilli and mustard were procured in the order of 26.77
quintals, 5.75 quintals, 5.22 quintals, 5.50 quintals, 0.26 quintals and 0.18 quintals,
respectively. The amount spent high in respective commodities. The frequency purchase was
3.67 in rice, wheat, green gram, tur dal and two in mustard. No sale of fruits and vegetables
were seen in Hubli-Dharwad.
4.4.2.5 Overall
The overall monthly average quantity and value of products procured across different
cities in Karnataka are shown in Table 4.9. It was noticed from the table that the average
frequency of purchase in groceries was 4.53 times a month in rice and wheat, 4.47 times in
green gram, 4.48 times in tur dal, 4.67 times in chilli but only 2.2 times in mustard. The
quantity purchased was also more in rice (7.69 quintals) followed by tur dal (1.55 quintals),
green gram (1.42 quintals), wheat (1.09 quintals), chilli (0.21 quintals) and mustard (0.12
quintals). The amount spent on grocery items was more in rice (Rs. 57,715.31) followed by
green gram (Rs. 9,48,952), tur dal (Rs. 21,716.35), wheat (Rs. 9,489.52), chilli (Rs. 6,482.37)
and mustard (Rs. 6,482.37). Further, it is revealed that the APMC was the only agency
preferred in buying these products.
In case of fruits and vegetables, the purchase frequency was more in tomato (10.83)
and banana (10.00). Similarly, the quantity purchased was high in tomato (2.16 quintals/trip)
as the quantity purchased in maximum quantity. Apart from own production, these fruits and
vegetables were procured from various sources such as commission agents and direct
purchase from the farmers particularly in case of tomato.

Table 4.6: Monthly Average Quantity and Value of Products Procurement in Mangalore Supermarkets
Rice
Wheat
Green Gram
Products Agency
Purchase
Frequency
Qty Purchased/
Trip (qtls)
Price/
Quintal
(Rs)
Total Quantity
(Qtls)
Total Amount
(Rs)
SMR (Premium) 5.67 1.03 1813.33 5.83 10577.78
SMR (Regular) 5.67 1.36 1726.67 7.73 13352.89
SMR (Std) 5.67 1.60 1625.00 9.08 14760.42
PBRice 5.67 0.66 1558.33 3.75 5843.75
Traders in APMC
Idli Rice 5.67 0.51 1200.00 2.87 3440.00
RBR 5.67 0.70 1250.00 3.95 4937.50
Dosa rice 5.67 0.59 1175.00 3.33 3916.67
Basmati Rice
5.67 0.55 2373.33 3.10 7357.33
Total 7.00 39.65 64186.33
Weighted Average 1618.82
Punjab 5.67 0.29 1530.00 1.62 2473.50
Traders in APMC
Broken
5.67 0.15 2911.67 0.87 2523.44
Total 0.44 2.48 4996.94
Weighted Average 2012.19
GM whole 5.67 0.49 4366.67 2.80 12226.67
Traders in APMC
GM split
5.67 0.50 4533.33 2.83 12844.44
Total 0.99 5.63 25071.11
Weighted Average 4450.49
Contd…..

Tur Dal
Chilli
Premium 5.67 0.51 3240.00 2.87 9288.00
Traders in APMC
Regular
5.67 0.70 2991.67 3.95 11817.08
Total 1.20 6.82 21105.08
Weighted Average 3096.10
Byadigi (with stem) 5.67 0.05 7090.00 0.26 1867.03
Guntur (stem less) Traders in APMC 6.50 0.04 7225.00 0.26 1842.38
Guntur (with stem)
5.67 0.03 6641.67 0.18 1162.29
Total 0.12 0.69 4871.70
Weighted Average 7026.49
Mustard Big Traders in APMC 2.33 0.06 2406.67 0.15 361.00
Tomato Tomato Wholesale Market 10.00 0.45 621.67 4.50 2797.50
Onion Onion Wholesale Market 5.00 1.10 715.00 5.50 3932.50
Banana Banana Wholesale Market 10.00 0.90 1633.33 9.00 14700.00
Note: Traders in APMC-Agricultural Produce Market Committee

Table 4.7: Monthly Average Quantity and Value of Products procurement in Belgaum Supermarkets
Rice
Wheat
Products Agency
Purchase
Frequency
Qty Purchased/Trip
(qtls)
Price/
Quintal (Rs)
Total
Quantity
(Qtls)
Total
Amount
(Rs)
SMR (Premium) 4.50 0.67 1700.00 3.00 5100.00
SMR (Regular) 4.33 0.77 1658.33 3.33 5527.78
SMR (Std) Traders in 4.33 0.92 1500.00 3.97 5950.00
Idli Rice
APMC
4.33 0.35 1200.00 1.50 1800.00
Dosa rice 4.33 0.27 1150.00 1.15 1322.50
Basmati Rice
4.50 0.22 2262.50 1.00 2262.50
Total 3.19 13.95 21962.78
Weighted Average 1574.39
Punjab Traders in 4.33 0.60 1441.67 2.58 3724.31
Broken
APMC
5.00 0.25 2600.00 1.25 3250.00
Total 0.85 3.83 6974.31
Weighted Average 1819.38
Contd……

Green Gram
Tur Dal
Chilli
Mustard
GM whole Traders in 4.33 0.44 4233.33 1.90 8043.33
GM split
APMC
4.33 0.25 4216.67 1.08 4568.06
Total 0.69 2.98 12611.39
Weighted Average 4227.28
Premium Traders in 4.50 0.50 3050.00 2.25 6862.50
Regular
APMC
4.33 0.46 2850.00 2.00 5700.00
Total 0.96 4.25 12562.50
Weighted Average 2955.88
Byadigi (with stem)
Big
Note: Traders in APMC-Agricultural Produce Market Committee
Traders in
APMC 4.33 0.04 6800.00 0.19 1292
Traders in
APMC 2.00 0.04 2266.67 0.09 196.44

Table 4.8: Monthly Average Quantity and Value of Products Procurement in Hubli-Dharwad Supermarkets
Rice
Wheat
Products Agency
Purchase
Frequency
Qty Purchased/Trip
(qtls)
Price/
Quintal (Rs)
Total
Quantity
(Qtls)
Total
Amount
(Rs)
SMR (Premium) 3.67 2.09 1795.00 7.67 13761.67
SMR (Regular) 3.67 1.45 1701.67 5.33 9075.56
SMR (Std) Traders in 3.67 1.91 1606.67 7.00 11246.67
Idli Rice
APMC
3.67 0.70 1266.67 2.58 3272.22
Dosa rice 3.67 0.63 1183.33 2.32 2741.39
Basmati Rice
3.67 0.51 2366.67 1.87 4417.78
Total 7.30 26.77 44515.28
Weighted Average 1663.09
Punjab Traders in 3.67 1.09 1476.67 4.00 5906.67
Broken
APMC
3.67 0.41 2758.33 1.50 4137.50
Total 1.50 5.50 10044.17
Weighted Average 1826.21
Contd…….

Green Gram
Tur Dal
Chilli
Mustard
GM whole Traders in 3.67 0.80 4050.00 2.92 11812.50
GM split
APMC
3.67 0.77 4236.67 2.83 12003.89
Total 1.57 5.75 23816.39
Weighted Average 4141.98
Premium Traders in 3.67 0.60 3136.67 2.22 6952.94
Regular
APMC
3.67 0.82 2970.00 3.00 8910.00
Total 1.42 5.22 15862.94
Weighted Average 3040.82
Byadigi (with stem)
Big
Traders in
APMC
Traders in
APMC
Note: Traders in APMC-Agricultural Produce Market Committee
3.67 0.07 6783.33 0.26 1763.67
2.00 0.09 2350.00 0.18 423.00

Table 4.9: Overall Monthly Average Quantity and Value of Products Procurement in Supermarkets
Rice
Wheat
Products Agency
Purchase
Frequency
Qty Purchased
/Trip (qtls)
Price/
Quintal(Rs)
Total
Quantity(Qtls)
Total Amount
(Rs)
SMR (Premium) 4.50 1.43 1791.33 6.43 11524.24
SMR (Regular) 4.47 1.45 1716.47 6.48 11122.70
SMR (Std) 4.47 1.80 1600.20 8.03 12844.27
PBRice 4.78 0.44 1609.56 2.11 3397.95
Idli Rice 4.47 0.65 1244.47 2.90 3604.81
RBR Traders in APMC 4.78 0.48 1305.89 2.29 2989.03
Jeera Rice 4.33 0.35 2376.00 1.50 3564.00
Dosa rice 4.47 0.56 1202.67 2.51 3014.68
Basmati Rice 4.50 0.54 2345.90 2.41 5653.62
Total 7.69 34.65 57715.31
Weighted Average
1665.51
Punjab 4.47 0.76 1516.20 3.39 5139.92
Broken 4.60 0.33 2867.87 1.52 4349.60
Traders in APMC
Total 1.09 4.91 9489.52
Weighted Average
1934.00
Contd……

Green
Gram
Tur Dal
Chilli
GM whole 4.47 0.82 4382.67 3.67 16099.00
GM split 4.47 0.60 4459.00 2.68 11964.98
Traders in APMC
Total 1.42 6.36 28063.98
Weighted Average
4414.89
Premium 4.50 0.86 3248.33 3.89 12636.02
Regular
Total
Traders in APMC
4.47 0.68
1.55
2970.67 3.06
6.95
9080.34
21716.35
Weighted Average
3126.15
Byadigi (with stem) 4.40 0.07 7010.33 0.33 2308.74
Guntur (stem less) 4.94 0.06 7624.44 0.28 2130.61
Guntur (with stem) Traders in APMC 4.67 0.08 5584.58 0.37 2043.03
Total 0.21 0.97 6482.37
Weighted Average
6651.24
Mustard Big Traders in APMC 2.20 0.12 2408.33 0.26 619.74
Tomato
Tomato
Farmer 10.00 1.43 435.00 14.25 6198.75
Wholesale Market 12.50 0.66 585.83 8.25 4833.13
Own prodn 10.00 1.50 375.00 15.00 5625.00
Total 2.16 23.25 10458.13
Weighted Average 449.81
Onion Onion Wholesale Market 4.56 2.05 704.44 9.33 6574.81
Banana Banana Wholesale Market 10.00 1.38 1694.44 13.83 23439.81
Apple Shimla Apple Wholesale Market 9.17 0.60 5435.00 5.50 29892.50
Note: Traders in APMC-Agricultural Produce Market Committee

4.4.3 Monthly costs incurred in procurement of commodities by supermarkets
in different cities
4.4.3.1 Bangalore
The Average monthly costs incurred in procurement of selected commodities by
supermarkets in Bangalore city are presented in Table 4.10. It was revealed from the table
that among grocery items, rice accounts for highest total cost (Rs. 88,545.75) in procurement
followed by green gram (Rs. 52,010.28), tur dal (Rs. 43,091.11), wheat (Rs. 18,135.11), chilli
(Rs. 5,955.39) and mustard (Rs. 1,773.52) while the quantity was maximum in rice (49.67
quintals) followed by tur dal (12.92 quintals), green gram (11.08 quintals), wheat (8.58
quintals), chilli (0.77 quintals) and mustard (0.64 quintals). Other than the price of the product,
transport costs are the prime costs in procurement however; the costs were Rs. 2,099.17, Rs.
559.17, Rs. 547.92, Rs. 470.83, Rs. 128.33 and Rs. 106.20 in rice, green gram, tur dal,
wheat, chilli and mustard respectively. The sales tax at the rate of four per cent seen only in
case of spices and it was found to be highest of Rs. 224.00 in chilli as the unit cost of the
product itself was high. Further, the total cost per quintal (weighted average) was high in the
order of chilli (Rs. 7,767.90), green gram (Rs. 4,692.66), tur dal (Rs. 3,336.09), mustard (Rs.
2,785.63), wheat (Rs. 2,112.83) and rice (Rs. 1,782.80).
In case of fruits and vegetables, tomato was procured in highest (29.25 quintals)
quantity followed by onion and banana (12.50 quintals each) and apple (5 quintals). The total
cost were high (Rs. 27,025) in apple followed by banana (Rs. 23,175), onion (Rs. 9,779.17)
and tomato (Rs. 14,448.75). The transport costs incurred in procurement of fruits and
vegetables were Rs. 2,625.00 in tomato, Rs. 675 each in banana and apple, and Rs. 275 in
onion. Yet, the costs per quintal were in the order of Rs. 5,405 in apple, Rs. 1,854 in banana,
Rs. 782.33 in onion and Rs. 493.97 in tomato.
4.4.3.2 Mysore
Table 4.11 corresponds to the average monthly cost incurred in procurement of
commodities by supermarkets in Mysore city. Here the highest total cost was accounted by
rice (Rs. 51,080.56) due to its higher quantity purchased and the minimum was accounted by
mustard (Rs. 646) as it was purchased in small quantity (0.23 quintals). The subsequent total
costs of other groceries were, Rs. 29,669.44 in green gram, Rs. 18,174.44 in tur dal, Rs.
8,309.67 in wheat and Rs. 4,949.52 in chilli. The proportion of transport cost was higher in
rice that is Rs. 1,282.67 followed by green gram (Rs. 273.33), tur dal (Rs.238.00), wheat (Rs.
204.33), chilli (Rs. 99.67) and mustard (Rs. 39.33). The sales tax of Rs. 186.32 was observed
in chilli.
In case of fruits and vegetables, the maximum procurement was found in banana (20
quintals) and less in apple (6 quintals) thus the total cost were also high (Rs. 34,000 and Rs.
33,420) in respective commodities. The cost was Rs. 7,200 each in tomato and onion. The
unit cost was as high as Rs. 5,570 per quintal in apple. However, the transport cost was more
in banana (Rs. 1,000) and least (Rs. 300) in apple.
4.4.3.3 Mangalore
The Average monthly costs incurred in procurement of selected commodities by
supermarkets in Mangalore city are depicted in Table 4.12. It was shown from the table that
the maximum quantities of groceries were procured in rice (39.65 quintals) followed by tur dal
(6.82 quintals), green gram (5.63 quintals), wheat (2.48 quintals) and chilli (0.69 quintals) and
the maximum cost was incurred in rice (Rs. 65,539.00) followed by green gram (Rs.
25,296.44), tur dal (Rs. 21,377.75) and wheat (Rs. 5,084.11) and chilli (Rs. 5,191.83).
Mustard was procured in minimum quantity. In addition, relatively high transport cost (Rs.
1,352.67) was found in rice and low (Rs. 26.08) in mustard. The highest local sales tax of Rs.
198.06 was accounted in chilli.
In respect of fruits and vegetables, there was no sale of apple was noticed in
Mangalore supermarkets, however, more procurement and total costs were observed in
banana (9 quintals & Rs. 15,150) followed by onion (5.5 quintals & Rs. 4,207.50) and tomato
(4.5 quintals & Rs. 3,022.50). The unit costs were also found in the same order.

Rice
Wheat
Green
Gram
Table 4.10: Average Monthly Costs Incurred in Procurment of Commodities by Supermarkets in Bangalore City
Products
Monthly
Quantity
Procured
(Qtls)
Price
(Rs/Qtl)
Total Price
(Rs)
Local
Sales Tax
@ 4% (Rs)
Transport
Cost (Rs)
TC (Rs) TC/Qtl (Rs)
SMR (Premium) 10.67 1863.33 19875.56 -- 447.50 20323.06 1905.29
SMR (Regular) 10.33 1762.33 18210.78 -- 438.33 18649.11 1804.75
SMR (Std) 11.42 1647.67 18810.86 -- 479.58 19290.44 1689.67
PBRice 1.58 1662.00 2631.50 -- 67.50 2699.00 1704.63
Idli Rice 4.67 1299.00 6062.00 -- 199.17 6261.17 1341.68
RBR 1.92 1351.00 2589.42 -- 80.83 2670.25 1393.17
Jeera Rice 2.00 2402.00 4804.00 -- 84.17 4888.17 2444.08
Dosa rice 3.00 1256.67 3770.00 -- 128.33 3898.33 1299.44
Basmati Rice 4.08 2373.67 9692.47 -- 173.75 9866.22 2416.22
Total 49.67 86446.58 0.00 2099.17 88545.75
Weighted average price 1782.80
Punjab 5.75 1579.33 9081.17 -- 312.50 9393.67 1633.68
Broken 2.83 3029.33 8583.11 -- 158.33 8741.44 3085.22
Total 8.58 17664.28 0.00 470.83 18135.11
Weighted average price 2112.83
GM whole 7.42 4640.00 34413.33 -- 404.17 34817.50 4694.49
GM split 3.67 4646.67 17037.78 -- 155.00 17192.78 4688.94
Total 11.08 51451.11 0.00 559.17 52010.28
Weighted average price 4692.66
Contd……

Tur Dal
Chilli
Premium 8.92 3421.67 30509.86 -- 377.50 30887.36 3464.00
Regular 4.00 3008.33 12033.33 -- 170.42 12203.75 3050.94
Total 12.92 42543.19 0.00 547.92 43091.11
Weighted average price 3336.09
Byadigi (with stem) 0.67 7158.33 4772.22 191.13 111.00 5074.36 7611.53
Guntur (stem less) 0.38 7833.33 3002.78 119.87 64.17 3186.81 8313.42
Guntur (with stem) 0.38 6783.33 2600.28 104.13 64.17 2768.58 7222.38
Total 0.77 5603.06 224.00 128.33 5955.39
Weighted average price 7767.90
Mustard Big 0.64 2518.33 1603.34 63.98 106.20 1773.52 2785.63
Tomato
Tomato
14.25 435.00 6198.75 -- 1425.00 7623.75 535.00
15.00 375.00 5625.00 -- 1200.00 6825.00 455.00
Total 29.25 11823.75 0.00 2625.00 14448.75
Weighted average price 493.97
Onion Onion 12.50 728.33 9104.17 -- 675.00 9779.17 782.33
Banana Banana 12.50 1800.00 22500.00 -- 675.00 23175.00 1854.00
Apple Shimla Apple 5.00 5350.00 26750.00 -- 275.00 27025.00 5405.00
Note: APMC-Agricultural Produce market Committee, SMR- Sona Masoori Rice, PBR- Para Boiled Rice, RBR- Red Boiled Rice, TC-Total Cost

Table 4.11: Average Monthly Costs Incurred in Procurment of Commodities by Supermarkets in Mysore City
Rice
Wheat
Green
Gram
Tur Dal
Products
Monthly
Quantity
Procured
(Qtls)
Price
(Rs/Qtl)
Total Price
(Rs)
Local
Sales Tax
@ 4%
(Rs)
Transport
Cost (Rs)
TC (Rs) TC/Qtl (Rs)
SMR (Premium) 5.00 1785.00 8925.00 -- 213.33 9138.33 1827.67
SMR (Regular) 5.67 1733.33 9822.22 -- 243.33 10065.56 1776.27
SMR (Std) 8.67 1621.67 14054.44 -- 370.00 14424.44 1664.36
PBRice 1.00 1608.33 1608.33 -- 41.67 1650.00 1650.00
Idli Rice 2.87 1256.67 3602.44 -- 123.00 3725.44 1299.57
RBR 1.00 1316.67 1316.67 -- 42.00 1358.67 1358.67
Jeera Rice 1.00 2350.00 2350.00 -- 45.00 2395.00 2395.00
Dosa rice 2.73 1248.33 3412.11 -- 117.67 3529.78 1291.38
Basmati Rice 2.00 2353.33 4706.67 -- 86.67 4793.33 2396.67
Total 29.93 49797.89 0.00 1282.67 51080.56
Weighted average price 1706.48
Punjab 3.00 1553.33 4660.00 -- 148.33 4808.33 1602.78
Broken 1.13 3040.00 3445.33 -- 56.00 3501.33 3089.41
Total 4.13 8105.33 0.00 204.33 8309.67
Weighted average price 2010.40
GM whole 3.33 4623.33 15411.11 -- 146.67 15557.78 4667.33
GM split 3.00 4661.67 13985.00 -- 126.67 14111.67 4703.89
Total 6.33 29396.11 0.00 273.33 29669.44
Weighted average price 4684.65
Premium 3.20 3393.33 10858.67 -- 138.00 10996.67 3436.46
Regular 2.33 3033.33 7077.78 -- 100.00 7177.78 3076.19
Total 5.53 17936.44 0.00 238.00 18174.44
Weighted average price 3284.54
Contd…..

Chilli
Byadigi (with stem) 0.27 7220.00 1925.33 76.96 41.67 2043.96 7664.85
Guntur (stem less) 0.20 7815.00 1563.00 62.52 31.00 1656.52 8282.60
Guntur (with stem) 0.17 6780.00 1175.20 46.84 27.00 1249.04 7205.98
Total 0.64 4663.53 186.32 99.67 4949.52
Weighted average price 7733.62
Mustard Big 0.23 2500.00 583.33 23.33 39.33 646.00 2768.57
Tomato Tomato 12.00 550.00 6600.00 -- 600.00 7200.00 600.00
Onion Onion 10.00 670.00 6700.00 -- 500.00 7200.00 720.00
Banana Banana 20.00 1650.00 33000.00 -- 1000.00 34000.00 1700.00
Apple Shimla Apple 6.00 5520.00 33120.00 -- 300.00 33420.00 5570.00
Note: APMC-Agricultural Produce market Committee, SMR- Sona Masoori Rice, PBR- Para Boiled Rice, RBR- Red Boiled Rice, TC-Total Cost

Table 4.12: Average Monthly Costs Incurred in Procurement of Commodities by Supermarkets in Mangalore City
Rice
Wheat
Green
Gram
Tur Dal
Products
Monthly
Quantity
Procured
(Qtls)
Price
(Rs/Qtl)
Total Price
(Rs)
Local Sales
Tax @ 4%
(Rs)
Transport
Cost (Rs)
TC (Rs) TC/Qtl (Rs)
SMR (Premium) 5.83 1813.33 10577.78 -- 202.50 10780.28 1848.05
SMR (Regular) 7.73 1726.67 13352.89 -- 261.83 13614.72 1760.52
SMR (Std) 9.08 1625.00 14760.42 -- 307.50 15067.92 1658.85
PBRice 3.75 1558.33 5843.75 -- 126.50 5970.25 1592.07
Idli Rice 2.87 1200.00 3440.00 -- 98.50 3538.50 1234.36
RBR 3.95 1250.00 4937.50 -- 134.50 5072.00 1284.05
Dosa rice 3.33 1175.00 3916.67 -- 114.17 4030.83 1209.25
Basmati Rice 3.10 2373.33 7357.33 -- 107.17 7464.50 2407.90
Total 39.65 64186.33 0.00 1352.67 65539.00
Weighted average price 1652.94
Punjab 1.62 1530.00 2473.50 -- 56.33 2529.83 1564.85
Broken 0.87 2911.67 2523.44 -- 30.83 2554.28 2947.24
Total 2.48 4996.94 0.00 87.17 5084.11
Weighted average price 2047.29
GM whole 2.80 4366.67 12226.67 -- 112.00 12338.67 4406.67
GM split 2.83 4533.33 12844.44 -- 113.33 12957.78 4573.33
Total 5.63 25071.11 0.00 225.33 25296.44
Weighted average price 4490.49
Premium 2.87 3240.00 9288.00 -- 114.67 9402.67 3280.00
Regular 3.95 2991.67 11817.08 -- 158.00 11975.08 3031.67
Total 6.82 21105.08 0.00 272.67 21377.75
Weighted average price 3136.10
Contd…..

Chilli
Byadigi (with stem) 0.26 7090.00 1867.03 74.35 46.15 1987.53 7547.60
Guntur (stem less) 0.26 7225.00 1842.38 77.32 45.38 1965.07 7706.14
Guntur (with stem) 0.18 6641.67 1162.29 46.39 30.54 1239.23 7081.30
Total 0.69 4871.70 198.06 122.07 5191.83
Weighted average price 7488.21
Mustard Mustard 0.15 2406.67 361 14.33 26.08 401.42 2676.11
Tomato Tomato 4.50 621.67 2797.50 -- 225.00 3022.50 671.67
Onion Onion 5.50 715.00 3932.50 -- 275.00 4207.50 765.00
Banana Banana 9.00 1633.33 14700.00 -- 450.00 15150.00 1683.33
Note: APMC-Agricultural Produce market Committee, SMR- Sona Masoori Rice, PBR- Para Boiled Rice, RBR- Red Boiled Rice, TC-Total Cost

4.4.3.4 Belgaum
The average monthly charges incurred in procurement of commodities by
supermarkets in Belgaum city are shown in Table 4.13. The table reveals that rice (13.95
quintals) was the major commodity procured by the supermarkets followed by tur dal (4.25
quintals), wheat (3.83 quintals), green gram (2.98 quintals), chilli (0.19 quintals) and mustard
(0.09 quintals). While the total costs were Rs. 22,415.28, Rs. 12,712.22, Rs. 12,706.67, Rs.
7,095.97, Rs. 1,370 and Rs. 216.48 in case of rice, green gram, tur dal, wheat, chilli and
mustard, respectively. The total transport costs were found to be highest in rice (Rs. 452.50)
followed by tur dal (Rs. 144.17) and wheat (Rs. 121.67). The unit cost was highest in chilli
that is Rs. 7,212.81/quintal and lowest in rice (Rs. 1,606.83/quintal). The local sales tax in
spices was more (Rs. 51.70) in chilli as compared to mustard. No sale of fruits and
vegetables were noticed in Belgaum city supermarkets.
4.4.3.5 Hubli-Dharwad
Table 4.14 presents the average monthly costs incurred in procurement of
commodities by supermarkets in Hubli-Dharwad city. It could be seen from the table that rice
followed by green gram, wheat, tur dal, chilli and mustard were procured in their higher order
of 29.77 quintals, 5.75 quintals, 5.50 quintals, 5.22 quintals, 0.26 quintals and 0.18 quintals,
respectively. Per quintal cost was Rs. 7,216.64 for chilli, Rs. 4,179.37 for green gram, Rs.
3,077.50 for tur dal, Rs. 2,604.41 for mustard, Rs. 1,863.48 for wheat and Rs. 1700.23 for
rice. As it was observed in the earlier cities that the sales tax was applied only for spices and
chilli was the maximum contributor (Rs. 71.36) for it. Here also no sale of fruits and
vegetables was found in supermarkets.
4.4.4 Average Monthly costs Incurred in Procurement of Commodities by
Supermarkets in Karnataka
The overall average monthly costs incurred in procurement of commodities by
supermarkets in different cities (Karnataka) is given in Table 4.15. It was observed from the
table that rice (34.65 quintals) followed by tur dal (6.95 quintals), green gram (6.36 quintals),
wheat (4.91 quintals), chilli (0.65 quintals) and mustard (0.26 quintals) were the major
groceries procured by the supermarkets. In proportion to the quantity, the total costs were
found to be in the descending order of Rs. 59,056.06, Rs. 28,338.71, Rs. 21,995.17, Rs.
9,707.32, Rs. 4413.41 and Rs. 687.56 for rice, green gram, tur dal, wheat, chilli and mustard.
The costs per quintal was Rs. 6,839.55 for chilli, Rs. 4,458.11for green gram, Rs. 3,166.29 for
tur dal, Rs. 2,671.88 for mustard, Rs. 1,978.39 for wheat and Rs. 1704.20 for rice. However,
the sales tax was found in spices and it was Rs. 87.42 in chilli followed by mustard that is Rs.
25.28. Similarly, in case of fruits and vegetables, the purchase was highest in case of tomato
(23.25 quintals) followed by banana (13.83 quintals), onion (9.33 quintals) and apple (5.50
quintals). The total costs incurred were Rs. 24,148.15, Rs. 7,058.15 and Rs. 12,070.33 for
apple, banana, onion and tomato. The transport cost seems to be more in tomato (Rs.
1,612.50) and less in apple (Rs. 287.50) based on their quantity purchased.
The Commodity-wise monthly costs incurred in procurement of commodities by
supermarkets in selected cities across Karnataka are illustrated in Table 4.16. On an average
among groceries, rice was the major commodity procured in highest quantity (159.97 quintals)
followed by tur dal (34.73 quintals), green gram (31.78 quintals), wheat (24.53 quintals), chilli
(2.55 quintals) and mustard (1.29 quintals) but the total costs were high in rice (Rs.
2,73,090.19) followed by green gram (Rs. 1,43,719.78), tur dal (Rs. 1,11,404.25), wheat
(22,336.59), chilli (Rs. 19,343.49) and mustard (Rs. 3,506.21). It was note worthy to mention
that in all the commodities, quantity procured and their unit costs were found to be high in
Bangalore alone wherein the procurement of rice was 49.67 quintals (Rs. 1,707.17/quintal),
tur dal was 12.92 quintals (Rs. 3,207.42/quintal), green gram was 11.08 quintals (Rs.
4,521.86/quintal), wheat was 24.53 quintals (Rs. 1,992.15/quintal), mustard was 0.64 quintals
(Rs. 2725.04/quintal) and chilli was 0.77 quintals (Rs. 7,585.68/quintal). Next to Bangalore,
the quantity procurement and their costs varied from city to city; as it was revealed from the
table the quantity procured in rice was more (5.63 quintals) in Mangalore but least in wheat
(2.48 quintals). In most of the commodities such as rice, green gram, tur dal, chilli and
mustard the procurement was less that is 13.95 quintals, 2.98 quintals, 4.25 quintals, 0.19
quintals and 0.09 quintals, respectively in Belgaum. The local sales tax of four per cent on

Table 4.13: Average Monthly Costs Incurred in Procurment of Commodities by Supermarkets in Belgaum City
Rice
Wheat
Green Gram
Products
Monthly
Quantity
Procured
(Qtls)
Price
(Rs/Qtl)
Total Price
(Rs)
Local Sales
Tax @ 4%
(Rs)
Transport
Cost (Rs)
TC (Rs) TC/Qtl (Rs)
SMR (Premium) 3.00 1700.00 5100.00 -- 95.00 5195.00 1731.67
SMR (Regular) 3.33 1658.33 5527.78 -- 110.00 5637.78 1691.33
SMR (Std) 3.97 1500.00 5950.00 -- 125.67 6075.67 1531.68
Idli Rice 1.50 1200.00 1800.00 -- 48.33 1848.33 1232.22
Dosa rice 1.15 1150.00 1322.50 -- 38.50 1361.00 1183.48
Basmati Rice 1.00 2262.50 2262.50 -- 35.00 2297.50 2297.50
Total 13.95 21962.78 0.00 452.50 22415.28
Weighted average price 1606.83
Punjab 2.58 1441.67 3724.31 -- 84.17 3808.47 1474.25
Broken 1.25 2600.00 3250.00 -- 37.50 3287.50 2630.00
Total 3.83 6974.31 0.00 121.67 7095.97
Weighted average price 1851.12
GM whole 1.90 4233.33 8043.33 -- 63.67 8107.00 4266.84
GM split 1.08 4216.67 4568.06 -- 37.17 4605.22 4250.97
Total 2.98 12611.39 0.00 100.83 12712.22
Weighted average price 4261.08
Contd……

Tur Dal
Chilli
Mustard
Premium 2.25 3050.00 6862.50 -- 77.50 6940.00 3084.44
Regular 2.00 2850.00 5700.00 -- 66.67 5766.67 2883.33
Total 4.25 12562.50 0.00 144.17 12706.67
Weighted average price 2989.80
Byadigi (with stem) 0.19 6800.00 1292.00 51.70 26.73 1370.43 7212.81
Big 0.09 2266.67 196.44 7.87 12.17 216.48 2497.90
Note: APMC-Agricultural Produce market Committee, SMR- Sona Masoori Rice, PBR- Para Boiled Rice, RBR- Red Boiled Rice, TC-Total Cost

Table 4.14: Average Monthly Costs Incurred in procurement of Commodities by Supermarkets in Hubli-Dharwad City
Rice
Wheat
Products
Monthly
Quantity
Procured
(Qtls)
Price
(Rs/Qtl)
Total Price
(Rs)
Local
Sales Tax
@ 4%
(Rs)
Transport
Cost (Rs)
TC (Rs) TC/Qtl (Rs)
SMR (Premium) 7.67 1795.00 13761.67 -- 283.33 14045.00 1831.96
SMR (Regular) 5.33 1701.67 9075.56 -- 196.67 9272.22 1738.54
SMR (Std) 7.00 1606.67 11246.67 -- 260.00 11506.67 1643.81
Idli Rice 2.58 1266.67 3272.22 -- 96.67 3368.89 1304.09
Dosa rice 2.32 1183.33 2741.39 -- 87.33 2828.72 1221.03
Basmati Rice 1.87 2366.67 4417.78 -- 70.33 4488.11 2404.35
Total 26.77 44515.28 0.00 994.33 45509.61
Weighted average price 1700.23
Punjab 4.00 1476.67 5906.67 -- 150.00 6056.67 1514.17
Broken 1.50 2758.33 4137.50 -- 55.00 4192.50 2795.00
Total 5.50 10044.17 0.00 205.00 10249.17
Weighted average price 1863.48
Contd…..

Green
Gram
Tur Dal
GM whole 2.92 4050.00 11812.50 -- 108.33 11920.83 4087.14
GM split 2.83 4236.67 12003.89 -- 106.67 12110.56 4274.31
Total 5.75 23816.39 0.00 215.00 24031.39
Weighted average price 4179.37
Premium 2.22 3136.67 6952.94 -- 81.33 7034.28 3173.36
Regular 3.00 2970.00 8910.00 -- 110.00 9020.00 3006.67
Total 5.22 15862.94 0.00 191.33 16054.28
Weighted average price 3077.50
Chilli Byadigi (with stem) 0.26 6783.33 1763.67 71.36 41.30 1876.33 7216.64
Mustard Big 0.18 2350.00 423.00 16.89 28.90 468.79 2604.41
Note: APMC-Agricultural Produce market Committee, SMR- Sona Masoori Rice, PBR- Para Boiled Rice, RBR- Red Boiled Rice, TC-Total Cost

Table 4.15: Overall Average Monthly Costs Incurred in Procurment of Commodities by Supermarkets
Rice
Wheat
Green
Gram
Products
Monthly
Quantity
Procured
(Qtls)
Price
(Rs/Qtl)
Total Price
(Rs)
Local
Sales Tax
@ 4%
(Rs)
Transport
Cost (Rs)
TC (Rs) TC/Qtl (Rs)
SMR (Premium) 6.43 1791.33 11524.24 -- 248.33 11772.58 1829.93
SMR (Regular) 6.48 1716.47 11122.70 -- 250.03 11372.74 1755.05
SMR (Std) 8.03 1600.20 12844.27 -- 308.55 13152.82 1638.64
PBRice 2.11 1609.56 3397.95 -- 78.56 3476.51 1646.77
Idli Rice 2.90 1244.47 3604.81 -- 113.13 3717.94 1283.52
RBR 2.29 1305.89 2989.03 -- 85.78 3074.81 1343.36
Jeera Rice 1.50 2376.00 3564.00 -- 64.58 3628.58 2419.06
Dosa rice 2.51 1202.67 3014.68 -- 97.20 3111.88 1241.44
Basmati Rice 2.41 2345.90 5653.62 -- 94.58 5748.20 2385.15
Total 34.65 57715.31 0.00 1340.75 59056.06
Weighted average price 1704.20
Punjab 3.39 1516.20 5139.92 -- 150.27 5290.18 1560.53
Broken 1.52 2867.87 4349.60 -- 67.53 4417.13 2912.39
Total 4.91 9489.52 0.00 217.80 9707.32
Weighted average price 1978.39
GM whole 3.67 4382.67 16099.00 -- 166.97 16265.96 4428.12
GM split 2.68 4459.00 11964.98 -- 107.77 12072.75 4499.16
Total 6.36 28063.98 0.00 274.73 28338.71
Weighted average price 4458.11
Contd….

Tur Dal
Chilli
Premium 3.89 3248.33 12636.02 -- 157.80 12793.82 3288.90
Regular 3.06 2970.67 9080.34 -- 121.02 9201.35 3010.26
Total 6.95 21716.35 0.00 278.82 21995.17
Weighted average price 3166.29
Byadigi (with stem) 0.33 7010.33 2308.74 93.10 53.37 2455.21 7455.08
Guntur (stem less) 0.28 7624.44 2130.61 86.57 46.85 2264.02 8101.87
Guntur (with stem) 0.37 5584.58 2043.03 65.79 40.57 2149.38 5875.31
Total 0.65 4173.64 152.36 87.42 4413.41
Weighted average price 6839.55
Mustard Big 0.26 2408.33 619.74 25.28 42.54 687.56 2671.88
Tomato
Tomato
14.25 435.00 6198.75 -- 1425.00 7623.75 535.00
8.25 585.83 4833.13 -- 412.50 5245.63 635.83
15.00 375.00 5625.00 -- 1200.00 6825.00 455.00
Total 23.25 10458.13 0.00 1612.50 12070.63
Weighted average price 519.17
Onion Onion 9.33 704.44 6574.81 -- 483.33 7058.15 756.23
Banana Banana 13.83 1694.44 23439.81 -- 708.33 24148.15 1745.65
Apple Shimla Apple 5.50 5435.00 29892.50 -- 287.50 30180.00 5487.27
Note: APMC-Agricultural Produce market Committee, SMR- Sona Masoori Rice, PBR- Para Boiled Rice, RBR- Red Boiled Rice, TC-Total Cost

Table 4.16: Commodity-wise Monthly Costs Incurred in Procurment of Commodities by Supermarkets in Karnataka
Products Cities Agency
Rice
Wheat
Green
Gram
Quantity
Procured
(Qtls)
Price
(Rs/Qtl)
Total Price
(Rs)
Local
Sales
Tax @
4% (Rs)
Transport
Cost (Rs)
TC (Rs)
Bangalore 49.67 1740.54 86446.58 -- 2099.17 88545.75 1740.54
Mysore
Mangalore
Belgaum
Traders
in
APMC
29.93
39.65
13.95
6654.51
1618.82
1574.39
49797.89
64186.33
21962.78
--
-
--
1282.67
1352.67
452.50
51080.56
65539.00
22415.28
1663.63
1618.82
1574.39
Hubli-Dharwad 26.77 1663.09 44515.28 -- 994.33 45509.61 1663.09
Total
159.97 266908.86 0.00 6181.33 273090.19
Weighted average price 1707.17
Bangalore 8.58 2057.97 17664.28 -- 470.83 18135.11 2057.97
Mysore
Mangalore
Belgaum
Traders
in
APMC
4.13
2.48
3.83
1960.97
2012.19
1819.38
8105.33
4996.94
6974.31
--
-
--
204.33
87.17
121.67
8309.67
5084.11
7095.97
1960.97
2012.19
1819.38
Hubli-Dharwad 5.50 1826.21 10044.17 -- 205.00 10249.17 1826.21
Total
24.53 47785.03 0.00 1089.00 48874.03
Weighted average price 1992.15
Bangalore 11.08 4642.21 51451.11 -- 559.17 52010.28 4642.21
Mysore
Mangalore
Belgaum
Traders
in
APMC
6.33
5.63
2.98
4641.49
4450.49
4227.28
29396.11
25071.11
12611.39
--
-
--
273.33
225.33
100.83
29669.44
25296.44
12712.22
4641.49
4450.49
4227.28
Hubli-Dharwad 5.75 4141.98 23816.39 -- 215.00 24031.39 4141.98
Total
31.78 142346.11 0.00 1373.67 143719.78
Weighted average price 4521.86
TC/Qtl
(Rs)
Contd…...

Tur Dal
Chilli
Mustard
Bangalore 12.92 3293.67 42543.19 -- 547.92 43091.11 3293.67
Mysore 5.53 3241.53 17936.44 -- 238.00 18174.44 3241.53
Mangalore Traders in 6.82 3096.10 21105.08 - 272.67 21377.75 3096.10
Belgaum APMC 4.25 2955.88 12562.50 -- 144.17 12706.67 2955.88
Hubli-Dharwad 5.22 3040.82 15862.94 -- 191.33 16054.28 3040.82
Total
34.73 110010.17 0.00 1394.08 111404.25
Weighted average price 3207.42
Bangalore 0.77 7238.57 5603.06 224.00 128.33 5955.39 7238.57
Mysore 0.64 7286.77 4663.53 186.32 99.67 4949.52 7286.77
Mangalore Traders in 0.69 7026.49 4871.70 198.06 122.07 5191.83 7026.49
Belgaum APMC 0.19 6800.00 1292.00 51.70 26.73 1370.43 7212.81
Hubli-Dharwad 0.26 6783.33 1763.67 71.36 41.30 1876.33 7216.64
Total
2.55 18193.96 731.44 418.10 19343.49
Weighted average price 7585.68
Bangalore 0.64 2518.33 1603.34 63.98 106.20 1773.52 2785.63
Mysore 0.23 2500.00 583.33 23.33 39.33 646.00 2768.57
Mangalore Traders in 0.15 2406.67 361.00 14.33 26.08 401.42 2676.11
Belgaum APMC 0.09 2266.67 196.44 7.87 12.17 216.48 2497.90
Hubli-Dharwad 0.18 2350.00 423.00 16.89 28.90 468.79 2604.41
Total
1.29 3167.12 126.40 212.69 3506.21
Weighted average price 2725.04
Contd…..

Tomato
Onion
Banana
Apple
Bangalore 29.25 404.23 11823.75 -- 2625.00 14448.75 404.23
Mysore
Mangalore
Wholesale Market/
Own
Production/Farmers
12.00
4.50
550.00
621.67
6600.00
2797.50
--
--
600.00
225.00
7200.00
3022.50
600.00
671.67
Total
45.75 21221.25 0.00 3450.00 24671.25
Weighted average price 539.26
Bangalore 12.50 728.33 9104.17 -- 675.00 9779.17 782.33
Mysore 10.00 670.00 6700.00 -- 500.00 7200.00 720.00
Wholesale Market
Mangalore 5.50 715.00 3932.50 -- 275.00 4207.50 765.00
Total
28.00 19736.67 0.00 1450.00 21186.67
Weighted average price 756.67
Bangalore 12.50 1800.00 22500.00 -- 675.00 23175.00 1854.00
Mysore 20.00 1650.00 33000.00 -- 1000.00 34000.00 1700.00
Wholesale Market
Mangalore 9.00 1633.33 14700.00 -- 450.00 15150.00 1683.33
Total
41.50 70200.00 0.00 2125.00 72325.00
Weighted average price 1742.77
Bangalore 5.00 5350.00 26750.00 -- 275.00 27025.00 5405.00
Mysore Wholesale Market 6.00 5520.00 33120.00 -- 300.00 33420.00 5570.00
Total
11.00 59870.00 0.00 575.00 60445.00
Weighted average price 5495.00
Note: CA- Commission Agent, TC-Total Cost

spices found in all the cities and the average was highest in chilli (Rs. 731.44) followed by
mustard (Rs. 126.40). The transport costs varied in accordance with the quantity purchased in
all the cities and in all the commodities. However, the highest transport cost was noticed in
rice (Rs. 6,181.33) and the least was in mustard (Rs. 212.69).
In respect of fruits and vegetables, the maximum quantity of commodity procured was
tomato (45.75 quintals) followed by banana (41.50 quintals), onion (28.00 quintals) and apple
(11.00 quintals) whereas the cost per quintal and total costs incurred were more in banana
(Rs. 1,742.77/quintal and Rs. 72,325.00 total cost) followed by apple (Rs. 5,495.00/quintal
and Rs. 60,445.00 total cost), onion (Rs. 756.67/quintal and Rs. 21,186.67 total cost) and
tomato (Rs. 539.26/quintal and Rs. 24,671.25 total cost). The table also indicated that the
fruits and vegetables procured from various sources such as commission agents or own
production or from farmers directly in the study area. The transport costs were high in tomato
(Rs. 2,467.25) and banana (Rs. 2,125.00) as the quantity procured was high in these
commodities.
Table 4.17 presents the city-wise average monthly charges incurred in procurement
of commodities by supermarkets. The monthly total quantity procured was highest in
Bangalore (142.90 quintals) followed by Mysore (94.81 quintals), Mangalore (74.63 quintals),
Hubli-Dharwad (43.67 quintals) and Belgaum (25.29 quintals) and in the same descending
order, the total costs were Rs. 2,83,939.07, Rs. 1,94,649.63, Rs. 1,45,270.55, Rs. 56,517.06
and Rs. 98,189.56 in respective cities. Similarly, the transport costs were Rs. 8,162.62, Rs.
4,537.33, Rs. 3,530.98, Rs. 858.07 and Rs. 1,675.87 in Bangalore, Mysore, Mangalore,
Belgaum and Hubli-Dharwad. However, depending on the quantity procured total costs in
different commodities varied across cities.
4.5 INVENTORY MANAGEMENT AND ITS COSTS IN
SUPERMARKETS
Inventory refers to stocks of anything necessary to do business. These stocks
represent a large portion of the business investment and must be well managed in order to
maximize profits. Raw materials inventory, Work in process inventory, finished products
inventory and work in sales inventory represents the various forms of inventories. Each type
represents money tied up until the inventory leaves the company as purchased products.
Likewise, merchandise stocks in a retail store contribute to profits only when their sale puts
money into the cash register. In fact, many small businesses like supermarkets cannot absorb
the types of losses arising from poor inventory management. Unless inventories are
controlled, they are unreliable, inefficient and costly. Inventory Management and Inventory
Control must be designed to meet the dictates of the marketplace and support the company's
strategic plan.
In addition to interest on working capital, shrinkage, labour charges and packing
material, cold storage charges were also added to the inventory cost components of fruits and
vegetables.
4.5.1 Cost of Inventories and Preparation of Products for Sale in
Supermarkets of Different Cities
4.5.1.1 Bangalore
The costs of inventory and preparing the products for sale in Bangalore city is
presented in Table 4.18. It is seen from the table that different short time period inventories
were maintained in different commodities. In groceries, the period was 4.67 days in rice,
wheat, green gram and tur dal, 4.33 days in chilli and 11.24 days in mustard whereas in case
of fruits and vegetables, 4.67 days in onion, 3.60 days in apple and 3 days in very perishable
like tomato and banana.
The quantum of inventories was found to be the highest in rice (10.64 quintals)
followed by tur dal (2.77 quintals), green gram (2.38 quintals), wheat (1.84 quintals), chilli
(0.33 quintals) and mustard (0.24 quintals) in groceries, the respective inventories valued at
Rs. 19,535.04, Rs. 9,597.36, Rs. 11,555.50, Rs. 3,983.60, Rs. 2,539.35 and Rs. 656.28.
Among different type of inventories, the finished product inventory was observed to be the
highest both in terms of quantity and storage period. It was 6.94 quintals in rice valued at Rs.

Table 4.17: City-wise Monthly Costs Incurred in Procurment of Commodities by Supermarkets in Karnataka
Cities Products Agency
Bangalore
Mysore
Quantity
Procured
(Qtls)
Price
(Rs/Qtl)
Total Price
(Rs)
Local
Sales Tax
@ 4%
(Rs)
Transport
Cost (Rs)
TC (Rs) TC/Qtl (Rs)
Rice 49.67 1740.54 86446.58 -- 2099.17 88545.75 1740.54
Wheat 8.58 2057.97 17664.28 -- 470.83 18135.11 2057.97
Green Gram
Tur Dal
APMC
11.08
12.92
4642.21
3293.67
51451.11
42543.19
--
--
559.17
547.92
52010.28
43091.11
4642.21
3293.67
Chilli 0.77 7238.57 5603.06 224.00 128.33 5955.39 7238.57
Mustard
0.64 2518.33 1603.34 63.98 106.20 1773.52 2785.63
Tomato
Farmer/ Own
prodn
29.25 404.23 11823.75 -- 2625.00 14448.75
404.23
Onion
Banana
Apple
Wholesale
Market
12.50
12.50
5.00
728.33
1800.00
5350.00
9104.17
22500.00
26750.00
--
--
--
675.00
675.00
275.00
9779.17
23175.00
27025.00
782.33
1854.00
5405.00
Total 142.90 275489.48 287.98 8161.62 283939.07
Rice 29.93 6654.51 49797.89 -- 1282.67 51080.56 1663.63
Wheat 4.13 1960.97 8105.33 -- 204.33 8309.67 1960.97
Green Gram
Tur Dal
APMC
6.33
5.53
4641.49
3241.53
29396.11
17936.44
--
--
273.33
238.00
29669.44
18174.44
4641.49
3241.53
Chilli 0.64 7286.77 4663.53 186.32 99.67 4949.52 7286.77
Mustard
0.23 2500.00 583.33 23.33 39.33 646.00 2768.57
Tomato 12.00 550.00 6600.00 -- 600.00 7200.00 600.00
Onion Wholesale 10.00 670.00 6700.00 -- 500.00 7200.00 720.00
Banana Market 20.00 1650.00 33000.00 -- 1000.00 34000.00 1700.00
Apple
6.00 5520.00 33120.00 -- 300.00 33420.00 5570.00
Total 94.81 189902.64 209.65 4537.33 194649.63
Contd……

Mangalore
Belgaum
Hubli-
Dharwad
Rice 39.65 1618.82 64186.33 - 1352.67 65539.00 1618.82
Wheat 2.48 2012.19 4996.94 - 87.17 5084.11 2012.19
Green Gram 5.63 4450.49 25071.11 - 225.33 25296.44 4450.49
APMC
Tur Dal 6.82 3096.10 21105.08 - 272.67 21377.75 3096.10
Chilli 0.69 7026.49 4871.70 198.06 122.07 5191.83 7026.49
Mustard
0.15 2406.67 361.00 14.33 26.08 401.42 2676.11
Tomato 4.50 621.67 2797.50 -- 225.00 3022.50 671.67
Wholesale
Onion 5.50 715.00 3932.50 -- 275.00 4207.50 765.00
Market
Banana
9.00 1633.33 14700.00 -- 450.00 15150.00 1683.33
Total 74.43 142022.17 212.39 3035.98 145270.55
Rice 13.95 1574.39 21962.78 -- 452.50 22415.28 1574.39
Wheat 3.83 1819.38 6974.31 -- 121.67 7095.97 1819.38
Green Gram 2.98 4227.28 12611.39 -- 100.83 12712.22 4227.28
APMC
Tur Dal 4.25 2955.88 12562.50 -- 144.17 12706.67 2955.88
Chilli 0.19 6800.00 1292.00 51.70 26.73 1370.43 7212.81
Mustard
0.09 2266.67 196.44 7.87 12.17 216.48 2497.90
Total 25.29 55599.42 59.57 858.07 56517.06
Rice 26.77 1663.09 44515.28 -- 994.33 45509.61 1663.09
Wheat 5.50 1826.21 10044.17 -- 205.00 10249.17 1826.21
Green Gram 5.75 4141.98 23816.39 -- 215.00 24031.39 4141.98
APMC
Tur Dal 5.22 3040.82 15862.94 -- 191.33 16054.28 3040.82
Chilli 0.26 6783.33 1763.67 71.36 41.30 1876.33 7216.64
Mustard
0.18 2350.00 423.00 16.89 28.90 468.79 2604.41
Total 43.67 96425.44 88.25 1675.87 98189.56
Note: CA- Commission Agent, TC-Total Cost

Table 4.18: Costs of Inventory and Preparing the Products for Sale in Bangalore Supermarkets
Products Inventories
Rice
Wheat
Green
gram
Tur dal
Total
Qty
(Qtls)
Value (Rs)
No.of
Days
Stored
Interest
@12.5%
Shrinkag
e
Cost components (Rs)
Labour
Charge
(Cleaning and
packing)
Cold
storage
Packaging
Material
Cost
TIC TIC/Qtl
RMI 1.39 2414.82 1.07 0.88 24.15 -- -- -- 25.03 18.04
WIPI 0.77 1355.44 1.00 0.46 13.55 38.55 -- -- 52.57 68.18
FPI 6.94 12670.85 1.40 6.08 126.71 346.96 -- 867.39 1347.13 194.14
WSI 1.54 3114.90 1.20 1.28 31.15 -- -- -- 32.43 21.03
T inv 10.64 19535.04 4.67 8.70 195.56 385.51 -- 867.39 1457.16 136.95
RMI 0.20 421.48 1.03 0.15 4.21 -- -- -- 4.36 21.31
WIPI 0.11 232.85 0.84 0.07 2.33 5.60 -- -- 8.00 71.39
FPI 1.35 2896.48 1.50 1.49 28.96 67.36 -- 202.08 299.89 222.60
WSI 0.18 417.65 1.30 0.19 4.18 -- -- -- 4.36 24.79
T inv 1.84 3983.60 4.67 1.89 39.68 72.96 -- 202.08 316.61 172.07
RMI 0.77 3589.59 1.12 1.38 71.79 -- -- -- 73.17 94.62
WIPI 0.08 386.66 0.70 0.09 7.73 4.08 -- -- 11.91 145.88
FPI 1.37 6712.80 1.80 4.14 134.26 68.74 -- 171.84 378.97 275.67
WSI 0.15 775.71 1.05 0.28 15.51 -- -- -- 15.79 105.04
T inv 2.38 11555.50 4.67 5.89 229.30 72.82 -- 171.84 479.84 201.61
RMI 0.36 1200.58 1.32 0.54 24.01 -- -- -- 24.55 67.37
WIPI 0.23 763.82 0.65 0.17 15.28 11.36 -- -- 26.81 117.97
FPI 2.00 6951.65 1.60 3.81 139.03 99.91 -- 249.77 492.52 246.49
WSI 0.18 670.85 1.10 0.25 13.42 -- -- -- 13.67 75.90
Tinv 2.77 9597.36 4.67 4.77 191.74 111.27 -- 249.77 557.56 201.28
Contd……

RMI 0.08 597.22 1.27 0.26 13.92 -- -- -- 14.17 171.82
WIPI 0.07 509.51 0.52 0.09 11.87 13.18 -- -- 25.14 365.67
Chilli FPI 0.14 1122.80 1.52 0.58 26.16 27.67 -- 29.45 83.87 580.92
WSI 0.03 287.13 1.02 0.10 6.69 -- -- -- 6.79 197.54
T inv 0.33 2539.35 4.33 1.04 58.64 40.85 -- 29.45 129.98 393.87
RMI 0.05 113.31 2.32 0.09 1.13 -- -- -- 1.22 27.18
WIPI 0.02 47.72 1.52 0.02 0.48 3.59 -- -- 4.10 218.44
Mustard FPI 0.16 435.17 5.10 0.76 4.35 30.19 -- 19.69 54.99 349.13
WSI 0.02 58.35 2.30 0.05 0.58 -- -- -- 0.63 33.57
Tinv 0.24 656.28 11.24 0.92 6.55 33.78 -- 19.69 60.94 253.90
RMI 0.41 164.94 0.80 0.05 16.49 -- 20.41 -- 36.95 90.51
WIPI 0.21 104.02 0.20 0.01 10.40 21.01 10.51 -- 41.93 199.53
Tomato FPI 2.10 1460.50 1.60 0.80 146.05 210.14 105.07 105.07 567.14 269.88
WSI 0.21 202.79 0.40 0.03 20.28 -- -- -- 20.31 96.63
T inv 2.93 1874.47 3.00 0.88 193.23 231.16 135.99 105.07 666.33 227.42
RMI 0.38 273.15 1.50 0.14 27.31 -- -- -- 27.45 73.17
WIPI 0.34 274.78 0.67 0.06 27.48 32.02 -- -- 59.56 173.61
Onion FPI 1.82 1771.37 1.90 1.15 177.14 170.08 -- 91.12 439.49 241.16
WSI 0.14 169.04 0.60 0.03 16.90 -- -- -- 16.94 121.55
T inv 2.68 2488.38 4.67 1.39 248.83 202.10 -- 91.12 543.44 202.78
RMI 0.31 566.55 0.80 0.16 56.65 -- 15.74 -- 72.55 230.49
WIPI 0.17 340.77 0.50 0.06 34.08 16.79 8.39 -- 59.31 353.35
Banana FPI 0.25 607.18 0.78 0.16 60.72 23.78 12.74 -- 97.40 382.27
WSI 0.51 1417.31 0.92 0.45 141.73 -- -- 38.44 180.62 352.37
T inv 1.25 2805.63 3.00 0.82 293.18 40.57 36.87 38.44 409.88 327.91
RMI 0.11 577.34 1.12 0.22 57.73 -- 5.40 -- 63.35 587.05
WIPI 0.16 922.58 0.55 0.17 92.26 15.54 7.77 -- 115.74 744.82
Apple FPI 0.14 951.82 0.58 0.19 95.18 13.29 7.12 -- 115.79 812.86
WSI 0.19 1455.86 1.35 0.67 145.59 -- -- 14.57 160.83 827.97
T inv 0.60 3819.60 3.60 1.26 390.76 28.83 20.29 14.57 455.71 759.51
Note: RMI-Raw Material Inventory, WIPI- Work In Proces Inventory, FPI- Finished Product Inventory, WSI- Work in Sales Inventories, T inv- Total
inventories, TIC- Total Inventory Cost

12,670.85 held for 1.40 days, 1.35 quintals in wheat valued at Rs. 2,896.48 held for 1.50 days
and 2.00 quintals in tur dal valued at Rs. 6,951.65 held for 1.60 days. Next to the finished
product inventory, most of the product was detained at work in sales inventory and raw
material inventory. The work in sales inventory in tur dal was 0.18 quintals for 1.10 days, in
wheat was 0.18 quintals for 1.30 days and in rice was 1.54 quintals for 1.20 days. The
storage period of work in process inventory was low in most of the products that is one day in
rice, 0.84 days in wheat, 0.22 days in green gram, 0.39 days in tur dal and 0.13 days in chilli.
The packaging material cost and labour charges for cleaning and packing were found to be
the major cost components of inventory management in all the commodities. However, these
costs were Rs. 867.39 and Rs. 346.96 in tur dal, Rs. 202.08 and Rs. 67.36 in wheat and Rs.
171.84 and Rs. 68.74 in green gram. The minor costs include interest on working capital at
the rate of 12.5 per cent and shrinkage/wastage of the product. The shrinkage costs were Rs.
229.30 in green gram, Rs. 191.74 in tur dal, Rs. 195.56 in rice etc. At an average, the total
inventory cost per quintal was more in chilli (Rs. 393.87) followed by mustard (Rs. 253.90),
green gram (Rs. 201.61), tur dal (Rs. 201.28), wheat (Rs. 172.07) and rice (Rs.136.95).
In fruits and vegetables, the quantity of inventory maintained and their values were
high in onion (2.68 quintals valued at Rs. 2,488.38) and low in apple (0.60 quintals valued at
Rs. 3819.60). In addition, the quantity maintained in tomato was 2.68 quintals with the worth
of Rs. 1,874.47 and in banana was 1.25 quintals with the worth of Rs. 2,805.63. The work in
process and finished product inventories were 0.17 quintals and 0.51 quintals in case of
banana and 0.16 quintals and 0.19 quintals in apple. As in the case of groceries, the finished
product inventories found to be maintained in highest quantity and for long period in tomato
(2.10 quintals for 1.60 days) and onion (1.82 quintals for 1.90 days) on the other hand, raw
material inventory was found maximum in tomato (0.41 quintals for 0.80 days) and banana
(0.31 quintals for 2.20 days). In inventory cost components, shrinkage was perceived to be
the highest cost in apple (Rs. 390.76) followed by banana (Rs. 293.18), onion (Rs. 248.83)
and tomato (Rs. 193.23). Further, the cold storage cost was Rs. 105.07 in tomato, Rs. 38.44
in banana and Rs. 20.29 in apple. In contrast, the labour charges were Rs. 231.16 in tomato
and apple, and no cold storage was used in onion. However, the total inventory cost per
quintal was in descending order incase of apple (Rs. 759.51), banana (Rs.321.91), tomato
(Rs. 227.42) and onion (Rs.202.78).
4.5.1.2 Mysore
Table 4.19 presents the costs of inventory and preparing the product for sale in
Mysore supermarkets.
It was shown in table that the storage period of inventories was 4 days in all the
groceries except mustard wherein storage period was 15 days. In case of fruits and
vegetables, the period was 2 days in tomato, banana and apple but 4 days in onion.
The quantity and value of groceries was looked to be high in rice (7.48 quintals
accounted for worth of Rs. 13,136.75) followed by green gram (1.58 quintals accounted for
worth of Rs. 2,125.66), wheat (1.03 quintals accounted for worth of Rs. 2,125.66), tur dal
(1.38 quintals accounted for worth of Rs. 4,707.18), chilli (0.16 quintals accounted for worth of
Rs. 1230.88) and mustard (0.12 quintals accounted for worth of Rs. 325.65). The maximum
quantity of inventory was held in finished product inventory stage in all the grocery items. It
was 3.09 quintals for 1.30 days in rice, 0.42 quintals for 1.30 days in wheat, 0.65 quintals for
1.66 days in green gram, 0.57 quintals for 1.40 days in tur dal. More than half of the quantity
of chilli (0.07 quintals) and mustard (0.05 quintals) was also held in this stage only. The work
in process inventory accounts for less quantity and minimum storage period in almost all
groceries. Work in sales inventory was 2.34 quintals of rice, 0.32 quintals of wheat, 0.49
quintals green gram, 0.43 quintals of tur dal, 0.05 quintals of chilli and 0.04 quintals mustard.
In respect of costs, packaging material and labours charge was the major, and shrinkage and
interest on working capital were the minor components in inventory management. The
packaging cost was higher in the order of rice (Rs. 357.92), green gram (Rs. 74.95), tur dal
(Rs. 65.46), wheat (Rs. 54.38), chilli (Rs. 13.46) and mustard (Rs. 8.32). The labour charge
accounted for Rs. 201.03, Rs. 45.29, Rs. 39.56, Rs. 29.52, Rs. 14.76 and Rs. 11.07 in rice,
green gram, tur dal, wheat, chilli and mustard. Shrinkage was observed to be more in green
gram (Rs. 155.25).

Table 4.19: Costs of Inventory and Preparing the Products for Sale in Mysore Supermarkets
Products Inventories
Rice
Wheat
Green
gram
Tur dal
Total
Qty
(Qtls)
Value (Rs)
No.of
Days
Stored
Interest
@12.5%
Shrinkage
Cost components (Rs)
Labour
Charge
(Cleaning
and
packing)
Cold
storage
Packaging
Material
Cost
TIC TIC/Qtl
RMI 1.12 1867.01 1.10 0.70 18.67 -- -- -- 19.37 17.27
WIPI 0.94 1571.74 0.90 0.48 15.72 46.75 -- -- 62.95 67.33
FPI 3.09 5393.45 1.30 2.40 53.93 154.28 -- 357.92 568.53 184.26
WSI 2.34 4516.05 0.70 1.08 45.16 -- -- -- 46.24 19.78
T inv 7.48 13136.75 4.00 4.67 133.48 201.03 -- 357.92 697.10 93.19
RMI 0.15 302.97 1.00 0.10 3.03 -- -- -- 3.13 20.28
WIPI 0.13 255.05 0.60 0.05 2.55 6.87 -- -- 9.47 73.55
FPI 0.42 873.12 1.30 0.39 8.73 22.66 -- 54.38 86.16 202.79
WSI 0.32 726.79 1.10 0.27 7.27 -- -- -- 7.54 23.43
T inv 1.03 2125.66 4.00 0.82 21.58 29.52 -- 54.38 106.31 103.21
RMI 0.24 1099.92 1.00 0.38 22.00 -- -- -- 22.38 94.41
WIPI 0.20 935.16 0.45 0.14 18.70 10.53 -- -- 29.38 148.76
FPI 0.65 3183.15 1.52 1.66 63.66 34.76 -- 74.95 175.03 268.55
WSI 0.49 2544.29 1.03 0.90 50.89 -- -- -- 51.78 104.88
T inv 1.58 7668.14 4.00 3.08 155.25 45.29 -- 74.95 278.57 176.31
RMI 0.21 671.09 1.05 0.24 13.42 -- -- -- 13.66 66.01
WIPI 0.17 570.63 0.65 0.13 11.41 9.20 -- -- 20.74 120.23
FPI 0.57 1951.39 1.40 0.94 39.03 30.36 -- 65.46 135.79 238.53
WSI 0.43 1580.96 0.90 0.49 31.62 -- -- -- 32.11 74.45
Tinv 1.38 4707.18 4.00 1.79 95.48 39.56 -- 65.46 202.29 146.59
Contd…..

Chilli
Mustard
Tomato
Onion
Banana
Apple
RMI 0.02 174.89 1.24 0.07 3.50 -- -- -- 3.57 148.83
WIPI 0.02 148.72 0.34 0.02 2.97 3.43 -- -- 6.43 321.26
FPI 0.07 511.96 1.42 0.25 10.24 11.33 -- 13.46 35.28 534.58
WSI 0.05 414.60 1.00 0.14 8.29 -- -- -- 8.43 168.68
T inv 0.16 1230.88 4.00 0.48 25.00 14.76 -- 13.46 53.71 335.71
RMI 0.02 45.00 3.72 0.06 0.45 -- -- -- 0.51 28.18
WIPI 0.02 37.92 2.48 0.03 0.38 2.58 -- -- 2.99 199.10
FPI 0.05 134.99 6.50 0.30 1.35 8.50 -- 8.32 18.46 373.01
WSI 0.04 116.25 2.30 0.09 1.16 -- -- -- 1.25 33.44
Tinv 0.12 325.65 15.00 0.48 3.34 11.07 -- 8.32 23.21 193.43
RMI 0.12 66.00 0.45 0.01 6.60 -- 6.00 -- 12.61 105.08
WIPI 0.10 65.50 0.20 0.00 6.55 7.50 5.00 -- 19.05 190.54
FPI 0.33 279.18 0.75 0.07 27.92 24.75 16.50 16.50 85.74 259.82
WSI 0.25 276.50 0.60 0.06 27.65 -- -- -- 27.71 110.83
T inv 0.80 631.40 2.00 0.14 68.72 32.25 27.50 16.50 145.11 181.39
RMI 0.38 251.25 1.35 0.12 12.56 -- -- -- 12.68 33.81
WIPI 0.31 220.00 0.67 0.05 11.00 23.44 -- -- 34.49 110.36
FPI 1.03 839.44 1.40 0.40 41.97 77.34 -- 51.56 171.28 166.09
WSI 0.78 765.63 0.58 0.15 38.28 -- -- -- 38.43 49.19
T inv 2.50 1980.00 4.00 0.72 103.82 100.78 -- 51.56 256.88 102.75
RMI 0.30 495.00 0.50 0.08 24.75 -- 15.00 -- 39.83 132.78
WIPI 0.25 445.75 0.22 0.03 22.29 25.00 12.50 -- 59.82 239.28
FPI 0.83 1668.15 0.48 0.27 83.41 -- 41.25 -- 124.93 151.43
WSI 0.63 1358.13 0.80 0.37 67.91 -- -- 37.50 105.78 169.25
T inv 2.00 3814.00 2.00 0.76 198.35 25.00 68.75 37.50 330.37 165.18
RMI 0.09 496.80 0.45 0.08 49.68 -- 4.50 -- 54.26 602.85
WIPI 0.08 459.23 0.52 0.08 45.92 7.50 3.75 -- 57.25 763.39
FPI 0.25 1704.29 0.48 0.28 170.43 -- 12.38 -- 183.08 739.73
WSI 0.19 1429.88 0.55 0.27 142.99 -- -- 14.06 157.32 839.04
T inv 0.60 3923.25 2.00 0.71 409.02 7.50 20.63 14.06 451.91 753.19
Note: RMI-Raw Material Inventory, WIPI- Work In Proces Inventory, FPI- Finished Product Inventory, WSI- Work in Sales Inventories, T inv- Total
inventories, TIC- Total Inventory Cost

In fruits and vegetables, the quantity and value of inventory period was more in onion
(2.50 quintals valued at Rs. 1,980.00) followed by banana (2.00 quintals valued at Rs.
3,814.00), tomato (0.80 quintals valued at Rs. 631.40) and apple (0.60 quintals valued at Rs.
3,923.25). The finished product inventory had the highest quantity in onion (1.03 quintals for
1.40 days) and it was 0.33 quintals in tomato. The work in sales inventory was 0.63 quintals in
banana, 0.78 quintals in onion, 0.25 quintals in tomato and 0.19 quintals in apple. Labours
charge for cleaning and packing was the prime cost component involved in inventory
management of fruits and vegetables followed by shrinkage and packaging material. The
costs were Rs. 100.78, Rs. 103.82 and Rs. 51.56 for onion and Rs. 32.25, Rs. 68.72 and Rs.
16.50 for tomato. However, the total inventory cost per quintal was Rs. 753.19 in apple, Rs.
181.39 in tomato, Rs. 165.18 in banana and Rs, 102.75 in onion.
4.5.1.3 Mangalore
It was revealed from the Table 4.20 that the storage period of rice, wheat, green
gram, and tur dal was 5.67 days whereas the period was 5.94 days in chilli and 12.87 days in
mustard. Similarly, in fruits and vegetables the storage period was 3 days in tomato and
banana but 5 days in onion. No sale of apple was observed in Mangalore supermarkets.
The grocery inventories maintained in different stages were greatest in rice (7.00
quintals) followed by tur dal (1.20 quintals), green gram (0.99 quintals), wheat (0.44 quintals),
chilli (0.12 quintals) and mustard (0.06 quintals) and the respective worth were Rs. 11,900.00,
Rs. 3,906.60, Rs. 4,731.21, Rs. 933.46, Rs. 891.18 and Rs. 156.48. Here also the finished
product inventories occupied the most quantity and maximum period of storage. It was 4.05
quintals for 1.87 days in rice, 0.25 quintals for 1.95 days in wheat, 0.57 quintals for 1.92 days
in green gram, 0.69 quintals for 1.05 days in tur dal, 0.07 quintals in 2.22 days and 0.03
quintals for 5.07 days in mustard. The least quantity the commodity seized was again the
work in process inventory. The quantity at work in sales was moderate that is 0.73 quintals in
rice, 0.08 quintals in wheat, 0.17 quintals in green gram, 0.21 quintals in tur dal, 0.02 in chilli
and 0.01 quintals in mustard. In case of costs, packaging material followed by labour charges
were the major costs in inventory. In packaging material the cost involved was Rs 445.54 in
rice, Rs. 76.38 in tur dal, Rs. 63.01 in green gram, Rs. 31.82 in wheat, Rs. 13.26 in chilli and
Rs. 3.82 in mustard. The labour charges were Rs. 175.44 in rice, Rs. 38.28 in tur dal, Rs.
31.58 in green gram, Rs. 18.55 in wheat, Rs. 14.58 in chilli and Rs. 7.27 in mustard.
However, the total inventory cost per quintal was highest in chilli (Rs. 385.78) followed by
green gram (Rs. 195.27), tur dal (Rs. 162.62), mustard (Rs. 214.70) and wheat (Rs. 136.87).
In fruits and vegetables, the maximum inventory was maintained in onion (1.10
quintals valued at Rs. 925.65) subsequently in tomato (0.45 quintals valued at Rs. 357.08)
and banana (0.90 quintals valued at Rs 1,852.20). It was also observed from the table that
the finished product inventory had the highest quantity and maximum storage period that is
0.64 quintals for 1.90 days in onion. As for as inventory costs concern labour charge and
packaging materials were the main components. It was Rs. 57.64 and Rs. 31.82 in onion, Rs.
23.58 and Rs. 13.02 in tomato respectively. The unit cost of inventory for banana was Rs.
312.36, Rs. 163.21 for tomato and Rs. 124.39 for onion.
4.5.1.4 Belgaum
It could be noticed from the Table 4.21 that the storage period of inventory by the
supermarkets were 4.39 days in rice, 4.42 days in tur dal, 4.33 days each in wheat, green
gram and mustard but the highest storage period of 15 days was observed in mustard.
The quantity of inventories was found to be high in rice (3.19 quintals) followed by tur
dal (0.96 quintals), wheat (0.85 quintals), green gram (0.69 quintals), chilli and mustard (0.04
quintals each) in groceries. The respective inventories valued at Rs. 5,273.87, Rs. 3,051.84,
Rs. 1,622.01, Rs. 3,045.66, Rs. 286.25 and Rs. 99.43. Among different type of inventories,
the finished product inventory was observed to be the highest in terms of quantity. It was 2.07
quintals in rice followed by 0.59 quintals in tur dal, 0.58 quintals in wheat, 0.47 quintals in
green gram, 0.02 quintals in chilli and 0.01 quintals in mustard. The kept in work in process
inventory was found to be minimum in all the cases. The Packaging cost was found to be the
prime cost in inventory as it was Rs. 212.94 in rice, Rs. 70.34 in wheat, Rs. 60.81 in tur dal,
Rs. 48.21 in green gram, Rs. 3.43 in chilli and Rs. 2.17 in mustard. Similarly the labour cost
incurred were Rs. 94.98 in rice, Rs. 28.64 in tur dal, Rs. 24.78 in wheat, Rs. 20.95 in green

Table 4.20: Costs of Inventory and Preparing the Products for Sale in Mangalore Supermarkets
Rice
Products Inventories
Wheat
Green gram
Tur dal
Total
Qty
(Qtls)
Value (Rs)
No.of
Days
Stored
Interest
@12.5% Shrinkage
Cost components (Rs)
Labour
Charge
(Cleaning
and
packing)
Cold
storage
Packaging
Material
Cost
TIC TIC/Qtl
RMI 1.20 1942.15 1.65 1.10 19.42 -- -- -- 20.52 17.10
WIPI 0.73 1200.61 1.30 0.53 12.01 26.91 -- -- 39.45 53.76
FPI 4.05 6845.18 1.87 4.38 68.45 148.53 -- 445.54 666.91 164.65
WSI 1.02 1884.92 0.85 0.55 18.85 -- -- -- 19.40 19.09
T inv 7.00 11900.00 5.67 6.56 118.73 175.44 -- 445.54 746.28 106.61
RMI 0.08 151.71 1.47 0.08 1.52 -- -- -- 1.59 21.13
WIPI 0.05 93.78 1.25 0.04 0.94 2.84 -- -- 3.82 82.87
FPI 0.25 538.73 1.95 0.36 5.39 15.70 -- 31.82 53.27 209.24
WSI 0.06 148.50 1.00 0.05 1.49 -- -- -- 1.54 24.05
T inv 0.44 933.46 5.67 0.53 9.33 18.55 -- 31.82 60.22 136.87
RMI 0.17 754.97 1.54 0.40 15.10 -- -- -- 15.50 91.35
WIPI 0.10 471.31 0.68 0.11 9.43 4.84 -- -- 14.38 138.55
FPI 0.57 2825.83 1.92 1.86 56.52 26.73 -- 63.01 148.12 258.57
WSI 0.14 746.14 1.53 0.39 14.92 -- -- -- 15.31 106.56
T inv 0.99 4731.21 5.67 2.76 95.97 31.58 -- 63.01 193.31 195.27
RMI 0.21 636.68 1.82 0.40 12.73 -- -- -- 13.13 63.85
WIPI 0.13 397.55 0.92 0.13 7.95 5.87 -- -- 13.95 110.87
FPI 0.69 2271.23 1.88 1.46 45.42 32.41 -- 76.38 155.67 224.20
WSI 0.17 608.81 1.05 0.22 12.18 -- -- -- 12.40 71.16
Tinv 1.20 3906.60 5.67 2.20 78.29 38.28 -- 76.38 195.14 162.62
Contd….

Chilli
Mustard
Tomato
Onion
Banana
RMI 0.02 144.49 1.63 0.08 2.89 -- -- -- 2.97 144.44
WIPI 0.01 90.20 0.74 0.02 1.80 2.24 -- -- 4.06 322.94
FPI 0.07 520.28 2.22 0.40 10.41 12.34 -- 13.26 36.40 524.28
WSI 0.02 139.65 1.35 0.06 2.79 -- -- -- 2.86 164.05
T inv 0.12 891.18 5.94 0.56 17.89 14.58 -- 13.26 46.29 385.78
RMI 0.01 24.75 2.82 0.02 0.25 -- -- -- 0.27 26.39
WIPI 0.01 15.30 2.58 0.01 0.15 1.12 -- -- 1.28 203.81
FPI 0.03 91.55 5.07 0.16 0.92 6.16 -- 3.82 11.05 318.28
WSI 0.01 25.74 2.40 0.02 0.26 -- -- -- 0.28 31.98
Tinv 0.06 156.48 12.87 0.22 1.57 7.27 -- 3.82 12.88 214.70
RMI 0.08 47.97 0.95 0.08 4.80 -- -- -- 4.87 63.20
WIPI 0.05 32.27 0.53 0.05 3.23 3.62 -- -- 6.89 146.07
FPI 0.26 215.86 0.85 0.26 21.59 19.96 -- 13.02 54.83 210.57
WSI 0.07 67.87 0.67 0.07 6.79 -- -- -- 6.85 104.90
T inv 0.45 357.08 3.00 0.45 36.40 23.58 -- 13.02 73.45 163.21
RMI 0.19 134.78 1.58 0.07 6.74 -- -- -- 6.81 36.14
WIPI 0.12 86.61 0.67 0.02 4.33 8.84 -- -- 13.19 114.39
FPI 0.64 550.57 1.90 0.36 27.53 48.80 -- 31.82 108.51 170.48
WSI 0.16 165.27 0.85 0.05 8.26 -- -- -- 8.31 52.05
T inv 1.10 925.65 5.00 0.50 46.86 57.64 -- 31.82 136.83 124.39
RMI 0.15 251.86 0.90 0.08 25.19 -- -- -- 25.26 163.80
WIPI 0.09 169.56 0.35 0.02 16.96 9.44 4.72 -- 31.13 329.92
FPI 0.52 1107.67 0.60 0.23 110.77 48.60 26.04 -- 185.64 356.47
WSI 0.13 324.39 1.15 0.13 32.44 -- -- 6.53 39.10 299.28
T inv 0.90 1852.20 3.00 0.45 185.35 58.04 30.76 6.53 281.13 312.36
Note: RMI-Raw Material Inventory, WIPI- Work In Proces Inventory, FPI- Finished Product Inventory, WSI- Work in Sales Inventories, T inv- Total
inventories, TIC- Total Inventory Cost

Table 4.21: Costs of Inventory and Preparing the Products for Sale in Belgaum Supermarkets
Products Inventories
Rice
Wheat
Green
gram
Tur dal
Total
Qty
(Qtls)
Value (Rs)
No.of
Days
Stored
Interest
@12.5%
Shrinkage
Cost components (Rs)
Labour
Charge
(Cleaning
and
packing)
Packaging
Material
Cost
TIC TIC/Qtl
RMI 0.34 538.74 1.43 0.26 5.39 -- -- 5.65 16.51
WIPI 0.47 740.60 1.35 0.34 7.41 17.46 -- 25.20 54.15
FPI 2.07 3400.77 1.28 1.49 34.01 77.53 212.94 325.96 157.67
WSI 0.31 567.75 0.33 0.06 5.68 -- -- 5.74 18.23
T inv 3.19 5273.87 4.39 2.16 52.48 94.98 212.94 362.56 113.65
RMI 0.12 209.75 1.47 0.11 2.10 -- -- 2.20 19.11
WIPI 0.04 78.72 0.46 0.01 0.79 1.71 -- 2.51 58.67
FPI 0.58 1093.72 1.55 0.58 10.94 23.06 70.34 104.92 181.98
WSI 0.12 239.73 0.85 0.07 2.40 -- -- 2.47 21.40
T inv 0.85 1622.01 4.33 0.77 16.22 24.78 70.34 112.10 131.88
RMI 0.09 395.67 0.90 0.12 7.91 -- -- 8.04 85.84
WIPI 0.03 149.92 0.68 0.03 3.00 1.45 -- 4.48 128.91
FPI 0.47 2078.49 1.22 0.87 41.57 19.50 48.21 110.15 235.35
WSI 0.09 437.70 1.53 0.23 8.75 -- -- 8.98 95.97
T inv 0.69 3045.66 4.33 1.25 61.24 20.95 48.21 131.65 190.79
RMI 0.16 466.30 1.32 0.21 9.33 -- -- 9.54 60.46
WIPI 0.09 280.61 0.72 0.07 5.61 3.79 -- 9.47 105.11
FPI 0.59 1899.98 1.33 0.87 38.00 24.84 60.81 124.52 210.91
WSI 0.12 417.28 1.05 0.15 8.35 -- -- 8.50 69.81
T inv 0.96 3051.84 4.42 1.30 61.28 28.64 60.81 152.03 158.36
Contd…..

Chilli
Mustard
RMI 0.01 57.26 1.33 0.03 1.15 -- -- 1.17 139.10
WIPI 0.00 29.22 0.74 0.01 0.58 0.58 -- 1.17 278.87
FPI 0.02 151.96 1.72 0.09 3.04 2.91 3.43 9.47 449.94
WSI 0.01 48.43 0.54 0.01 0.97 -- -- 0.98 154.78
T inv 0.04 286.25 4.33 0.13 5.74 3.49 3.43 12.80 319.89
RMI 0.01 20.15 3.82 0.03 0.40 -- -- 0.43 48.31
WIPI 0.00 10.29 2.58 0.01 0.21 0.61 -- 0.83 186.68
FPI 0.01 33.36 6.07 0.07 0.67 1.84 2.17 4.75 356.57
WSI 0.01 38.12 2.53 0.03 0.76 -- -- 0.80 59.66
T inv 0.04 99.43 15.00 0.14 2.04 2.46 2.17 6.81 170.22
Note: RMI-Raw Material Inventory, WIPI- Work In Proces Inventory, FPI- Finished Product Inventory, WSI- Work in Sales Inventories, T inv- Total
inventories, TIC- Total Inventory Cost

gram, Rs. 3.49 in chilli and Rs. 2.46 in mustard. It was observed that the total inventory costs
were found maximum in case of rice (Rs. 362.56) and low in mustard (Rs. 6.81). However,
the unit cost per quintal was high in chilli (Rs. 190.79) followed by mustard (Rs. 158.36),
green gram (Rs. 190.79), tur dal (Rs. 158.36), wheat (Rs. 131.88) and rice (Rs. 113.65). No
sale of fruits and vegetables were observed in Belgaum supermarkets.
4.5.1.5 Hubli-Dharwad
It was observed from the Table 4.22 that the storage periods of commodities in the
inventories by the supermarkets were 3.67 days each in rice, wheat, green gram, tur dal and
chilli whereas, the period was 15 days in mustard.
As it was revealed from the table that the quantity maintained in inventories and their
values were more in rice (7.30 quintals worth at Rs. 12,685.58) followed by green gram (1.57
quintals worth at Rs. 1,803.20), wheat (1.50 quintals worth at Rs. 2,886.38), tur dal (1.42
quintals worth at Rs. 4,539.74), chilli (0.07 quintals worth at Rs. 500.19) and mustard (0.09
quintals worth at Rs. 228.11). Among the different inventories finished product inventory
occupied maximum quantity and storage period in all the commodities that is 4.58 quintals for
1.26 days in rice followed by 1.09 quintals for 1.60 days in green gram, 0.81 quintals for 1.35
days in wheat, 0.95 quintals for 1.20 days in tur dal, 0.04 quintals for 1.35 days in chilli and
0.03 quintals for 5.97 days in mustard. Again the work in process inventory was low in all the
commodities. Here packaging materials, labour charges and shrinkage were the major cost
components. The packaging material cost was Rs. 458.30, Rs. 116.66, Rs. 103.20, Rs.
95.21, Rs. 6.34 and Rs. 2.83 in rice, green gram, wheat, tur dal, chilli and mustard
respectively. The cost was Rs. 136.72 and Rs. 91.12 in shrinkage of green gram and tur dal.
The total inventory costs were found to be high in rice (Rs. 757.51) and low in mustard (Rs.
12.30). At an average the total inventory cost per quintal was in the descending order in chilli
(Rs. 337.14), green gram (Rs. 200.72), tur dal (Rs 169.78), mustard (Rs. 136.62), wheat (Rs.
121.12) and rice (Rs. 103.77). No sale of fruits and vegetables were observed in Hubli-
Dharwad supermarkets.
4.5.2 Average costs of Inventory and preparing the products for sale at
supermarkets in Karnataka
The costs of inventory and preparing the products for sale in selected cities across
Karnataka are presented in Table 4.23. It could be seen from the table that the short time
period inventories were maintained in different commodities. In case of groceries, the period
was 4.48 days in rice, 4.47 days each in wheat and green gram, 4.49 days in tur dal, 4.45
days in chilli and 13.82 days in mustard while in case of fruits and vegetables, 2.73 days in
onion, 1.12 days in apple and 1.60 days each in tomato and banana.
The quantity of inventories in groceries was found to be high in rice (7.12 quintals)
followed by tur dal (1.55 quintals), green gram (1.44 quintals), wheat (1.13 quintals), chilli
(0.14 quintals) and mustard (0.11 quintals). The respective inventories valued at Rs.
12,506.25, Rs. 5,160.54, Rs. 6,760.74, Rs. 2310.22, Rs. 1089.00 and Rs. 293.19. Among
different type of inventories, the finished product inventory was observed to be the highest
both in terms of quantity and storage period. It was 4.15 quintals in rice valued at Rs.
7,246.84 held for 1.42 days, 0.96 quintals in tur dal valued at Rs. 3,227.05 held for 1.48 days,
0.83 quintals in green gram valued at Rs. 3,910.78 held for 1.61 days, 0.68 quintals in wheat
valued at Rs. 1389.04 held for 1.53 days, 0.07 quintals in chilli valued at Rs. 579.68 held for
1.65 days and 0.06 quintals in mustard valued at Rs. 151.80 held for 5.74 days. Next to the
finished product inventory, most of the product was detained at work in sales inventory and
raw material inventory. The work in sales inventory in rice was 1.17 quintals for 0.70 days, in
wheat was 0.68 quintals for 1.53 days, in green gram was 0.83 quintals for 1.61 days, in tur
dal 0.22 quintals for 0.95 days, in chilli 0.02 quintals for 0.89 days and in mustard was 0.03
quintals for 2.22 days. The storage period of work in process inventory was low in most of the
products that is 1.08 days in rice, 0.23 days in tur dal, 0.15 days in green gram, 0.08 days in
wheat, 0.06 days in mustard and 0.05 days in chilli. The packaging material cost and labour
charges for cleaning and packing were found to be the major cost components of inventory
management in all the commodities. However, these costs were Rs. 468.42 and Rs. 205.08 in
rice, Rs. 109.53 and Rs. 54.16 in tur dal and Rs. 45.85 in green gram, Rs. 92.37 and Rs.
38.87 in wheat, Rs. 94.93 and Rs. 13.19 and Rs. 16.14 in chilli and Rs. 7.36 and Rs. 12.30 in

Table 4.22: Costs of Inventory and Preparing the Products for Sale in Hubli-Dharwad Supermarkets
Products Inventories
Rice
Wheat
Green
gram
Tur dal
Total
Qty
(Qtls)
Value (Rs)
No.of
Days
Stored
Interest
@12.5%
Shrinkage
Cost components (Rs)
Labour
Charge
(Cleaning
and
packing)
Packaging
Material
Cost
TIC TIC/Qtl
RMI 1.34 2232.00 1.13 0.86 22.32 -- -- 23.18 17.27
WIPI 0.74 1237.40 0.85 0.36 12.37 23.33 -- 36.06 48.96
FPI 4.58 7923.94 1.26 3.42 79.24 145.14 458.30 686.10 149.71
WSI 0.64 1199.44 0.43 0.18 11.99 -- -- 12.17 19.07
T inv 7.30 12685.58 3.67 4.82 125.93 168.47 458.30 757.51 103.77
RMI 0.29 520.41 1.09 0.19 5.20 -- -- 5.40 18.94
WIPI 0.17 304.43 0.58 0.06 3.04 8.25 -- 11.35 68.82
FPI 0.81 1543.16 1.35 0.71 15.43 40.31 103.20 159.66 198.02
WSI 0.24 514.80 0.65 0.11 5.15 -- -- 5.26 21.59
T inv 1.50 2886.38 3.67 1.08 28.83 48.56 103.20 181.67 121.12
RMI 0.21 857.82 1.18 0.35 17.16 -- -- 17.50 84.49
WIPI 0.08 345.48 0.36 0.04 6.91 4.09 -- 11.04 135.02
FPI 1.09 4753.61 1.60 2.60 95.07 54.51 116.66 268.85 246.59
WSI 0.19 879.01 0.53 0.16 17.58 -- -- 17.74 92.98
T inv 1.57 6803.20 3.67 3.15 136.72 58.60 116.66 315.13 200.72
RMI 0.19 578.88 1.30 0.26 11.58 -- -- 11.84 62.15
WIPI 0.11 337.54 0.52 0.06 6.75 5.44 -- 12.25 112.59
FPI 0.95 3061.02 1.20 1.26 61.22 47.61 95.21 205.29 215.62
WSI 0.17 578.67 0.65 0.13 11.57 -- -- 11.70 69.38
Tinv 1.42 4539.74 3.67 1.70 91.12 53.05 95.21 241.08 169.78
Contd……

Chilli
Mustard
RMI
WIPI
FPI
WSI
T inv
RMI
WIPI
FPI
WSI
Tinv
0.01 91.31 1.04 0.03 1.83 -- -- 1.86 138.08
0.01 37.27 0.74 0.01 0.75 0.83 -- 1.58 293.50
0.04 291.38 1.35 0.13 5.83 6.19 6.34 18.49 457.97
0.01 82.52 0.54 0.02 1.65 -- -- 1.67 154.68
0.07 500.19 3.67 0.19 10.05 7.02 6.34 23.60 337.14
0.03 58.75 3.90 0.08 0.59 -- -- 0.67 26.64
0.02 47.54 3.58 0.06 0.48 3.07 -- 3.60 180.01
0.03 63.93 5.97 0.13 0.64 3.83 2.83 7.43 297.13
0.02 57.08 1.55 0.03 0.57 -- -- 0.60 30.05
0.09 228.11 15.00 0.30 2.27 6.90 2.83 12.30 136.62
Note: RMI-Raw Material Inventory, WIPI- Work In Proces Inventory, FPI- Finished Product Inventory, WSI- Work in Sales Inventories, T inv- Total
inventories, TIC- Total Inventory Cost

Table 4.23: Overall Costs of Inventory and Preparing the Products for Sale in Supermarkets
Products Inventories
Rice
Wheat
Green
gram
Tur dal
Total
Qty
(Qtls)
Value (Rs)
No.of
Days
Stored
Interest
@12.5% Shrinkage
Cost components (Rs)
Labour
Charge
(Cleaning
and
packing)
Cold
storage
Packaging
Material
Cost
TIC TIC/Qtl
RMI 1.08 1798.94 1.28 0.76 17.99 -- -- -- 18.75 17.38
WIPI 0.73 1221.16 1.08 0.44 12.21 30.60 -- -- 43.25 59.37
FPI 4.15 7246.84 1.42 3.55 72.47 174.49 -- 468.42 718.92 173.44
WSI 1.17 2256.61 0.70 0.63 22.57 -- -- -- 23.20 19.83
T inv 7.12 12506.25 4.48 5.38 125.24 205.08 -- 468.42 804.12 112.91
RMI 0.17 321.26 1.21 0.13 3.21 -- -- -- 3.34 19.99
WIPI 0.10 192.97 0.75 0.05 1.93 5.05 -- -- 7.03 71.06
FPI 0.68 1389.04 1.53 0.71 13.89 33.82 -- 92.37 140.78 206.46
WSI 0.18 409.49 0.98 0.14 4.09 -- -- -- 4.23 22.99
T inv 1.13 2310.22 4.47 1.02 23.13 38.87 -- 92.37 155.38 137.27
RMI 0.30 1339.59 1.54 0.71 26.79 -- -- -- 27.50 92.86
WIPI 0.10 457.71 0.57 0.08 9.15 5.00 -- -- 14.24 142.54
FPI 0.83 3910.78 1.61 2.23 78.22 40.85 -- 94.93 216.22 260.03
WSI 0.21 1076.57 1.13 0.39 21.53 -- -- -- 21.92 102.23
T inv 1.44 6760.74 4.86 3.41 135.69 45.85 -- 94.93 279.88 194.09
RMI 0.23 710.71 1.36 0.33 14.21 -- -- -- 14.54 64.62
WIPI 0.14 470.03 0.69 0.11 9.40 7.13 -- -- 16.64 114.87
FPI 0.96 3227.05 1.48 1.67 64.54 47.02 -- 109.53 222.76 231.83
WSI 0.22 771.31 0.95 0.25 15.43 -- -- -- 15.67 72.84
Tinv 1.55 5160.54 4.49 2.35 103.58 54.16 -- 109.53 269.62 174.40
Contd….

Chilli
Mustard
Tomato
Onion
Banana
Apple
RMI 0.03 213.03 1.30 0.09 4.65 -- -- -- 4.75 159.44
WIPI 0.02 162.98 0.62 0.03 3.60 4.05 -- -- 7.68 346.02
FPI 0.07 519.68 1.65 0.29 11.13 12.09 -- 13.19 36.70 537.80
WSI 0.02 194.47 0.89 0.07 4.08 -- -- -- 4.15 174.34
T inv 0.14 1089.57 4.45 0.48 23.46 16.14 -- 13.19 53.28 369.97
RMI 0.02 52.39 3.32 0.06 0.56 -- -- -- 0.62 28.90
WIPI 0.01 31.75 2.55 0.03 0.34 2.19 -- -- 2.56 198.41
FPI 0.06 151.80 5.74 0.28 1.58 10.10 -- 7.36 19.34 345.24
WSI 0.02 59.11 2.22 0.04 0.67 -- -- -- 0.71 36.20
Tinv 0.11 293.19 13.82 0.41 3.15 12.30 -- 7.36 23.23 211.15
RMI 0.12 55.78 0.44 0.03 5.58 -- 5.28 -- 10.89 89.92
WIPI 0.07 40.36 0.19 0.01 4.04 6.43 3.10 -- 13.58 189.96
FPI 0.54 391.11 0.64 0.23 39.11 50.97 24.31 26.92 141.54 262.91
WSI 0.11 109.43 0.33 0.03 10.94 -- -- -- 10.97 104.41
T inv 0.84 572.59 1.60 0.29 59.67 57.40 32.70 26.92 176.98 211.70
RMI 0.19 131.84 0.89 0.07 9.32 -- -- -- 9.39 50.01
WIPI 0.15 116.28 0.40 0.03 8.56 12.86 -- -- 21.45 139.11
FPI 0.70 632.28 1.04 0.38 49.33 59.25 -- 34.90 143.86 206.09
WSI 0.22 219.99 0.41 0.05 12.69 -- -- -- 12.74 58.95
T inv 1.26 1078.81 2.73 0.52 79.90 72.10 -- 34.90 187.43 149.23
RMI 0.15 262.68 0.44 0.06 21.32 -- 6.15 -- 27.53 179.00
WIPI 0.10 191.21 0.21 0.02 14.66 10.24 5.12 -- 30.05 293.36
FPI 0.32 676.60 0.37 0.13 50.98 14.48 16.01 -- 81.59 254.89
WSI 0.25 619.97 0.57 0.19 48.42 -- -- 16.50 65.10 256.66
T inv 0.83 1694.37 1.60 0.41 135.38 24.72 27.28 16.50 204.28 246.12
RMI 0.04 214.83 0.31 0.06 21.48 -- 1.98 -- 23.52 594.24
WIPI 0.05 276.36 0.21 0.05 27.64 4.61 2.30 -- 34.60 750.86
FPI 0.08 531.22 0.21 0.09 53.12 2.66 3.90 -- 59.77 766.44
WSI 0.08 577.15 0.38 0.19 57.71 -- -- 5.73 63.63 833.40
T inv 0.24 1548.57 1.12 0.39 159.96 7.27 8.18 5.73 181.52 756.35
Note: RMI-Raw Material Inventory, WIPI- Work In Proces Inventory, FPI- Finished Product Inventory, WSI- Work in Sales Inventories, T inv- Total
inventories, TIC- Total Inventory Cost

Table 4.24: Commodity-wise cost of inventory and Preparing the Product for Sale in Supermarkets
Products Cities
Rice
Wheat
Green
Gram
Total
Qty
(Qtls)
Value (Rs)
No.of
Days
Stored
Interest
@12.5% Shrinkage
Labour
Charge
(Cleaning
and
packing)
Cost components (Rs)
Cold
storage
Packaging
Material
Cost
TIC TIC/Qtl
Bangalore 10.64 19535.04 4.67 8.70 195.56 385.51 -- 867.39 1457.16 136.95
Mysore 7.48 13136.75 4.00 4.67 133.48 201.03 -- 357.92 697.10 93.19
Mangalore 7.00 11900.00 5.67 6.56 118.73 175.44 -- 445.54 746.28 106.61
Belgaum 3.19 5273.87 4.39 2.16 52.48 94.98 -- 212.94 362.56 113.65
Hubli-
Dharwad 7.30 12685.58 3.67 4.82 125.93 168.47 -- 458.30 757.51 103.77
Average 7.12 12506.25 4.48 5.38 125.24 205.08 - 468.42 804.12 110.84
Bangalore 1.84 3983.60 4.67 1.89 39.68 72.96 - 202.08 316.61 172.07
Mysore 1.03 2125.66 4.00 0.82 21.58 29.52 -- 54.38 106.31 103.21
Mangalore 0.44 933.46 5.67 0.53 9.33 18.55 -- 31.82 60.22 136.87
Belgaum 0.85 1622.01 4.33 0.77 16.22 24.78 -- 70.34 112.10 131.88
Hubli-
Dharwad 1.50 2886.38 3.67 1.08 28.83 48.56 -- 103.20 181.67 121.12
Average 1.13 2310.22 4.47 1.02 23.13 38.87 - 92.37 155.38 133.03
Bangalore 2.38 11555.50 4.67 5.89 229.30 72.82 - 171.84 479.84 201.61
Mysore 1.58 7668.14 4.00 3.08 155.25 45.29 -- 74.95 278.57 176.31
Mangalore 0.99 4731.21 5.67 2.76 95.97 31.58 -- 63.01 193.31 195.27
Belgaum 0.69 3045.66 4.33 1.25 61.24 20.95 -- 48.21 131.65 190.79
Hubli-
Dharwad 1.57 6803.20 3.67 3.15 136.72 58.60 -- 116.66 315.13 200.72
Average 1.44 6760.74 4.47 3.23 135.69 45.85 - 94.93 279.70 192.94
Contd…..

Tur Dal
Chilli
Mustard
Tomato
Bangalore 2.77 9597.36 4.67 4.77 191.74 111.27 - 249.77 557.56 201.28
Mysore 1.38 4707.18 4.00 1.79 95.48 39.56 -- 65.46 202.29 146.59
Mangalore 1.20 3906.60 5.67 2.20 78.29 38.28 -- 76.38 195.14 162.62
Belgaum 0.96 3051.84 4.42 1.30 61.28 28.64 -- 60.81 152.03 158.36
Hubli-
Dharwad 1.42 4539.74 3.67 1.70 91.12 53.05 -- 95.21 241.08 169.78
Average 1.55 5160.54 4.49 2.35 103.58 54.16 - 109.53 269.62 167.73
Bangalore 0.33 2539.35 4.33 1.04 58.64 40.85 -- 29.45 129.98 393.87
Mysore 0.16 1230.88 4.00 0.48 25.00 14.76 -- 13.46 53.71 335.71
Mangalore 0.12 891.18 5.94 0.56 17.89 14.58 -- 13.26 46.29 385.78
Belgaum 0.04 286.25 4.33 0.13 5.74 3.49 -- 3.43 12.80 319.89
Hubli-
Dharwad 0.07 500.19 3.67 0.19 10.05 7.02 -- 6.34 23.60 337.14
Average 0.14 1089.57 4.45 0.48 23.46 16.14 - 13.19 53.28 354.48
Bangalore 0.24 656.28 11.24 0.92 6.55 33.78 - 19.69 60.94 253.90
Mysore 0.12 325.65 15.00 0.48 3.34 11.07 -- 8.32 23.21 193.43
Mangalore 0.06 156.48 12.87 0.22 1.57 7.27 -- 3.82 12.88 214.70
Belgaum 0.04 99.43 15.00 0.14 2.04 2.46 -- 2.17 6.81 170.22
Hubli-
Dharwad 0.09 228.11 15.00 0.30 2.27 6.90 -- 2.83 12.30 136.62
Average 0.11 293.19 13.82 0.41 3.15 12.30 - 7.36 23.23 193.77
Bangalore 2.93 1874.47 3.00 0.88 193.23 231.16 135.99 105.07 666.33 227.42
Mysore 0.80 631.40 2.00 0.14 68.72 32.25 27.50 16.50 145.11 181.39
Mangalore 0.45 357.08 3.00 0.45 36.40 23.58 -- 13.02 73.45 163.21
Average 1.39 954.31 2.67 0.49 99.45 95.66 81.75 44.86 294.96 190.67
Contd…..

Onion
Banana
Apple
Note: TIC- Total Inventory Cost
Bangalore 2.68 2488.38 4.67 1.39 248.83 202.10 0.00 91.12 543.44 202.78
Mysore 2.50 1980.00 4.00 0.72 103.82 100.78 -- 51.56 256.88 102.75
Mangalore 1.10 925.65 5.00 0.50 46.86 57.64 -- 31.82 136.83 124.39
Average 2.09 1798.01 4.56 0.87 133.17 120.17 - 58.17 312.38 143.31
Bangalore 1.25 2805.63 3.00 0.82 293.18 40.57 36.87 38.44 409.88 327.91
Mysore 2.00 3814.00 2.00 0.76 198.35 25.00 68.75 37.50 330.37 165.18
Mangalore 0.90 1852.20 3.00 0.45 185.35 58.04 -- 6.53 281.13 312.36
Average 1.38 2823.94 2.67 0.68 225.63 41.20 52.81 27.49 340.46 268.49
Bangalore 0.60 3819.60 3.60 1.26 390.76 28.83 20.29 14.57 455.71 759.51
Mysore 0.60 3923.25 2.00 0.71 409.02 7.50 20.63 14.06 451.91 753.19
Average 0.60 3871.43 2.80 0.98 399.89 18.17 20.46 14.32 453.81 756.35

Table 4.25: Average City-wise Costs of Inventory and Preparing the Products for Sale in Supermarkets
Cities Products
Bangalore
Mysore
Total
Qty
(Qtls)
Value (Rs)
No.of
Days
Stored
Interest
@12.5% Shrinkage
Labour
Charge
(Cleaning
and
packing)
Cost components (Rs)
Cold
storage
Packaging
Material
Cost
TIC TIC/Qtl
Rice 10.64 19535.04 4.67 8.70 195.56 385.51 - 867.39 1457.16 136.95
Wheat 1.84 3983.60 4.67 1.89 39.68 72.96 -- 202.08 316.61 172.07
Green Gram 2.38 11555.50 4.67 5.89 229.30 72.82 -- 171.84 479.84 201.61
Tur Dal 2.77 9597.36 4.67 4.77 191.74 111.27 -- 249.77 557.56 201.28
Chilli 0.33 2539.35 4.33 1.04 58.64 40.85 -- 29.45 129.98 393.87
Mustard 0.24 656.28 11.24 0.92 6.55 33.78 -- 19.69 60.94 253.90
Tomato 2.93 1874.47 3.00 0.88 193.23 231.16 135.99 105.07 666.33 227.42
Onion 2.68 2488.38 4.67 1.39 248.83 202.10 -- 91.12 543.44 202.78
Banana 1.25 2805.63 3.00 0.82 293.18 40.57 36.87 38.44 409.88 327.91
Apple 0.60 3819.60 3.60 1.26 390.76 28.83 20.29 14.57 455.71 759.51
Total 25.66 58855.20 4.85 27.56 1847.46 1219.85 193.15 1789.43 5077.45 2877.30
Rice 7.48 13136.75 4.00 4.67 133.48 201.03 - 357.92 697.10 93.19
Wheat 1.03 2125.66 4.00 0.82 21.58 29.52 -- 54.38 106.31 103.21
Green Gram 1.58 7668.14 4.00 3.08 155.25 45.29 -- 74.95 278.57 176.31
Tur Dal 1.38 4707.18 4.00 1.79 95.48 39.56 -- 65.46 202.29 146.59
Chilli 0.16 1230.88 4.00 0.48 25.00 14.76 -- 13.46 53.71 335.71
Mustard 0.12 325.65 15.00 0.48 3.34 11.07 -- 8.32 23.21 193.43
Tomato 0.80 631.40 2.00 0.14 68.72 32.25 27.50 16.50 145.11 181.39
Onion 2.50 1980.00 4.00 0.72 103.82 100.78 -- 51.56 256.88 102.75
Banana 2.00 3814.00 2.00 0.76 198.35 25.00 68.75 37.50 330.37 165.18
Apple 0.60 3923.25 2.00 0.71 409.02 7.50 20.63 14.06 451.91 753.19
Total 17.65 39542.91 4.50 13.66 1214.04 506.77 116.88 694.12 2545.46 2250.96
Contd…..

Mangalore
Belgaum
Hubli-
Dharwad
Rice 7.00 11900.00 5.67 6.56 118.73 175.44 - 445.54 746.28 106.61
Note: TIC- Total Inventory Cost
Wheat 0.44 933.46 5.67 0.53 9.33 18.55 -- 31.82 60.22 136.87
Green Gram 0.99 4731.21 5.67 2.76 95.97 31.58 -- 63.01 193.31 195.27
Tur Dal 1.20 3906.60 5.67 2.20 78.29 38.28 -- 76.38 195.14 162.62
Chilli 0.12 891.18 5.94 0.56 17.89 14.58 -- 13.26 46.29 385.78
Mustard 0.06 156.48 12.87 0.22 1.57 7.27 -- 3.82 12.88 214.70
Tomato 0.45 357.08 3.00 0.45 36.40 23.58 -- 13.02 73.45 163.21
Onion 1.10 925.65 5.00 0.50 46.86 57.64 -- 31.82 136.83 124.39
Banana 0.90 1852.20 3.00 0.45 185.35 58.04 -- 6.53 281.13 312.36
Total 12.26 25653.86 5.83 14.24 590.38 424.95 0.00 685.22 1745.54 1801.82
Rice 3.19 5273.87 4.39 2.16 52.48 94.98 - 212.94 362.56 113.65
Wheat 0.85 1622.01 4.33 0.77 16.22 24.78 -- 70.34 112.10 131.88
Green Gram 0.69 3045.66 4.33 1.25 61.24 20.95 -- 48.21 131.65 190.79
Tur Dal 0.96 3051.84 4.42 1.30 61.28 28.64 -- 60.81 152.03 158.36
Chilli 0.04 286.25 4.33 0.13 5.74 3.49 -- 3.43 12.80 319.89
Mustard 0.04 99.43 15.00 0.14 2.04 2.46 -- 2.17 6.81 170.22
Total 5.77 13379.06 6.13 5.75 198.99 175.30 0.00 397.90 777.94 1084.80
Rice 7.30 12685.58 3.67 4.82 125.93 168.47 - 458.30 757.51 103.77
Wheat 1.50 2886.38 3.67 1.08 28.83 48.56 -- 103.20 181.67 121.12
Green Gram 1.57 6803.20 3.67 3.15 136.72 58.60 -- 116.66 315.13 200.72
Tur Dal 1.42 4539.74 3.67 1.70 91.12 53.05 -- 95.21 241.08 169.78
Chilli 0.07 500.19 3.67 0.19 10.05 7.02 -- 6.34 23.60 337.14
Mustard 0.09 228.11 15.00 0.30 2.27 6.90 -- 2.83 12.30 136.62
Total 11.95 27643.18 5.56 11.25 394.92 342.60 0.00 782.53 1531.30 1069.14

mustard. The minor costs include interest on working capital at the rate of 12.5 per cent and
shrinkage/ wastage of the product. The shrinkage costs were Rs. 135. 69 in green gram, Rs.
125.24 in rice, Rs. 103.58 in tur dal, Rs. 23.46 in chilli, Rs 33.13 in wheat and Rs. 7.36 in
mustard. At an average, the total inventory cost per quintal was more in chilli (Rs. 369.97)
followed by mustard (Rs. 211.15), green gram (Rs. 194.09), tur dal (Rs. 174.40), wheat (Rs.
137.27) and rice (Rs. 112.91).
With respect to fruits and vegetables, the quantity of inventories maintained and their
values were high in onion (1.26 quintals valued at Rs. 1078.81) and low in apple (0.24
quintals valued at Rs. 1548.97). The other commodities such as tomato were 0.84 quintals
valued at Rs. 572.59 and banana was 0.83 quintals valued at Rs. 1694.37. As in the case of
groceries, the finished product inventories found to be maintained in highest quantity and for
long period in onion(0.67 quintals for 1.04 days) and tomato (0.54 quintals for 0.64 days) but
the raw material inventory was also found maximum in onion (0.19 quintals for 0.89 days) and
apple (0.24 quintals for 1.12 days). In different inventory cost components, shrinkage
perceived to be the highest cost in apple (Rs. 159.96) followed by banana (Rs. 135.38), onion
(Rs. 79.90) and tomato (Rs. 59.67). The cold storage cost was Rs. 32.70 in tomato, Rs. 27.28
in banana and Rs. 8.18 in apple. Cold storage was not used for onion. However, the total
inventory cost per quintal was in descending order in case of apple (Rs. 756.35), banana (Rs.
246.12), tomato (Rs. 211.70) and onion (Rs. 149.23).
The commodity-wise costs of inventory and preparing the products for sale across
cities in Karnataka are shown in Table 4.24. It was observed from the study that on an
average rice (7.12 quintals) was the major commodity among groceries procured and stored
in supermarkets across the state which is followed by tur dal (1.55 quintals), green gram (1.44
quintals), wheat (1.13 quintals), chilli (0.14 quintals) and mustard (0.11 quintals). In
accordance with the quantity, the value was also found to be high in the same order that is
Rs. 12,506.25 in rice subsequently Rs. 5,160.54 in tur dal, Rs. 6,760.74 in green gram, Rs.
2,310.22 in wheat, Rs. 1,089.57 in chilli and Rs. 293.19 in mustard. With respect to the
inventory cost components the packaging material, labour charges, shrinkage and cold
storage were in their descending orders. The cost of packaging was maximum in rice (Rs.
468.42) and the least in mustard (Rs. 13.19). How ever, the unit inventory cost was as high as
Rs. 354.48 in chilli followed by mustard (Rs. 193.77), green gram (Rs. 192.94), tur al (Rs.
167.73), wheat (Rs. 133.03) and rice (Rs. 110.84).
In fruits and vegetables category, the average quantity inventory maintained was high
in onion (23.09 quintals) and the next were tomato (1.39 quintals), banana (1.38 quintals) and
apple (0.60 quintals). The respective costs were Rs. 1798.01, Rs. 954.31, Rs. 2823.94 and
Rs. 3871.43. Here shrinkage was found to be major inventory cost element which accounted
for Rs. 399.89 in apple, Rs. 225.63 in banana, Rs. 133.17 in onion and Rs. 99.45 in tomato.
Similarly, the packaging material cost was 58.17 in onion, Rs. 44.86 in tomato, Rs. 27.49 in
banana and Rs. 14.32 in apple. However, the total inventory cost per quintal was highest in
apple (Rs. 756.35) followed by Rs. 268.49 in banana, Rs. 190.67 in tomato and Rs. 143.31 in
onion.
The city-wise costs of inventory and preparing the product for sale are elucidated in
Table 4.25. Even though, the average quantity of inventory maintained was high in Bangalore
(25.66 quintals) followed by Mysore (17.65 quintals), Mangalore (12.26 quintals), Hubli-
Dharwad (11.95 quintals) and Belgaum (5.77 quintals), the average inventory period was
highest (6.13 days) in Belgaum followed by Mangalore (5.83 days), Hubli-Dharwad (5.56
days), Bangalore (4.85 days) and Mysore (4.50 days). Among different commodities, the
quantity stored in onion was maximum (10.64 quintals in Bangalore, 7.48 quintals in Mysore
and 7.00 quintals in Mangalore) in all the cities and minimum in chilli (0.33 quintals in
Bangalore, 0.16 quintals in Mysore, 0.12 quintals in Mangalore, 0.04 quintals in Belgaum and
0.07 quintals in Hubli-Dharwad). The respective values were maximum and minimum as the
case may be. With respect to cost components, packaging costs were found to be the prime
constituent, on an average it accounts for Rs. 1789.43 in Bangalore followed by Rs. 694.00 in
Mysore, Rs. 685.22 in Mangalore, Rs. 982.33 in Hubli-Dharwad and Rs. 397.90 in Belgaum.
The cold storages were nil in Mangalore, Belgaum and Hubli-Dharwad but seen only in case
of tomato, banana and apple in Bangalore and Mysore. However, the total inventory cost per
unit was more in case of chilli (Rs. 394.87 in Bangalore, Rs. 335.71 in Mysore, Rs. 385.78 in
Mangalore, Rs. 319.89 in Belgaum and Rs. 337.14 in Hubli-Dharwad).

4.6 PROCESSING / VALUE ADDITION IN SUPERMARKETS
Processing in the supermarkets is the removal of inert materials, other crop seeds
and undersized seeds from the raw materials in case of groceries whereas, it is cleaning and
grading of products in fruits and vegetables. Generally, these activities are done through
mechanical means.
4.6.1 Extent of activities undertaken in preparation of the products for sale in
supermarkets
The steps or stages identified in the processing of commodities by the supermarkets
are as follows.
Stage I: Cleaning
Stage II: Grading
Stage III: Bagging
Stage IV: Labeling and Sticking
Conditioning was not observed in any supermarkets in the study area. The extent of
activities undertaken in preparation of the products for sale in supermarkets is shown in Table
4.26.
It is revealed from the table that in the entire groceries cent per cent of cleaning,
bagging and labeling and sticking were undertaken by all the supermarkets. However, grading
was observed in 66.67 per cent of Bangalore supermarkets but it was not seen in Belgaum
supermarkets. In overall, it represents that cent per cent of the supermarkets followed
cleaning, bagging and labeling and sticking activities and 26.67 per cent of them undertaken
grading activities across cities in the state.
In fruits and vegetables cleaning activity was observed in all the supermarkets, which
are dealing with these products but cent per cent grading, bagging and labeling and sticking
were identified only in Bangalore supermarkets. At an overall, it accounts 100 per cent of the
supermarkets carried out cleaning activity and 33.33 per cent each followed grading, bagging
and labeling and sticking activities in the state.
4.6.2 Value addition in supermarkets for the selected products
Value addition as a result of processing during the resale of commodities for the
selected supermarkets across the state is presented in Table 4.27.
It is observed from the Table that in Bangalore supermarkets, the average value
added in case of groceries was maximum in wheat (31.33 per cent). This is followed by rice
(30.59 per cent), mustard (28.05 per cent), tur dal (23.45 per cent), green gram (19.94 per
cent) and chilli (17.52 per cent). In Mysore supermarkets, the per cent value addition was
highest in mustard (26.47 per cent) followed by wheat (24.23 per cent), rice (22.86 per cent),
tur dal (19.67 per cent), green gram (15.97 per cent) and chilli (15.45 per cent). Similarly, in
Mangalore the value added was more in mustard (28.16 per cent) followed by rice (27.72 per
cent), wheat (27.14per cent), tur dal (18.00 per cent), chilli (16.82 per cent) and green gram
(16.04 per cent). As incase of others, the per cent of value addition in mustard was found to
be high (29.17per cent) in case of Belgaum supermarkets. It was 26.07 per cent, 24.83 per
cent, 20.27 per cent, 16.05 per cent and 15.50 per cent in other commodities such as wheat,
rice, green gram, tur dal and chilli respectively. Further, in the supermarkets of Hubli-
Dharwad, the value addition was found to be 26.56per cent, in mustard, 26.17 per cent in
wheat, 24.85 per cent in rice, 20.32 per cent in green gram, 18.58 per cent in tur dal and
15.21 per cent in chilli.
On the other hand, in fruits and vegetable category the per cent value addition in
Bangalore super markets was found to be highest in tomato (64.78 per cent) as against 20.65
per cent in apple. Similarly, it was 41.73 per cent in onion and 28.00 per cent in banana. The
indicated percentage of value addition in Mysore supermarkets were 45 per cent in tomato,
39.09 per cent in onion, 25.00 per cent in banana and 21.14 per cent in apple. In respect of
Mangalore too, the value addition was maximum in tomato wherein the percentage value

Table 4.26: Extent of Activities Undertaken in Preparation of the Product for Sale in Supermarkets
Groceries
(No. of respondents)
Cleaning Grading Bagging Label & sticking
Bangalore 3 (100) 2 (66.67) 3 (100) 3 (100)
Mysore 3 (100) 1 (33.33) 3 (100) 3 (100)
Mangalore 3 (100) 1 (33.33) 3 (100) 3 (100)
Belgaum 3 (100) - 3 (100) 3 (100)
Hubli-Dharwad 3 (100) - 3 (100) 3 (100)
Overall 15 (100) 4 (26.67) 3 (100) 3 (100)
Fruits & Vegetables
Bangalore 3 (100) 3 (100) 3 (100) 3 (100)
Mysore 3 (100) - - -
Mangalore 3 (100) - - -
Belgaum - - - -
Hubli-Dharwad - - - -
Overall 9 (100.00) 3 (33.33) 3 (33.33) 3 (33.33)
Note:Hubli-Dharwad and Belgaum supermarkets are not dealing with fruits and vegetables, (Figures in the paranthesis indicates
percentages to the supermarkets at each cities)

Table 4.27: Value Addition in Supermarkets for the Selected Products
Products Particulars Bangalore Mysore Mangalore
Rice
Wheat
Green
Gram
Tur Dal
Chilli
Hubli-
Dharwad
(Rs/Kg)
Belgaum Overall
Sale value of Product Obtained 25.00 22.00 22.00 22.00 21.00 22.40
Purchase value of the product 17.35 16.97 15.90 16.53 15.78 16.51
Value Added 7.65 5.03 6.10 5.47 5.22 5.89
Percentage of value Added 30.59 22.86 27.72 24.85 24.83 26.17
Sale value of Product Obtained 23.00 20.50 21.00 20.00 19.50 20.80
Purchase value of the product 15.79 15.53 15.30 14.77 14.42 15.16
Value Added 7.21 4.97 5.70 5.23 5.08 5.64
Percentage of value Added 31.33 24.23 27.14 26.17 26.07 26.99
Sale value of Product Obtained 58.00 55.00 53.00 52.00 50.00 53.60
Purchase value of the product 46.43 46.43 44.50 41.43 42.25 44.21
Value Added 11.57 8.58 8.50 10.57 7.75 9.39
Percentage of value Added 19.94 15.59 16.04 20.32 15.50 17.48
Sale value of Product Obtained 42.00 40.00 38.00 37.50 37.00 38.90
Purchase value of the product 32.15 32.13 31.16 30.53 29.50 31.10
Value Added 9.85 7.87 6.84 6.97 7.50 7.81
Percentage of value Added 23.45 19.67 18.00 18.58 20.27 19.99
Sale value of Product Obtained 88.00 86.00 84.00 80.00 81.00 83.80
Purchase value of the product 72.58 72.72 69.86 67.83 68.00 70.20
Value Added 15.42 13.28 14.14 12.17 13.00 13.60
Percentage of value Added 17.52 15.45 16.84 15.21 16.05 16.21
Contd…….

Mustard
Tomato
Onion
Banana
Apple
Sale value of Product Obtained 35.00 34.00 33.50 32.00 32.00 33.30
Purchase value of the product 25.18 25.00 24.07 23.50 22.67 24.08
Value Added 9.82 9.00 9.43 8.50 9.33 9.22
Percentage of value Added 28.05 26.47 28.16 26.56 29.17 27.68
Sale value of Product Obtained 11.50 10.00 10.00 -- -- 10.50
Purchase value of the product 4.05 5.50 6.22 -- -- 5.26
Value Added 7.45 4.50 3.78 -- -- 5.24
Percentage of value Added 64.78 45.00 37.83 -- -- 49.21
Sale value of Product Obtained 12.50 11.00 11.00 -- -- 11.50
Purchase value of the product 7.28 6.70 7.15 -- -- 7.04
Value Added 5.22 4.30 3.85 -- -- 4.46
Percentage of value Added 41.73 39.09 35.00 -- -- 38.61
Sale value of Product Obtained 25.00 22.00 23.00 -- -- 23.33
Purchase value of the product 18.00 16.50 16.33 -- -- 16.94
Value Added 7.00 5.50 6.67 -- -- 6.39
Percentage of value Added 28.00 25.00 28.99 -- -- 27.33
Sale value of Product Obtained 71.00 70.00 -- -- -- 70.50
Purchase value of the product 53.50 55.20 -- -- -- 54.35
Value Added 17.50 14.80 -- -- -- 16.15
Percentage of value Added 24.65 21.14 -- -- -- 22.90

added was 37.83 per cent. The banana and apple occupied 35.00per cent and 28.99 per cent
accordingly.
On the overall supermarkets, the greatest per cent of value addition was found in
mustard (27.68 per cent) among groceries and tomato (49.21per cent) in fruits and
vegetables. The value addition in other commodities were in the descending order of 26.99
per cent, 26.17 per cent, 19.99 per cent, 17.48per cent, and 16.21 per cent in wheat, rice, tur
dal, green gram and chilli, and 38.61 per cent, 27.33per cent and 22.90 per cent in onion,
banana and apple. However, out of the selected cities the maximum value addition in both
groceries and fruits and vegetables were found in Bangalore.
4.7 FINANCIAL MANAGEMENT IN SUPERMARKETS
Financial performance refers to any company’s ability to generate new resources,
from day to day operations, over a given period of time. The financial ratio represents the
relationship between two accounting figures expressed mathematically. In financial analysis,
a ratio is used as an index or yardstick for evaluating the financial performance or status of
any institution against certain standards. Ratio analysis technique is popular in the accounting
system of enterprises in general and helps in spotting trends towards better or poor
performance. It is helpful in finding significant deviations from an average or pre-determined
standard. The financial ratios relevant to supermarkets in retailing are grouped under four
different categories namely, solvency ratios, liquidity ratios, profitability ratios and turnover
ratios and are presented in Table 4. 28.
Solvency ratios
The long-term solvency positions of the supermarket are assessed by these ratios.
Solvency refers to the ability of the supermarket to repay its outside long-term liabilities/total
liabilities. Solvency ratio indicates long-term stability of a concern. The long-term creditors
would judge the soundness of the supermarket on the basis of the long-term financial strength
measured in terms of its ability to pay the interest regularly as well as repay the installment of
the principal on due dates or in one lump sum at the time of maturity. Here the ratios like total
liabilities to owned funds and fixed assets to owned funds were considered.
The ratio of total liabilities to owned funds was found to be 0.798, 0.600, 1.905, 3.535,
0.345 in Bangalore, Mysore, Mangalore, Hubli and Belgaum, respectively. On the overall
across cities, it was 1.400, which indicates the unreliability of the supermarkets existing ones.
The ratio of fixed assets to owned funds was found to be 0.697 in Bangalore, while 1.731 and
1.367 were found in Mangalore and Hubli-Dharwad. At an average the ratio was 0.853 for the
overall supermarkets across the state.
Liquidity ratios
Liquidity ratio indicates the continuous operation of the supermarkets. These ratios
are used to measure the ability of an institution to possess adequate cash to meet immediate
obligations. The liquidity position of the supermarkets was examined using two ratios namely
liquid assets to total assets ratio and current assets to current liabilities ratio.
A review of the table indicates that in all the supermarkets, the liquid assets to total
assets ratio was less than 0.5, which is 0.459 in Bangalore, 0.404 in Mysore, 0.399 in
Mangalore, 0.157 in Belgaum and 0.268 in Hubli-Dharwad and hence the overall was 0.337. It
indicates that more than 50per cent of the assets were not in liquid assets form. The current
ratio (ratio of current assets to current liabilities) presented in the table indicates that the ratio
was more than one in all the cities supermarkets except Mysore, wherein the ratio was 0.994.
It means to say the supermarkets had more than one rupee of current assets per rupee of
current liabilities.
Profitability ratios
These ratios can be used to assess the financial status and overall efficiency of the
supermarkets. These ratios were used to compare the return on investments. An important
indicator of the operational efficiency of a firm is its profits. However, total profits do not
indicate the efficiency whereas the profit per unit of different aspects of the business certainly

Table 4.28: Financial Performance of Supermarktets During the Year 2006-07
Ratios Particulars Bangalore Mysore Mangalore
Test of
Solvency
Test of
Liquidity
Tests of
Profitability
Test of
Turnover
Hubli-
Dharwad
Belgaum Overall
Ratio of total liability to owned funds 0.798 0.600 1.905 3.353 0.345 1.400
Fixed assets to owned funds ratio 0.697 0.317 1.731 1.367 0.154 0.853
Ratio of liquid assets to total assets 0.459 0.404 0.399 0.268 0.157 0.337
Ratio of cuurrent assets to current liabilities 1.275 0.994 1.943 1.741 3.623 1.915
Net profits to fixed assets ratio 0.572 1.297 0.677 0.717 0.705 0.811
Net profits to total assets ratio 1.373 3.146 2.187 0.868 4.509 2.499
Net profits to owned funds ratio 0.856 1.229 4.621 1.773 0.537 1.989
Net profits to total sales ratio 0.205 0.191 0.170 0.180 0.178 0.189
Working capital turnover 1.431 1.331 1.576 1.375 5.156 2.174
Fixed assets turnover ratio 2.716 6.784 3.971 3.974 3.931 4.275

does. Hence, the ratio of net profits to different determinations were worked out and
presented in Table 4.28.
Net profits to fixed assets ratio were found to be 1.297, 0.717, 0.705, 0.677 and 0.572
in various cities on the descending order in Mysore, Hubli-Dharwad, Belgaum, Mangalore and
Bangalore. Similarly, the ratio in case of net profits to total assets was high in Belgaum
wherein the ratio was 4.509 followed by Mysore (3.146), Mangalore (2.187), Bangalore
(1.373) and Hubli-Dharwad (0.868). However, the overall ratio was 2.499. The obtained ratios
were 4.621 in Mangalore subsequently 1.773 in Hubli-Dharwad, 1.229 in Mysore, 0.859 in
Bangalore and 0.537 in Belgaum. The overall net profit to own funds was 1.989. The ratio of
net profits to total sales ratio point outs the net profits for each rupee of own funds used in the
business, which were 0.205 incase of Bangalore, while 0.170 in case of Mangalore. It is quite
good in Mysore (0.191), Hubli-Dharwad (0.180) and Belgaum (0.178). Net profits to total sales
were also found to be 0.189 in cities across the state indicating 0.189 rupee contribution to
per rupee of total sales.
Turnover ratio
The turnover ratio indicates the operational efficiency of the supermarkets in the
study area. The efficiency of supermarkets in the selected cities was compared using the
indicators such as working capital turnover ratio and fixed assets turnover ratios.
The working capital turnover ratio indicated the relationship between sales and
working capital. This ratio was highest of 5.156 in Belgaum followed by 1.890 in Bangalore,
1.576 in Mangalore, 1.539 in Hubli-Dharwad and 1.331 in Mysore supermarkets. In contrast,
the fixed assets to turnover ratio was 6.784 in Mysore, 4.319 in Hubli-Dharwad, 3.971 in
Mangalore, 3.931 in Belgaum and 3.581 in Bangalore. At an average, the average working
capital turnover ratio was 2.298 and fixed assets to turnover ratio was 4.517 for the state.
4.8 FACTORS CONSIDERED AND METHODS OF PRICE-
FORMATION IN SUPERMARKETS
In order to assess the relative importance attached by the supermarkets to the factors
considered in pricing of products at supermarkets in different cities across Karnataka Garret
ranking technique was employed. The factors considered in the analysis were nature of
products, market forces (Supply & Demand), product life, competition, long-term pricing,
market segmentation, quality of the products, relative prices of the producers, price should not
be high, price should convince prospective consumers, price shall ensure profitability and
availability of the products. In addition to city-wise results, overall results of the analysis are
presented in Table 4.29.
Table 4.29 represents the results of the Garret ranking analysis conducted in respect
of factors considered in pricing the products in supermarkets by the retailers
(supermarketers).
As the Table 4.29 reveals, the Bangalore supermarkets attached significance
importance to quality of the product followed by price should ensure profitability, nature of the
product, competition, product life, price should not be high, availability of product, price shall
convenience prospective consumers etc. In Mysore, supermarkets attached first preference to
nature of the product and the least consideration was given to market segmentation. The
other factors such as quality of the products, availability of the product, price should not be
high, competition etc were also considered next to nature of the product. Nature of the
product, quality of the product, price should ensure profitability and competition were reflected
as the prime factors considered in pricing at Mangalore. Similarly, competition, price should
not be high, quality of the product and price should ensure profitability were the factors
considered in Belgaum firms. In case of Hubli-Dharwad, quality of the products was
considered the most important factor in fixing the price for the product. Long term pricing was
given least importance. The other factors namely, competition, price should not be high,
nature of the products, availability of the product, market forces, product life assumed second,
third, fourth, fifth, sixth and seventh important places in Hubli-Dharwad supermarkets.
In the overall, the factors – quality of the product, nature of the product, competition,
price should not be high, price should ensure profitability, availability of the product, product
life, relative price of the rival products, market forces, price shall convenience prospective

Table 4.29: Ranking of the Factors Considered by Supermarketers in Pricing the Products in Supermakets
Factors
Hubli-
Dharwad
Garret Ranks
Mangalore Belgaum Mysore Bangalore Overall
Nature of products 4 1 5 1 3 2
Market forces (Supply & Demand) 6 7 9 10 11 9
Product life 7 8 8 6 5 7
Competition 2 4 1 5 4 3
Long-term pricing 12 12 11 11 12 12
Market segmentation 11 11 12 12 10 11
Relative prices of the producers 9 10 6 9 9 8
Price should not be high 3 6 2 4 6 4
Price should ensure profitability 8 3 4 7 2 5
Price shall convince prospective consumers 10 9 10 8 8 10
Quality of the products 1 2 3 2 1 1
Availability of the products 5 5 7 3 7 6

Table 4.30: Methods of Pricing Followed in Supermarkets
Pricing Methods
Cost based pricing Methods
Hubli-
Dharwad
Mangalore Belgaum Mysore Bangalore Overall
Res % Res % Res % Res % Res % Res %
a) Absorption cost pricing 3 100.00 3 100.00 3 100.00 3 100.00 3 100.00 15 100.00
b) Target pricing - - - - - - - - 2 66.67 2 13.33
Market based pricing methods
a) Penetration pricing 1 33.33 1 33.33 - - 1 33.33 2 66.67 5 33.33
b) Market skimming - - - - - - - - - -
c) Loss leader pricing 1 33.33 2 66.67 - - - - 1 33.33 4 26.67
d) Psychological pricing - - - - - - - - - - - -
e) Discounting pricing 3 100.00 1 33.33 1 33.33 2 66.67 2 66.67 9 60.00
Competition based pricing
a) Going rate or market pricing 3 100.00 3 100.00 3 100.00 3 100.00 3 100.00 15 100.00
b) Destroyer or destructor pricing - - 1 33.33 - - - - - 1 6.67

consumers, market segmentation and long-term pricing were considered as important in that
order. The sum of the opinions of the retailers, which are converted into scores (Garret table)
and the mean scores obtained are presented in Appendix-I.
One of the most crucial areas of decision making for retailers is pricing. The main
objectives of the pricing are to get handsome return on investment, to achieve the growth in
terms of sales, to increase the market share and to stabilize the variations in the prices to
protect prospective consumers and in turn total sales. In case of retailing, the supermarkets
decide the price for their products based on the market situation. However, the methods of
pricing followed in supermarkets were illustrated in Table 4.30.
In addition to absorption cost pricing and going rate pricing methods by the cent per
cent of the Bangalore supermarkets, target pricing, penetration pricing and discounting pricing
were adopted by 66.67 per cent of the supermarkets. About 33.33 per cent were followed loss
leader pricing in times. It was cent per cent, 66.67 per cent and 33.33 per cent of the
supermarkets in Mysore followed absorption cost pricing and going rate or market pricing,
discounting pricing and penetration method of pricing. All the supermarkets in Mangalore
adopted absorption cost pricing and going rate or market pricing methods, whereas 66.67 per
cent of them in the city were also made use of loss leader pricing. Apart from this, 33.33 per
cent of the supermarkets also went behind penetration pricing, discounting and destroyer or
destructor pricing methods occasionally. The pricing in Belgaum supermarkets was done
through absorption cost pricing and going rate or market pricing methods by all the firms
together with discounting pricing by 33.33 per cent of the supermarkets. Similarly, the
methods employed by the Hubli-Dharwad supermarkets were absorption cost pricing,
discounting pricing (in festivals) and going rate or market pricing methods (100 per cent each)
and penetration pricing and loss leader pricing (33.33 per cent each).
At an overall, cent per cent of the supermarkets in the state followed absorption cost
pricing and going rate or market pricing methods in pricing the products at supermarkets.
About 60 per cent followed discounting pricing during special days while 33.33 per cent and
26.67 per cent adopted penetration pricing and loss leader pricing methods. A small
proportion (13.33 per cent and 6.67 per cent) of the supermarkets also adopted target pricing
(for selected products) and destroyer or destructor pricing methods in their retailing business.
4.9 PROBLEMS FACED BY THE FOOD RETAILERS
In the present study 38 variables were identified and grouped into 10 factors after
rotation of principle component technique. Out of the 10 factors 9 factors, which explain 92.38
per cent of the total variance were selected for interpretation. Table 4.31 shows the factor
loading of the each variable under different factors and the percentage variation explained by
each factor.
The first dimension explains 19.18 per cent of the variation. Among 38 indicators 8
showed higher factor loading (above 0.5) on the first dimension. Availability of trained
employees, banks for sources of finance, demand for credit from the customers, bargain from
the customers, government scheme for finance, repayment from the customers and credit
facility from the wholesalers had highest factor loadings of 0.797, 0.788, 0.743, 0.697, 0.665,
0.594, 0.555 and 0.523 respectively. This implied that these indicators were the key problems
in the supermarket business in different cities of Karnataka. In contrast to these
advertisement rate and coverage of area, WTO impact on profit margin and on price of the
products and market information from the wholesalers has shown negative factor loadings.
The second dimensions explained 15.85 per cent of the variation and it consists of 6
indicators with high factor loadings (above 0.4). Except transportation facilities (-0.6319), all
the indicators such as experience of business (0.677), timing of advertisement (0.669),
damage of products from wholesalers (0.658), bribes to government authorities (0.650), tax
charged by the government (0.583) and margin from the wholesalers (0.486) have shown
positive factor loadings on supermarket business.
The third dimension, which explained 11.04 per cent of the variation in the problems
of the supermarkets consist of 5 indicators. Among the five, four indicators – demand for
discounts and offers from the customers, location of the supermarket, WTO impact on
competition and existing laws of the business had positive impact on the problems but
information in advertisement shown negative effect.

Table 4.31: Variables with Relatively Higher Factor Loadings on Nine Dimesions on the
Problems of Supermarketers in Karnataka
First Dimension
Variables
Second Dimension
Variables
Third Dimension
Variables
Variables Factor loadings
Availability of Trained employees 0.7973
Banks for sources of finance 0.7881
Demand for credit from the customers 0.7428
Bargain from the customers 0.6970
Govt. schemes for finance 0.6652
Repayment from the customers 0.5937
Credit facility from the wholesalers 0.5551
Electricity 0.5232
Advertisement rate -0.4172
Advertisement coverage (of area) -0.5568
WTO impact on profit margin -0.5589
Market information from the wholesalers -0.5876
WTO impact on price of the product -0.7112
Percentage Variation 19.1760
Experience in the business 0.6772
Timing of the advertisement 0.6687
Damage of products from wholesalers 0.6575
Bribes to Govt. authorities 0.6504
Tax charge by the Govt. 0.5829
Margin from the wholesalers 0.4861
Transportation facilities -0.6319
Percentage Variation 15.8454
Demand for discounts & offers from the
customers
0.6713
Location of the supermarket 0.5932
WTO impact on competition 0.5928
Existing laws 0.4599
Information in advertisement -0.5735
Contd…..

Fourth Dimension
Variables
Fifth Dimension
Variables
Sixth Dimension
Variables
Seventh Dimension
Variables
Eigth Dimension
Variables
Ninth Dimension
Variables
Percentage Variation 11.0437
VAT Charges 0.7235
Demand for new products from the
customers
0.5576
Land and building 0.5233
Financial resource 0.4899
Percentage Variation 9.7770
Price variation from the wholesalers 0.5486
Insurance facilities -0.5219
Procedures in the Govt. -0.5479
Percentage Variation 9.4247
Storage facility 0.6345
Agencies for products supply 0.5987
Percentage Variation 6.6697
Delivery from the wholesalers 0.6480
Opinion regarding VAT 0.5183
Percentage Variation 6.1932
Existing location of the site -0.4656
Percentage Variation 4.7010
Availability of un trained employees 0.5366
Percentage Variation 4.1074
VAT charges, demand for new products from the customers, land and building and
financial resource were comes under fourth dimension explained about 9.78 per cent
variation, the respective factor loadings are 0.72, 0.55, 0.52 and 0.48.
The fifth dimension explained 9.42 per cent of the variation. The number of indicators
included in this dimension was 3, with insurance facilities and procedures of the government
have negative factor loadings but price variation by the wholesalers had positive factor
loading.
About 6.67 percent of total variation was explained by sixth dimension consisting of
storage facilities and agencies for supply of products to the supermarkets have positive
loadings.
The two variables such as delivery from the wholesalers and opinion of the retailers
regarding VAT included in seventh dimension explained 6.19 per cent of the total variation
with positive consequence on the problems of the retailing.

The eighth and ninth dimensions which explained 4.70 and 4.10 per cent of total
variation included existing location of the site and availability of untrained employees
respectively had factor loadings of -0.46 and 0.54.
The component matrix and the extent of variation explained by different dimensions
on the problems of supermarkets in Karnataka are shown in Appendix-II and Appendix-III.
4.10 FACTORS INFLUENCING THE CONSUMERS TO
PURCHASE THE FOOD PRODUCTS IN SUPERMARKETS
In this section, results of the opinion of the consumers to go for purchase at the
supermarkets in the study area were collected using three point scale technique based on
their importance as most, medium and less preference. The opinions obtained in terms of
scores (i.e., three points scale) from the consumers were analyzed using cluster analysis and
the results of the analysis are presented in Table 4.32.
It was revealed from the Table 4.32 that out of 30 variables, 13 variables were found
in the first aggregate cluster named as accessibility and product quality factors, 10 were
grouped in second aggregate cluster named as influencing factors to go for purchase at
supermarkets and remaining seven variables were included in third cluster named the cluster
as product promotion factors. The important variables included in the accessibility and
product quality factors were convenient location of the supermarket, range of products
availability, convenient for purchase, availability of quality products, saves time of shopping,
working women and convenience, frequency of visits etc based on their similarity within the
variables. Similarly, the influencing factors in the second clusters were reasonable prices,
parking facility, shopping is seen enjoyable at supermarkets, attractive packing, schemes and
offers, concern about health, welfare and the environment, influence of peer group, availability
of range of brands etc as the stimulate the consumers to opt for supermarkets for their
purchase. The product promotion factors in the third cluster group were payment methods,
interest in eating foreign foods, home delivery facility, new products market development,
attractive advertisement, fresh fruits and vegetables and fresh bakery products availability.
The similarity of the variables can be seen in the dendogram (Appendix-IV). However, the
cluster classifications obtained from the analysis were tested in the discriminant analysis and
the results gained are presented in Table 4.33. It is found from the table that the group
classification was cent per cent correct. The cluster classification and case-wise statistics
based on discriminate analysis were given in Appendix-V and the proximity matrix of squared
Euclidean distance for the cluster classification was presented in Appendix-VI.

Table 4.32: Aggregation of Clusters of Variables Influencing Consumers to Purchase Food
Products in Supermarkets
Cluster
Group
1
2
3
Aggregation of
clusters
Accessability &
Product quality
Factors
Influencing
Factors
Product
Promotion
Factors
Variable
code
numbers
Name of the Variable
F1 Convenient location of the supermarket
F2 Range of products available
F3 Convenient for purchase
F4 Availability of quality products
F12 Better service to customers
F14 Save time of shopping
F16 Working women and convenience
F21 Store image
F22 Behaviour of the employees
F23 Freshness of the products
F26 Good quality products
F29 Frequency of visits
F30 Amount spare
F5 Reasonable prices
F6 Parking facility
F8 Shopping is seen as enjoyable
F9 Attractive packing
F11 Interest in eating foreign foods
F17
Concern about health, welfare and the
environment
F18 Peer group influence
F19 Range of brands
F24 Labeling (Composition of ingredients)
F25 Product warranty
F7
Payment methods (Cash, Cheques or Credit
cards)
F10 Interest in eating foreign foods
F13 Home delivery
F15 New food products market development
F20 Attractive Advertising
F27 Fresh fruits and vegetables
F28 Fresh bakery products

V. DISCUSSION
The findings of the study, which were presented previously, are discussed in this
chapter under the following headings to arrive at a meaningful interpretation.
5.1 Documentation of supermarkets
5.2 Investment pattern in supermarkets
5.3 Organizational structure in supermarkets
5.4 Procurement management in supermarkets
5.5 Inventory management and its costs in supermarkets
5.6 Processing /Value addition in supermarkets
5.7 Financial management in supermarkets
5.8 Factors considered and methods of price-formation in supermarkets
5.9 Problems faced by the food retailers
5.10 Factors influencing the consumers to purchase the food products in supermarkets.
5.1 DOCUMENTATION OF SUPERMARKETS
Table 4.1 presents the list of existing supermarkets in selected cities across
Karnataka (up to 2006). The names of existing supermarkets, number of outlets and address
of their head offices are presented in the Table 4.1. It was observed from the study that
majority of the organized supermarkets (multi outlets) existing and operating only in big cities
like Bangalore and Mysore. These organized supermarkets have multi outlets operating under
the single management and accounts for huge turnover. The un-organized recently formed
supermarkets were found in Mangalore, Belgaum and Hubli-Dharwad. In these cities, the big
local and conventional store owners have converted their indigenous general stores into the
modern type of stores called supermarkets to cater the changing needs and expectations of
modern consumers. Consumer familiarity that runs from generation to generation is one big
advantage for the traditional retailing sector.
The more organized form of supermarkets found in Bangalore city based on their
number of outlets were Shubhiksha (40) followed by Foodworld (33), Fabmall (23), S*mart
(18), Namdhari’s Fresh (14) and Niligiri Dairy Farm Ltd (12). The other important
supermarkets in the city were Spencer’s, Food Bazaar, Monday to Sunday, Farm Line
supermarkets, M.K. Retail Co. Super Mart, Ruba traders etc. All these supermarkets have
their Head offices at Bangalore.
The famous indigenous supermarkets in the Mysore city were Loyal World, Arihanth
Super Bazaar, Mohan Bhandar, Shivananda Supermarket, A-Z Supermarket and Foodworld.
However, the organized supermarkets like Foodworld, Niligiri’s, Shubhiksha and Fabmall
have penetrated the city more recently and most of these had their head office at Bangalore.
The family owned un-organized supermarkets such as Baliga Stores Supermarket,
Andy’s supermarket; Apna Bazaar, Jimmy’s Supermarket, Misbah Supermarket, Move N
Pick, Noor Super Bazaar Ruby’s Supermarket, Sadhar Bazaar were well known in the city.
Just recently, the organized supermarkets like Foodworld, Niligiri’s and Food Bazaar have
also entered into the food retailing business in the city.
Pick ‘n’ Pay, Sangram Food Basket, Day 2 Day, Needz Supermarket and Eshan
Super Shoppe were the only five supermarkets in Hubli-Dharwad city. However, Pick ‘n’ Pay
and Sangram Food Basket had two outlets each in the city. Similarly, the supermarkets in the
Belgaum city were Hans Raj Supermarket, Neena Supermarket, Quality Supermarket, Rex
Supermarket and Shoppers Paradise, most of which are family owned.
5.2 INVESTMENT PATTERN IN SUPERMARKETS
It was found from Table 4.2 that the average area of the supermarket outlets in
different cities were found to be 4333.33 square feet, 3133.33 square feet, 2833.33 square

feet, 1833.33 square feet and 1200 square feet in Bangalore, Mysore, Hubli-Dharwad,
Mangalore and Belgaum, respectively. The area was high due to more transactions, range of
products and more spacious to attract consumers in big cities like Bangalore and Mysore and
less in Mangalore, Hubli-Dharwad and Belgaum as the supermarkets in these cities were
recently converted from the conventional stores. Sometimes organizations are created large
at the outset, usually because size is an advantage or a necessity. For example, the owner of
an independent supermarket does not open a small store in a newly built subdivision and then
grow larger as demand warrants. Instead, a large store is designed and built that has the
capacity to deal with the expected number of customers in the neighbourhood. A small
grocery store could not compete effectively in price and selection with other nearby
supermarkets.
In addition, table indicated that though, the fixed capital drastically varied from city to
city, highest was found in Bangalore (Rs. 258.30 lakh) followed by Hubli-Dharwad (Rs. 71.60
lakh), Mysore (Rs. 39.23 lakh), Belgaum (Rs. 18.81 lakh) and Mangalore (Rs. 13.00 lakh),
However, the overall average total fixed cost per outlet was Rs. 78.42 lakh for the state as a
whole. At the same time, it accounts for 30.01 per cent of the total capital. This is due to
higher amount of capital investment on sophisticated modern equipments and infrastructural
facilities. Among different fixed capital, the proportion of land & building accounted for 23.50
per cent of the total capital as these resources become very costly in urban area. The
remaining fixed capital elements were machineries & equipments, other fixtures and salary to
permanent employees which accounts to 2.10 per cent, 1.20 per cent, 1.08 per cent
respectively of the total fixed capital.
In case of working capital, raw materials were the prime costs contributed about 67
per cent of the total capital as the retailing business (supermarkets) itself is to reselling of
commodities and quicker conversion of inventory into cash. The other important working
capitals incurred in the establishment of supermarkets were wages to casual labourers, power
charges and packaging material. These results are on par with the study conducted by
Nagesh (1990) wherein the highest fixed capital investment was in building (72.81 per cent)
followed by machinery and equipments (15.42 per cent) and land (11.77 per cent) in
production and marketing of cashew in Karnataka.
At an overall, the average total costs required to establish a supermarket in
Karnataka was Rs. 261.33 lakh and the same in different cities such as Bangalore, Mysore,
Hubli-Dharwad, Mangalore and Belgaum were Rs. 762.061 lakh, Rs. 205.876 lakh, Rs.
173.191 lakh, Rs. 96.78 lakh and Rs. 78.53 lakh, respectively. The higher costs in big cities
was due to higher labour costs, social security to employees, high quality real estate, much
bigger premises, comfort facilities such as air-conditioning, back-up power supply, taxes etc.,
it is more so incase of organized retailing. On the other hand, supermarkets in small cities are
of low cost structure, mostly owner-operated, has negligible real estate and labour costs and
little or no taxes to pay.
5.3 ORGANIZATIONAL STRUCTURE OF SUPERMARKETS
It was observed that the organized supermarkets or supermarkets in multi outlet
(chain of supermarkets) firms/companies followed line, line and staff, and the functional
categories of organizational structures whereas line organization was commonly followed in
un-organized supermarkets or supermarkets not in chain. This may be because of huge
investment and more number of activities in organized supermarkets and the reverse is true
in un-organized supermarkets. The line organizational structure in both the supermarkets was
found to be similar with the studies conducted by Ramdev (1998) and Mane (2000). They
found that the both small and large scale agro-based units having both less and high
investments followed line organization type of structure because of fast communication, easy
feed back and possibility to take easy and immediate corrective measures. The functional
organizational structure followed in the organized supermarkets was found to be reliable
when it is compared with the report presented by Kozachuk (2001) regarding management
practices existing in Russian enterprises, which were inappropriate for operating in market
conditions due to lack of functional organizational structure in trading enterprises.
The line organization is simple; authority and responsibility are clear cut, easily
assignable and traceable. It is easy to develop a sense of belonging to the organization.
Communication is fast, easy and feed back from employees can be easily obtained and

immediate corrective measures can be applied. The discipline among employees can be
maintained easily and effectively.
In line and staff organizational structures delineation of organizational authority
between management personnel (staff) having overall planning and direction responsibilities
and operational personnel (line) having direct job performance responsibilities. Here staff is
advisory to the line function.
Similarly, functional organization structure is based on functional performance;
organizational departments are created to fulfill organizational functions such as marketing,
finance, and personnel. This type of organization has characteristics of both line and staff
functions.
5.3.1 Organizational structures of supermarkets in chain (Organized
Supermarkets
In the hierarchy of these outlets/supermarkets, they have executive (Managing
Director (MD)/Chief Executive Officer (CEO) to design, develop and implement the strategic
plan for the company in most cost effective and time efficient manner and in turn he is
responsible for both day-to-day running of the company and developing business plans for
the long term future of the supermarkets. He is assisted by General Managers (GM) of
different departments such as purchase, marketing, finance and the systems.
The General Manager takes care of overall responsibility for managing both revenue
and cost elements of their respective department. Usually he over see almost all the functions
as well as day-to-day operations of their department. Frequently, He is also responsible for
leading or coordinating the strategic planning functions of the supermarkets. The GM
(Purchase) is assisted by an Assistant General Manager (AGM) in turn Purchase managers,
Store managers, Supervisors and labourers in a hierarchy. The whole team is responsible for
the complete purchase and procurement of related materials for the company such as price,
quality, availability, reliability of the products and technical support when choosing suppliers
and merchandise. They try to get the best deal for their company, meaning the highest quality
goods and services at the lowest possible cost to their companies. The purchasing managers,
buyers, and purchasing agents make up a key component of a firm’s supply chain.
The responsibilities of the GM (Marketing) and his team involved in supervision,
marketing, sales in the supermarkets. He is assisted by an AGM (Marketing), Shop
managers, supervisors, cashiers, attenders, sales representatives and watchmen in a topdown
hierarchy. The team looks after reporting, resale pricing, inventory, service maintenance
and other duties as requested by management. In addition, the marketing people involves in
developing and implementing an annual marketing plan, directing division marketing activities,
and developing an annual sales and promotion program
The GM (Finance) assisted by AGM (Accounts) and Accountants are responsible for
maintenance of overall accounting and auditing aspects of the business. They helped in
planning, budgeting, maintaining records and accounts of employees, customers and
suppliers
Finally, GM (System) looks after day to day operations of the supermarkets and is
responsible for developing process, systems, quality and service standards.
5.3.2 Organizational structures of supermarkets not in chain (un-organized
Supermarkets)
The Proprietor or the Manager is the head and sole responsible for anything in these
supermarkets. He will be the decision maker in the organization usually assisted with
Supervisors, Cashiers, Sales representatives and watchmen in a hierarchical way. The
manager himself looks after purchasing, inventory and marketing activities. Some time, any
person in the supermarket can be assigned for various activities like purchasing, processing,
marketing and sales activities as desired by the manager.

5.4 PROCUREMENT MANAGEMENT IN SUPERMARKETS
5.4.1 Existing procurement patterns
It was observed from the Table 4.3 that only two types of purchasing patterns such as
centralized or store level purchasing pattern were followed in supermarkets for procuring the
selected products. In order to establish and effectuate a uniform procedure for the handling of
purchasing matters; to obtain the most suitable services and commodities at the lowest price;
and to promote the best possible means of exercising financial control over expenditures, the
centralized purchasing system was adopted by most of the organized supermarkets having
multi outlets/chain of outlets. It also optimizes multi-store inventory control from one central
location to manage Just-In-Time replenishment. In contrast, store level purchasing refers to
the purchase of commodities for the individual outlets as and when necessary, mostly
followed by the un-organized supermarkets.
It was also noticed from the table that in Bangalore, cent per cent of the supermarkets
followed centralized purchasing pattern due to their multi outlet operations and organized
form of retailing. On the other hand, in Mangalore and Belgaum, cent per cent preferred store
level purchasing because of their single outlet operations and un-organized structure of
retailing. However, 66.67 per cent of supermarkets in Mysore, preferred store level
purchasing and 33.33 per cent have gone for centralized purchasing and the reverse was
found in Hubli-Dharwad depending upon their mode and size of operation. These results are
in accordance with the study conducted by Woods et al (2000) while studying the supply
chain concept for horticultural products. They found that many supply chains in smaller
industries were loose, fragmented, interwoven, unstable and unique. Hence, they suggested
those firms operating in within these environments needs an astute understanding of the
chains, the hierarchy of channel members and their relative position. In the study, he also
suggested effective business strategies for individual firms and supply chains need to be
developed and redeveloped to accommodate the dynamic nature of horticulture. Further, it
was noticed from the Table 4.3 that all the supermarkets purchased groceries through APMC
(Agricultural Produce Market Committee) in all the cities because of prevention of the existing
rules and regulations of the Government to procure agricultural products from any other
sources but fruits and vegetables were purchased directly from farmers and from wholesale
markets. In addition, to these sources some supermarkets in Bangalore have their own
production. In Mysore and Mangalore fruits and vegetables purchased through wholesale
market only. On the other hand, no sale of fruits and vegetables were found in Belgaum and
Hubli-Dharwad supermarkets. These results are equivalence with the results of the study
reported by Narayana Reddy (2004), he stated that most (61 per cent) of the retailers get their
requirements from wholesalers, 15 per cent from the large and other retailers. Over 17 per
cent of the selected retailers get their goods from more than one source, but a small
percentage of retailers get some of their requirements from producers. Apart from this, the
study also shows that the organized retailers/hyper malls and super marketers get
wholesales’ margin plus concession as they buy in bulk and are also the producers.
5.4.2 Monthly Average Quantity and Value of Procurement in Various
Supermarkets across Cities
5.4.2.1 Bangalore
It was revealed from Table 4.4 that among grocery items, the average frequency of
purchase was ranged from four to five times in a month for groceries. Among the groceries,
rice, wheat, green gram and tur dal and chilli were procured more frequently than mustard
wherein the procurement was 2.67 times a month. On the average, rice was procured in
highest (10.46 quintals) quantity followed by tur dal (2.77 quintals), green gram (2.38
quintals), wheat (1.84 quintals), chilli (0.33 quintals) and mustard (0.24 quintals). The average
quantity of purchase in cereals and pulses was high because of the high turnover and
demand from the consumers as these are the daily use items. The grades like standard,
premium and regular in Sona Masoori Rice and Byadgi stem less variety chilli were the major
varieties procured in highest quantities based on the consumer preference. The average total
amount spent on these items were found to be high in the total amount spent on these items
was found to be high in rice (Rs. 86,446.58) followed by green gram (Rs. 51,451.11), tur dal
(Rs. 42,543.19), wheat (Rs. 17,664.28), chilli (Rs. 10,375.28) and mustard (Rs. 1,603.34).

However, the average price per quintal was highest in chilli (Rs. 7,238.57) and lowest in rice
(Rs. 1740.54). The main source of purchase for groceries was traders in APMC only.
In case of fruits and vegetables, tomato was procured was highest (2.93 quintals)
quantity followed by onion (2.68 quintals) and banana (1.25 quintals each), and apple (0.60
quintals). High demand for tomato and onion was natural due to the daily use of these things
in food preparation by the consumers. On an average, the frequency of purchase was 10
times a month in tomato and banana, 4.67 times in onion and 8.33 times in apple depending
on their perishability nature. In addition to market, and direct procurement of tomato from
farmers, own production was also observed in Bangalore supermarkets whereas the
procurement in other fruits and vegetables was found to be from wholesale market only. The
maximum amount spent in procurement of apple (Rs. 26,750.00) because of its high unit cost
price.
5.4.2.2 Mysore
As presented in Table 4.5, the average monthly purchase frequency in groceries was
found to be four times a month in case of rice, wheat, green gram, tur dal and chilli but it was
two times in mustard because of its less demand. the highest quantity of commodity procured
by the supermarkets was in rice (7.48 quintals) followed by green gram (1.58 quintals), tur dal
(1.38 quintals), wheat (1.03 quintals), chilli (0.16 quintals) and mustard (0.12 quintals) in
grocery items. Based on the unit cost and quantity purchase the total amount spent by these
supermarkets was maximum was observed in rice due to its high quantity procured and the
minimum was found in mustard (Rs. 583.33) as it was demanded in small quantity.
The higher procurement incase of fruits and vegetables was observed in banana (20
quintals) followed by tomato (12 quintals), onion (10 quintals) and apple (6 quintals)
depending upon the demand for these products and the total amounts to Rs. 33,120 for
apple, Rs. 33,000 for banana, Rs. 6,700 for onion and Rs. 6600 for tomato. The average
frequency of purchase was 15 in tomato, 10 in banana and apple, but four in onion because
of its hardiness.
5.4.2.3 Mangalore
The average monthly purchase of selected commodities in Mangalore supermarkets
shown in Table 4.6 reveals that the maximum quantity of grocery purchase was in rice (39.65
quintals) followed by tur dal (6.82 quintals), green gram (5.63 quintals), wheat (2.48 quintals)
chilli (0.69 quintals) and mustard (0.15 quintals) depending on their turnover in the
supermarkets. The amount spent respective of the order was Rs. 64,186.33, Rs. 21,105.08,
Rs. 25,071.11, Rs. 4,996.94, Rs. 1,623.90 and Rs. 361.00 based on their quantity purchased
due to the demand for those products. The purchase frequency was 5.67 times a month in
rice, wheat, green gram, tur dal and chilli but 2.33 times a month in mustard because of its
less demand. All these products were acquired from the traders in the APMC only.
In fruits and vegetables, no sale of apple was noticed in Mangalore supermarkets
because of non-availability of fruits in wholesale market and the dominance of traditional fruits
sellers in the study area. However, more procurement in terms of quantity and total costs
were observed in banana (9 quintals & Rs. 14,700) followed by onion (5.5 quintals & Rs.
3,932.50) and tomato (4.5 quintals & Rs. 2,797.50). The unit costs were also observed in the
same order, while the purchase frequency was 10 times a month in tomato and five times in
onion. All these products were also purchased from the wholesale market.
5.4.2.4 Belgaum
The frequency of purchase of groceries in Belgaum was differed from commodity to
commodity (Table 4.7) that is 4.39 times a month in rice, 4.67 times a month in wheat, 4.33
times a month in green gram, 4.42 times a month in tur dal, 4.33 times a month in chilli and
two times a month in mustard for the reason that the supermarkets purchases the products
whenever need arises. All these products were procured from APMC only. In addition, the
table also revealed that rice (13.95 quintals) was the major commodity procured by the
supermarkets followed by tur dal (4.25 quintals), wheat (3.83 quintals), chilli (0.19 quintals)
and mustard (0.09 quintals). At the same time, the estimated total amount were Rs.
21,962.78, Rs. 12,562.50, Rs. 12,611.39, Rs. 6,974.31, Rs. 1,292 and Rs. 196.44 in case of
rice, tur dal, green gram, wheat, chilli and mustard, respectively based on their unit cost and

quantity purchased. However, these products were brought from APMC only as it is the only
regulating body for marketing of agricultural commodities.
No sale of fruits and vegetables were noticed in supermarkets of this city due to lack
of infrastructural facilities required to handle these products in the supermarkets. Apart from
this fact, the other reasons opined by the retailers were lack of availability of fruits and
vegetables regularly, existence of traditional fruit and vegetables vendors in the city, lack of
manpower to look out of these products as these are marketed in everyday early morning.
5.4.2.5 Hubli-Dharwad
The results of Table 4.8 reported that the average monthly quantity and value
products procurement of commodities by the supermarkets in Hubli-Dharwad city. It was rice
followed by green gram, tur dal, wheat, chilli and mustard were procured in the order of 26.77
quintals, 5.75 quintals, 5.22 quintals, 5.50 quintals, 0.26 quintals and 0.18 quintals,
respectively. The amount spent was also high in those respective commodities. The
frequency of purchase was 3.67 times in rice, wheat, green gram, tur dal and two in mustard.
No sale of fruits and vegetables were seen in Hubli-Dharwad which are attributed to
the reasons that lack of infrastructural facilities to handle these products like lack of
manpower, cold storage, non-availability of products etc. Like in other cities, the grocery items
were procured from the market.
5.4.2.5 Overall
The overall monthly average quantity and value of products procurement across cities
in Karnataka presented in Table 4.9 revealed that the average frequency of purchase in
groceries was ranged from four to five times a month but it was only 2.2 times in mustard. The
quantity purchased was also more in rice (7.69 quintals) followed by tur dal (1.55 quintals),
green gram (1.42 quintals), wheat (1.09 quintals), chilli (0.21 quintals) and mustard (0.12
quintals). This is attributed to the fact that the turnover in cereals and pulses was much more
when compared with spices, as these products are the daily use items by the consumers and
hence, the demand was more in these commodities. The cost per quintal was highest in chilli
while least in rice. Further, the total amount spent found to be much in rice (Rs. 57,715.31)
due to its high quantity purchase. It was also reported that the APMC was the only source of
purchase for grocery products as it is the only governing body for marketing of agricultural
commodities. The existing policies of the government also prevents from other sources.
With respect to fruits and vegetables, the purchase frequency was more in tomato
(10.83) and banana (10.00) due to their perishability nature of the products in general and
tomato in particular and also to avoid wastages during storage. Correspondingly, the quantity
purchased was high in banana as the demand for this product was more. Apart from own
production and direct purchase of fruits and vegetables from farmers by the supermarkets in
Bangalore, all supermarkets in various cities purchased fruits and vegetables from wholesale
markets only.
5.4.3 Monthly costs incurred in procurement of commodities by supermarkets
in different cities
5.4.3.1 Bangalore
It could be seen from the Table 4.10 that the average monthly costs incurred in
procurement of selected commodities by supermarkets in Bangalore city. Among grocery
items, rice accounts for highest total cost (Rs. 88,545.75) in procurement followed by green
gram (Rs. 52,010.28), tur dal (Rs. 43,091.11), wheat (Rs. 18,135.11), chilli (Rs. 5,955.39) and
mustard (Rs. 1,773.52), wherein the quantity purchased was 49.67 quintals in rice, 12.92
quintals in tur dal, 11.08 quintals in green gram, 8.58 quintals in wheat, 0.77 quintals in chilli
and 0.64 quintals in mustard. It was found from the study that next to price of the product,
transport costs were the prime costs in procurement and the sales tax at the rate of four per
cent seen only in case of spices. However, the costs observed in transport were Rs. 2,099.17,
Rs. 559.17, Rs. 547.92, Rs. 470.83, Rs. 128.33 and Rs. 106.20 in rice, green gram, tur dal,
wheat, chilli and mustard respectively. The sales tax at the rate of four per cent seen only in
case of spices and it was found to be highest of Rs. 224.00 in chilli as the unit cost of the

product itself was high. The total cost per quintal was also high in chilli when compared to
other commodities.
As in the case of groceries, transport costs were also found to be high in fruits and
vegetables. The costs were Rs. 2,625.00 in tomato, Rs. 675 each in banana and apple, and
Rs. 275 in onion. The high total transport costs in tomato and banana attributed to high
quantity purchase primarily. In addition, these vegetables are more perishable than the other
two (onion and apple) and needs special care while transport including the transport material.
Further, tomato was procured in highest (29.25 quintals) quantity because of more demand
from the consumers. Onion and banana stands next to tomato in terms of quantity purchased
(12.50 quintals each). Apple procurement was very meager (5 quintals) because of its high
unit cost and less demand from the consumers.
5.4.3.2 Mysore
In Mysore, the highest total cost was accounted by rice (Rs. 51,080.56) due to
its higher quantity purchased and the minimum was accounted by mustard (Rs. 646) as it was
purchased in small quantity (0.23 quintals). Based on the quantity purchased, the proportion
of transport cost was higher in rice that is Rs. 1,282.67 followed by green gram (Rs. 273.33),
tur dal (Rs.238.00), wheat (Rs. 204.33), chilli (Rs. 99.67) and mustard (Rs. 39.33). In addition,
the sales tax was also found in spices.
In fruits and vegetables, the utmost procurement seen in banana (20 quintals) and
less in apple (6 quintals) thus the total cost were also high (Rs. 34,000 and Rs. 33,420) in
respective commodities. The transport costs were more in banana (Rs. 1,000) and least in
apple (Table 4.11).
5.4.3.3 Mangalore
The average monthly costs incurred in procurement of selected commodities by
supermarket in Mangalore city depicted in Table 4.12 shows that the maximum quantity of
groceries purchased was in rice (39.65 quintals) followed by tur dal (6.82 quintals), green
gram (5.63 quintals), wheat (2.48 quintals) and chilli (0.69 quintals) and the maximum cost
was also incurred in rice (Rs. 65,539.00) because of its high turnover. Mustard was procured
in minimum quantity due to its less demand and consumption by the consumers. Relatively
high transports cost (Rs. 1,352.67) was found in rice and low (Rs. 26.08) in mustard
depending on their quantity purchased. The local sale tax at the rate of four per cent was
prevailed in this market too which is highest of Rs. 198.06 accounted in chilli.
No sale of apple was noticed in Mangalore supermarkets because of non-availability
of the product in wholesale market and the dominance of traditional fruit sellers in the town.
More procurement and total costs were observed in banana (9 quintals & Rs. 15,150)
followed by onion (5.5 quintals & Rs. 4,207.50) and tomato (4.5 quintals & Rs.
3,022.50)depending on their quantity handled.
5.4.3.4 Belgaum
It could be seen from the Table 4.13 that the average monthly costs incurred in
procurement of commodities in Belgaum supermarkets, rice (13.95 quintals) was the major
commodity procured by the supermarkets followed by tur dal (4.25 quintals), wheat (3.83
quintals), green gram (2.98 quintals), chilli (0.19 quintals) and mustard (0.09 quintals) in
Mysore supermarkets. Corresponding total costs were Rs. 22,415.28, Rs. 12,712.22, Rs.
12,706.67, Rs. 7,095.97, Rs. 1,370 and Rs. 216.48 in case of rice, green gram, tur dal, wheat,
chilli and mustard, respectively, because of their high quantity purchased and high unit cost.
The total transport costs were found to be high in rice (Rs. 452.50) followed by tur dal (Rs.
144.17) and wheat (Rs. 121.67) for the same reason. The local sales tax in spices was more
(Rs. 51.70) in chilli as compared to mustard for the simple reason that the unit cost of chilli
was more than the mustard. No sale of fruits and vegetables were noticed in Belgaum city
supermarkets because of lack of infrastructural facilities to handle these products.
5.4.3.5 Hubli-Dharwad
It could be seen from the Table 4.14 that rice followed by green gram, wheat, tur dal,
chilli and mustard were procured in rice followed by green gram, wheat, tur dal, chilli and
mustard were procured in their higher order of 29.77 quintals, 5.75 quintals, 5.50 quintals,

5.22 quintals, 0.26 quintals and 0.18 quintals respectively, in Hubli-Dharwad. As it was
observed in the earlier cities that the sales tax was applied only for spices and chilli was the
maximum contributor (Rs. 71.36) for it. However, the transport costs were high in green gram
followed by wheat. Here also no sale of fruits and vegetables were observed because of lack
of infrastructural facilities to handle these fruits and vegetables and also due to nonavailability
of these products and product suppliers regularly.
5.4.4 Average Monthly costs Incurred in Procurement of Commodities by
Supermarkets in Karnataka
As it was observed from Table 4.15 that at an overall, rice (34.65 quintals) followed
by tur dal (6.95 quintals), green gram (6.36 quintals), wheat (4.91 quintals), chilli (0.65
quintals) and mustard (0.26 quintals) were the major groceries procured by the supermarkets
as these are the daily use items by the consumers and hence the demand was more in these
cases. Whereas, in case of spices such as chilli and mustard the quantity purchased was very
meager (less than 0.5 quintals/month) because of less turnover in these commodities. In
proportion to the quantity, the total costs were also found high in respective commodities.
However, the average cost per quintal accounted was Rs. 6,839.55 for chilli, Rs. 4,458.11for
green gram, Rs. 3,166.29 for tur dal, Rs. 2,671.88 for mustard, Rs. 1,978.39 for wheat and
Rs. 1704.20 for rice. The sales tax was found only in spices and it was Rs. 87.42 in chilli
which is followed by mustard.
Similarly, in case of fruits and vegetables, the purchase was highest in case of tomato
(23.25 quintals) followed by banana (13.83 quintals), onion (9.33 quintals) and apple (5.50
quintals). The total costs incurred were Rs. 24,148.15, Rs. 7,058.15 and Rs. 12,070.33 for
apple, banana, onion and tomato depending on their demand prevalence. The transport costs
seems to be more in tomato (Rs. 1,612.50) as it is very perishable and purchased in high
quantity compared to other products and less in apple (Rs. 287.50).
It was found from Table 4.16 that the commodity-wise costs incurred in procurement
of commodities by supermarkets in selected cities across Karnataka shown that on an
average among groceries, rice was the major commodity procured in highest quantity (159.97
quintals) followed by tur dal (34.73 quintals), green gram (31.78 quintals), wheat (24.53
quintals), chilli (2.55 quintals) and mustard (1.29 quintals) but the total costs were high in rice
(Rs. 2,73,090.19) and again least in mustard (Rs. 3,506.21). It was also well noted from the
table that in all the commodities, quantity procured and their unit costs were found to be high
in Bangalore alone. It may be due to the higher average size of the supermarkets and high
turnover of the commodities. In contrast, the commodity procurement was found to be less in
Belgaum due to the existence small sized un-organized supermarkets and their small
turnover. The local sales tax of four per cent on spices found in all the cities and slightly high
sales tax was observed in chilli (Rs. 731.44) compared to mustard (Rs. 126.40). The transport
costs varied accordance with the quantity purchased in all the cities and in all the
commodities. However, the highest was noticed in rice and the least in mustard.
In fruits and vegetables, the quantity procured was maximum in banana (13.83
quintals) followed by tomato (45.75 quintals) followed by banana (41.50 quintals), onion
(28.00 quintals) and apple (11.00 quintals). It was depending upon their existing demand,
whereas, the cost per quintal and total costs incurred were more in banana (Rs.
1,742.77/quintal and Rs. 72,325.00 total cost) followed by apple (Rs. 5,495.00/quintal and Rs.
60,445.00 total cost), onion (Rs. 756.67/quintal and Rs. 21,186.67 total cost) and tomato (Rs.
539.26/quintal and Rs. 24,671.25 total cost). The table also indicated that the fruits and
vegetables procured from various sources such as wholesale market, own production and
direct purchase from farmers Except Bangalore, almost all the cities purchased fruits and
vegetables from wholesale market only. The transport costs detected high in tomato (Rs.
2,467.25) and banana (Rs. 2,125.00) as the quantity procured was high in these
commodities. It was note worthy to mention that total costs per quintal in all the commodities
were also found to be high in Bangalore only, except tomato. This is mainly because of the
reason that the supermarkets in Bangalore procuring tomato from more than one source such
as direct procurement from the farmers and wholesale markets (like auction market- Safal
Company which is mainly dealing with auctioning of fruits and vegetables and other fruits and
vegetables markets in the city). Apart from this, own production of fruits and vegetables was
also observed in few supermarkets.

City-wise average monthly cost incurred in procurement of commodities by the
supermarkets (Table 4.17) found that the monthly total quantity procured was highest in
Bangalore (142.90 quintals) followed by Mysore (94.81 quintals), Mangalore (74.63 quintals),
Hubli-Dharwad (43.67 quintals) and Belgaum (25.29 quintals) depending on size
supermarkets and the turnovers in respective cities. Sometimes organizations are of the
supermarkets created large at the outset, usually because size is an advantage or a
necessity. For example, the owner of an independent supermarket does not open a small
store in a newly built subdivision and then grow larger as demand warrants. Instead, a large
store is designed and built that has the capacity to deal with the expected number of
customers in the neighborhood. A small grocery store could not compete effectively in price
and selection with other nearby supermarkets. In the same way, the total costs were in
descending order in these cities. Similarly, the transport costs were Rs. 8,162.62, Rs.
4,537.33, Rs. 3,530.98, Rs. 858.07 and Rs. 1,675.87 in Bangalore, Mysore, Mangalore,
Belgaum and Hubli-Dharwad. However, depending on the quantity procured total costs in
different commodities varied across cities.
5.5 INVENTORY MANAGEMENT AND ITS COSTS IN
SUPERMARKETS
Inventory refers to stocks of products, which represents a large portion of the
business investment and must be well managed in order to maximize profits. Raw materials
inventory, work in process inventory, finished products inventory and work in sales inventory
represents the various forms of inventories maintained by the supermarkets. Each type
represents money tied up until the inventory leaves the company as purchased products. In
fact, many small businesses like supermarket cannot absorb the types of losses arising from
poor inventory management. Unless inventories are controlled, they are unreliable, inefficient
and costly. Inventory Management and Inventory Control must be designed to meet the
dictates of the marketplace and support the company's strategic plan. The major costs
involved in maintaining inventories in the supermarkets are interest on working capital,
shrinkage, labour charges, packing material and cold storage charges.
5.5.1 Cost of Inventories and Preparation of Products for Sale in Supermarket
of Different Cities
5.5.1.1 Bangalore
The costs of inventory and preparing the products for sale in Bangalore city
presented in Table 4.18 revealed that supermarkets maintained short time period inventories
in almost all the commodities. It may be due to the reason that they do not want to get caught
with obsolete items and just try to have an adequate inventory on hand. These Just-in-time
inventory and Material Requirements Planning (MRP) management approaches works to
eliminate inventories rather than optimize them. These reports are on par with the results
obtained by Farsad and LeBruto (1993). They reported that the consequences of
overstocking items or understocking were undesirable. Overstocks absorb money and invite
waste in food inventory management. Further, from better inventory management controls to
new loss prevention methods, retailers are integrating more technology initiatives into their
operations to run more efficient stores.
In groceries, particularly in cereals and pulses, the inventory period was ranged
between four to five days but in spices it ranged from four to 11 days. While in case of fruits
and vegetables the period ranged between three to five days because of perishability of these
products.
The volume of inventories found to be high in rice (10.64 quintals) followed by tur dal
(2.77 quintals), green gram (2.38 quintals), wheat (1.84 quintals), chilli (0.33 quintals) and
mustard (0.24 quintals) in groceries, the respective inventories valued at Rs. 19,535.04, Rs.
9,597.36, Rs. 11,555.50, Rs. 3,983.60, Rs. 2,539.35 and Rs. 656.28 based on their turnover
in turn due to consumer demand for essential and daily use items. The finished product
inventory was observed to be highest both in terms of quantity and storage period as the
business involves quick conversion of inventory and hence the mangers must formulate a
plan to ensure enough inventories is on hand for production of finished product. The finished
product stock was 6.94 quintals in rice valued at Rs. 12,670.85 held for 1.40 days, 1.35

quintals in wheat valued at Rs. 2,896.48 held for 1.50 days and 2.00 quintals in tur dal valued
at Rs. 6,951.65 held for 1.60 days. Next to the finished product inventory, most of the product
was detained at work in sales inventory and raw material inventory. The work in sales
inventory should be maintained to retain the prospective customers from the psychological
point of view. However, the work in sales inventory in tur dal was 0.18 quintals for 1.10 days,
in wheat was 0.18 quintals for 1.30 days and in rice was 1.54 quintals for 1.20 days. The
storage period of work in process inventory was low (less than a day) in almost all the
products because as soon as the raw material comes they will subject the material to work in
process to make it ready for the finished product stage.
In case of inventory costs, the packaging material and labour charges for cleaning
and packing were found to be the major cost components in all the commodities. Packaging is
an important cost component in supermarkets inventory as it involves costs in getting good
quality packing materials which should have good appearance, durable and printable form to
deliver the products in an exciting presentations with differences in size and weight of packets
with their own brand names. Most of the supermarkets have their own brand names which
create an image in the minds of customers in turn help in attracting them. However, Rs.
867.39 and Rs. 346.96 in tur dal, Rs. 202.08 and Rs. 67.36 in wheat and Rs. 171.84 and Rs.
68.74 in green gram. The minor costs include interest on working capital at the rate of 12.5
per cent and shrinkage/wastage of the product. The shrinkage costs were Rs. 229.30 in green
gram, Rs. 191.74 in tur dal, Rs. 195.56 in rice. At an average, the quintal was more in chilli
(Rs. 393.87) followed by mustard (Rs. 253.90), green gram (Rs. 201.61), tur dal (Rs. 201.28),
wheat (Rs. 172.07) and rice (Rs.136.95).
In fruits and vegetables, the quantity of inventory maintained and their values were
high in onion (2.68 quintals valued at Rs. 2,488.38) and low in apple (0.60 quintals valued at
Rs. 3819.60). In addition, the quantity maintained in tomato was 2.68 quintals with the worth
of Rs. 1,874.47 and in banana was 1.25 quintals with the worth of Rs. 2,805.63. The work in
process and finished product inventories were minimum in case of banana and apple as most
of these directly sold in the shop by just manual cleaning and grading. Alike groceries, the
finished product inventories in fruits and vegetables were maintained in higher quantity and
for lengthy period in tomato long period in tomato (2.10 quintals for 1.60 days) and onion
(1.82 quintals for 1.90 days) on the other hand, raw material inventory was found maximum in
tomato (0.41 quintals for 0.80 days) and banana (0.31 quintals for 2.20 days). On the other
hand, raw material inventory in banana was 1.05 quintals for 0.52 days and apple was 0.25
quintals for 1.12 days. In inventory, shrinkage cost was perceived to be the highest cost in
apple (Rs. 390.76) followed by banana (Rs. 293.18), onion (Rs. 248.83) and tomato (Rs.
193.23). The cold storage cost was Rs. 105.07 in tomato, Rs. 38.44 in banana and Rs. 20.29
in apple and the per unit cost seems to be same for all commodities. In contrast, no cold
storage was used for onion because of its sturdiness. Nevertheless, the total inventory cost
per quintal was in descending order in apple (Rs. 759.51) followed by banana (Rs. 327.91),
tomato (Rs. Rs. 227.42) and onion (Rs. 227.42).
5.5.1.2 Mysore
The costs of inventory and preparing the product for sale in Mysore supermarkets
presented in Table 4.19 revealed that storage period of inventories was four days in all
groceries except mustard, wherein the storage period was 15 days because of its nonperishability.
In case of fruits and vegetables, the period was two days in tomato, banana and
apple but four days in onion depending on their perishability.
The quantity and value of groceries was seems to be to be high in rice (7.48 quintals)
followed by green gram (1.58 quintals), wheat (1.03 quintals), tur dal (1.38 quintals), chilli
(0.16 quintals) and mustard (0.12 quintals), the respective values were Rs. Rs. 13,136.75, Rs.
2,125.66, Rs. 2,125.66, Rs. 4,707.18, Rs. 1230.88, and Rs. 325.65 depended on the
respective unit costs. The maximum quantity of inventory was held in finished product stage
in all grocery items as in the case of Bangalore supermarkets. However, the finished quantity
maintained were 3.09 quintals for 1.30 days in rice, 0.42 quintals for 1.30 days in wheat, 0.65
quintals for 1.66 days in green gram, 0.57 quintals for 1.40 days in tur dal. Even more than
half of the quantity of chilli and mustard found to be held at this stage only. The work in
process inventory accounted for less quantity and minimum storage period in almost all
groceries. The packaging cost was higher in the order of rice (Rs. 357.92), green gram (Rs.

74.95), tur dal (Rs. 65.46), wheat (Rs. 54.38), chilli (Rs. 13.46) and mustard (Rs. 8.32).
Shrinkage was observed to be more in green gram (Rs. 155.25).
In fruits and vegetables, the quantity and value of inventory period was more in onion
(2.50 quintals) followed by banana (2.00 quintals), tomato (0.80 quintals) and apple (0.60
quintals) depending on their perishability and demand. The finished product inventory had the
highest quantity in onion (1.03 quintals for 1.40 days) and it was 0.33 quintals in tomato. The
work in sales inventory was 0.63 quintals in banana, 0.78 quintals in onion, 0.25 quintals in
tomato and 0.19 quintals in apple as it is an important stage to attract customers and to retain
them. However, the labour costs were Rs. 100.78, Rs. 103.82 and Rs. 51.56 for onion and
Rs. 32.25, Rs. 68.72 and Rs. 16.50 for tomato. The total inventory cost per quintal was Rs.
753.19 in apple, Rs. 181.39 in tomato, Rs. 165.18 in banana and Rs, 102.75 in onion.
Negligible labour charges were seen in banana and apple as they involve simple cleaning and
grading.
5.5.1.3 Mangalore
It was observed from Table 4.20 that the storage period was 5.67 days in cereals and
pulses whereas the period was 5.94 days in chilli and 12.87 days in mustard. Similarly, in
fruits and vegetables the storage period was three to five days in fruits and vegetables
depending on their keeping quality and demand for the products. No sale of apple was
noticed in Mangalore supermarkets because of the reasons such as non-availability of the
product regularly, existence of conventional fruits and vegetables vendors in the city, less
demand for the product, high price of the product and fear of losses due to perishability and
lack of infrastructures to handle these fruits.
The inventories in grocery items were found more in in rice (7.00 quintals) followed by
tur dal (1.20 quintals), green gram (0.99 quintals), wheat (0.44 quintals), chilli (0.12 quintals)
and mustard (0.06 quintals) and the respective worth were Rs. 11,900.00, Rs. 3,906.60, Rs.
4,731.21, Rs. 933.46, Rs. 891.18 and Rs. 156.48. As in the case of other cities, finished
product inventories were also occupied top position in terms of quantity and period of storage.
The least quantity the commodity seized was again the work in process inventory. The
quantity at work in sales was moderate that is 0.73 quintals in rice, 0.08 quintals in wheat,
0.17 quintals in green gram, 0.21 quintals in tur dal, 0.02 in chilli and 0.01 quintals in mustard.
Again, in packaging material the cost involved was Rs 445.54 in rice, Rs. 76.38 in tur dal, Rs.
63.01 in green gram, Rs. 31.82 in wheat, Rs. 13.26 in chilli and Rs. 3.82 in mustard.
However, the highest cost in packaging materials was depends on the quantity of the product
sold but the unit cost of packaging material differed from commodity to commodity. The total
inventory cost per quintal was highest in chilli (Rs. 385.78) followed by green gram (Rs.
195.27), tur dal (Rs. 162.62), mustard (Rs. 214.70) and wheat (Rs. 136.87).
In fruits and vegetables, the maximum inventory was maintained in onion (1.10
quintals) subsequently in tomato (0.45 quintals) and banana (0.90 quintals) depending on its
prevailing demand/turnover and perishability of the products. The finished products were
stored in maximum quantity 0.64 quintals for 1.90 days. The work in process and finished
product inventories were seems to be very little in banana as it is directly sold in the shop.
The labours charge and packaging materials were Rs. 57.64 and Rs. 31.82 in onion, Rs.
23.58 and Rs. 13.02 in tomato respectively. However, no cold storage was observed for both
fruits and vegetables in Mangalore supermarkets. The unit cost of inventory for banana was
Rs. 312.36, Rs. 163.21 for tomato and Rs. 124.39 for onion.
5.5.1.4 Belgaum
It was noticed from the Table 4.21 that the storage period of inventory by the
supermarkets in Belgaum was ranged from four to 4.5 days in almost all groceries except
mustard wherein the storage period was 15 days.
The quantity of inventory was found to be high in high in rice (3.19 quintals) followed
by tur dal (0.96 quintals), wheat (0.85 quintals), green gram (0.69 quintals), chilli and mustard
(0.04 quintals each) in groceries. The respective inventories valued at Rs. 5,273.87, Rs.
3,051.84, Rs. 1,622.01, Rs. 3,045.66, Rs. 286.25 and Rs. 99.43. Among different types of
inventories, the finished product inventory was observed to be the highest in terms of quantity
as the supermarketers keep it ready for the sales counter. The work in process inventory was
found to be minimum in all the cases. The Packaging cost was found to be the prime cost in

inventory as it was Rs. 212.94 in rice, Rs. 70.34 in wheat, Rs. 60.81 in tur dal, Rs. 48.21 in
green gram, Rs. 3.43 in chilli and Rs. 2.17 in mustard. Packaging costs were observed to be
maximum because of the use of costly, durable and attractive materials and printed attractive
information on it to attract the customers. The maximum shrinkage cost was noticed in green
gram followed by in tur dal, wheat, rice, chilli and mustard may be depends on the quantity of
stock they handled. However, it was detected that the highest total inventory costs were found
in rice (Rs. 362.56) and low in mustard (Rs. 6.81).
There was no sale of fruits and vegetables in Belgaum supermarkets, the reason
attributed are – lack of infrastructural facilities to handle fruits and vegetables, lack of
availability of fruits and vegetables regularly, lack of manpower to look after fruits and
vegetables as these products were marketed in the everyday early morning at wholesale
market etc.
5.5.1.5 Hubli-Dharwad
Table 4.22 represented that the storage period of commodities in inventories by the
Hubli-Dharwad supermarkets were 3.67 days in cereals including chilli but the period was 15
days in mustard.
The total quantity maintained in inventories with their respective values were more in
rice (7.30 quintals worth at Rs. 12,685.58) followed by green gram (1.57 quintals worth at Rs.
1,803.20), wheat (1.50 quintals worth at Rs. 2,886.38), tur dal (1.42 quintals worth at Rs.
4,539.74), chilli (0.07 quintals worth at Rs. 500.19) and mustard (0.09 quintals worth at Rs.
228.11) depending on the turnover of the supermarkets. Finished product inventory occupied
maximum quantity as it is an important stage of inventory to maintain regular stock at sales
counter. Similar to other cities, the work in process inventory was low in all the commodities.
Again the costs incurred on packaging materials followed by labour charges were the major
inventory cost components. The shrinkage cost was found maximum in green gram followed
by tur dal, rice, wheat, chilli and mustard depends on the quantity handled. At an average the
total inventory cost per quintal was in the descending order in chilli (Rs. 337.14), green gram
(Rs. 200.72), tur dal (Rs 169.78), mustard (Rs. 136.62), wheat (Rs. 121.12) and rice (Rs.
103.77)
No sale of fruits and vegetables in Hubli-Dharwad supermarkets attributed to the facts
such as lack of infrastructural facilities to handle fruits and vegetables, existence of
professional local fruits and vegetable vendors, fear of loss due to perishability nature of the
products, less demand for the produce etc.
5.5.2 Average costs of Inventory and preparing the products for sale at
supermarket in Karnataka
The costs of inventory and preparing the products for sale in selected cities across
Karnataka presented in Table 4.23 revealed the short time period inventories maintained in
different commodities by the supermarkets in the state. The inventory period was ranged from
between four to 4.5 days in all the groceries except mustard where the storage period was
13.82 days. In case of fruits and vegetables, the inventory period was one day to three days
only because of their perishability and demand for only fresh items by the consumers.
The quantity of inventories in groceries was found to be high in rice (7.12 quintals)
followed by tur dal (1.55 quintals), green gram (1.44 quintals), wheat (1.13 quintals), chilli
(0.14 quintals) and mustard (0.11 quintals). The respective inventories were valued in
accordance with the quantity handled and the unit cost price of the products; however, the
respective inventories valued at Rs. 12,506.25, Rs. 5,160.54, Rs. 6,760.74, Rs. 2310.22, Rs.
1089.00 and Rs. 293.19. Among inventories, the finished product inventory was found to be
highest both in terms of quantity and storage period as the product should be ready for sales
shelves to maintain regular and accurate stocks for the consumers. However, the finished
stocks were 4.15 quintals for rice, 0.96 quintals in tur dal, 2.20 quintals in wheat, 0.83 quintals
in green gram, 0.68 quintals in chilli and 0.07 quintals in mustard. Next to finished product
inventory, most of the product was detained at work in sales inventory. The storage period of
work in process inventory was low in most of the products that is 1.08 days in rice, 0.23 days
in tur dal, 0.15 days in green gram, 0.08 days in wheat, 0.06 days in mustard and 0.05 days in
chilli because as soon as the raw material comes it was subjected to work in process

inventory to make it ready for the sale at the supermarkets and hence the inventory period is
low. The packaging material cost and labour charges for cleaning and packing were found to
be the major cost components of inventory management in all the commodities as the
packaging involve costly, durable, attractive material and printed information on it to attract
customers. The minor costs include interest on working capital at the rate of 12.5 per cent and
shrinkage/wastage of the product. However, at an average the total inventory cost per quintal
was more in chilli (Rs. 369.97) followed by mustard (Rs. 211.15), green gram (Rs. 194.09), tur
dal (Rs. 174.40), wheat (Rs. 137.27) and rice (Rs. 112.91).
With respect to fruits and vegetables, the quantity of inventories maintained and their
values were high in onion (1.26 quintals valued at Rs. 1078.81) and low in apple (0.24
quintals valued at Rs. 1548.97) due to their turnover and demand. The quantities uphold in
tomato and banana was 0.84 quintals and 0.83 quintals. The work in process and finished
product inventories kept in case of banana and apple was low due to their direct selling at
shop by just manual cleaning and grading of fruits. The finished product inventories were
maintained in highest quantity for long period in onion compared to other fruits and
vegetables because of its non-perishability for some time. The raw material inventory was
also found maximum in onion (0.19 quintals for 0.89 days) and apple (0.24 quintals for 1.12
days) due to no grading and cleaning of banana in most of the supermarkets. Shrinkage
perceived to be the highest cost in apple (Rs. 159.96) followed by banana (Rs. 135.38), onion
(Rs. 79.90) and tomato (Rs. 59.67). The cold storage cost was Rs. 32.70 in tomato, Rs. 27.28
in banana and Rs. 8.18 in apple and it was used in few supermarkets only for tomato, banana
and apple. However, the total inventory cost per quintal was in descending order in case of
apple (Rs. 756.35), banana (Rs. 246.12), tomato (Rs. 211.70) and onion (Rs. 149.23).
The Table 4.24 indicated that the average storage period of groceries was between
four to six days in groceries except mustard wherein it was 13.82 days. In case of fruits and
vegetables, the storage period was ranged between two to five days. It was noticed from the
table that the inventory period was varied across cities and commodities and found to be high
in mustard and low in tomato and apple due to their perishability nature and turnover of the
commodities.
The commodity-wise costs of inventory and preparing the products for sale across
cities in Karnataka shown that on an average rice (7.12 quintals) was the major commodity
among groceries procured and stored in supermarkets across the state which is followed by
tur dal (1.55 quintals), green gram (1.44 quintals), wheat (1.13 quintals), chilli (0.14 quintals)
and mustard (0.11 quintals) as rice is an staple food of the state and hence it is more
demanded by the consumers in turn the turnover is high. The cost of packaging was also
found to be maximum in rice (Rs. 468.42) and the least in mustard (Rs. 13.19) due to the use
of different packaging sizes and materials.
In fruits and vegetables category, the average quantity inventory maintained was high
in onion (23.09 quintals) and the next were tomato (1.39 quintals), banana (1.38 quintals) and
apple (0.60 quintals) depending on the perishability nature and prevailing demand for the
products. the total inventory cost per quintal was highest in apple (Rs. 756.35) followed by Rs.
268.49 in banana, Rs. 190.67 in tomato and Rs. 143.31 in onion due to high unit cost of the
respective products. No sale of fruits and vegetables were witnessed in Belgaum and Hubli-
Dharwad due to lack of infrastructural facilities to handle fruits and vegetables, existence of
local traditional fruits and vegetables vendors, non-availability of fruits and vegetables
regularly, fear of losses due to the perishability nature of fruits and vegetables.
It could be observed from Table 4.25 that even though, the quantity of inventory
maintained was high in Bangalore (25.66 quintals) followed by Mysore (17.65 quintals),
Mangalore (12.26 quintals), Hubli-Dharwad (11.95 quintals) and Belgaum (5.77 quintals), the
average inventory period was highest (6.13 days) in Belgaum followed by Mangalore (5.83
days), Hubli-Dharwad (5.56 days), Bangalore (4.85 days) and Mysore (4.50 days). Among
different commodities, the quantity stored was maximum in onion (10.64 quintals in
Bangalore, 7.48 quintals in Mysore and 7.00 quintals in Mangalore) in all the cities and
minimum in chilli (0.33 quintals in Bangalore, 0.16 quintals in Mysore, 0.12 quintals in
Mangalore, 0.04 quintals in Belgaum and 0.07 quintals in Hubli-Dharwad) depending on the
respective demand for the produce and turnover of the supermarkets. Next to the onion was
tur dal both in quantity and storage period. With respect to cost components, packaging costs
were found to be the prime constituent, on an average it accounts for Rs. 1,789.43 in

Bangalore followed by Rs. 694.00 in Mysore, Rs. 685.22 in Mangalore, Rs. 982.33 in Hubli-
Dharwad and Rs. 397.90 in Belgaum. The highest packaging cost attributed to the use of
costly material in packaging, which is durable, attractive and printed information (which
includes their trade mark and brand names) on it to attract the customers. The cold storages
were nil in Mangalore, Belgaum and Hubli-Dharwad because of their recent evolution towards
conventional shops to supermarkets but seen only in case of tomato, banana and apple in
Bangalore and Mysore as they are very perishables and demand for the fresh produce by the
consumers in this city.
5.6 PROCESSING/VALUE ADDITION IN SUPERMARKETS
5.6.1 Extent of activities undertaken in preparation of the products for sale in
supermarkets
Processing in supermarkets involves only four steps or stages such as cleaning,
grading, bagging and labelling and sticking. The conditioning was not observed in
supermarkets since they have not undertaking long-term inventories.
The results of the Table 4.26 revealed that in the entire groceries, cent per cent of
cleaning, bagging and labelling and sticking activities were undertaken by all the
supermarkets to maintain good relationship with the consumers by providing good quality
products. In addition, it is very much necessary and the only way to compete with the
conventional stores. On the other hand, these activities help in market segmentation with
price differentiation. However, grading was observed in 66.67 per cent of the Bangalore
supermarkets but it was not seen in Belgaum supermarkets since most of the supermarkets
are un-organized in the city. In overall, cent per cent of supermarkets across the Karnataka
followed cleaning, bagging and labeling and sticking activities whereas 26.67 per cent of the
supermarkets undertook grading activities.
In fruits and vegetables cleaning activity was observed in all the supermarkets as it is a
basic thing to differentiate from other stores which are dealing with these products because of
the existence of local fruits and vegetables vendors in all the cities. In contrast to this, all the
Bangalore supermarkets followed grading, bagging, and labelling and sticking activities since
the consumers of these markets in the city are highly sophisticated with high standard of
living. At an overall, it accounts cent per cent of supermarkets carried out cleaning activity and
33.33 per cent each followed grading, bagging and labeling and sticking activities across the
state.
These results are similar to the study conducted by Arora et al (2004) while studying
the microbial reduction by washing vegetables in a rotary washer. He reported that vegetable
washing is an important primary process unit operation for value addition of the produce at
farm level. Washing is used not only to remove field soil, dust, pesticides, but also the surface
microbial load.
5.6.2 Value addition in supermarkets for the selected products
It is observed from Table 4.27 that in Bangalore supermarkets, the average value
added in case of groceries was more in wheat (31.33 per cent) followed by rice (30.59 per
cent), mustard (28.05 per cent), tur dal (23.45 per cent), green gram (19.94 per cent) and
chilli (17.52 per cent) due to higher prices obtained and relatively lower percent of wastages.
In Similarly, in Mysore supermarkets, the per cent value addition was highest in mustard
(26.47 per cent) followed by wheat (24.23 per cent), rice (22.86 per cent), tur dal (19.67 per
cent), green gram (15.97 per cent) and chilli (15.45 per cent)., In Mangalore the value added
was more in mustard (28.16 per cent) followed by rice (27.72 per cent), wheat (27.14 per
cent), tur dal (18.00 per cent), chilli (16.82 per cent) and green gram (16.04 per cent) because
of higher prices for the products. The per cent of value addition in mustard was found to be
high (29.17 per cent) in case of Belgaum supermarkets also due to high price for the produce
which is followed by wheat (26.07 per cent), rice (24.83 per cent), green gram (20.27 per
cent), tur dal (16.05 per cent) and chilli (15.50 per cent). Further, in the supermarkets of Hubli-
Dharwad, the value addition was found to be 26.56 per cent in mustard, 26.17 per cent in
wheat, 24.85 per cent in rice, 20.32 per cent in green gram, 18.58 per cent in tur dal and
15.21 per cent in chilli depending upon their higher price realization.

On the other hand, in fruits and vegetable category the per cent value addition in
Bangalore supermarkets was found to be the highest in tomato (64.78 per cent) as against
20.65 per cent in apple. This indicated the benefits of use of different sources of purchase for
the produce such as direct procurement from the farmers and own production will obviously
enhances realization especially in case of vegetables like tomato. Similarly, it was 41.73 per
cent in onion and 28.00 per cent in banana due to higher prices obtained. It may be attributed
to the lack of cleaning and grading activities of theses produces in other markets. The
indicated percentage of value addition in Mysore supermarkets were 45 per cent in tomato,
39.09 per cent in onion, 25.00 per cent in banana and 21.14 per cent in apple. In respect of
Mangalore too, the value addition was maximum in tomato wherein the percentage value
added was 37.83 per cent. The banana and apple occupied 35.00 per cent and 28.99 per
cent accordingly.
Overall at the supermarkets across the state, the higher per cent of value addition
was noticed in mustard (27.68 per cent) among groceries and tomato (49.21 per cent) in fruits
and vegetables. The higher price realization from mustard was due to absence of cleaning,
grading of these produce in other markets as it is less demanded from the consumers. The
value addition in other commodities were in the descending order of 26.99 per cent, 26.17 per
cent, 19.99 per cent, 17.48 per cent, and 16.21 per cent in wheat, rice, tur dal, green gram
and chilli, and 38.61 per cent, 27.33 per cent and 22.90 per cent in onion, banana and apple.
However, out of the selected cities, the maximum value addition in both groceries, and fruits
and vegetables were found in Bangalore because of higher prices of the produces in this
market.
5.7 FINANCIAL MANAGEMENT IN SUPERMARKETS
Various financial ratios were worked out for the year 2006-07 and presented in Table
4.28 to assess the financial performance of the supermarkets in different cities across
Karnataka.
Solvency ratios
The solvency ratios indicate the extent of amount borrowed per rupee of owned funds
in the business. Solvency refers to the ability of the supermarket to repay its outside long-term
liabilities/total liabilities in turn it indicates long-term stability of a concern. The solvency ratios
analyzed during the study were identified as total liabilities to owned funds ratio and fixed
assets to owned funds ratio.
The ratio of total liabilities to owned funds was found to be 0.798, 0.600, 1.905, 3.535,
0.345 in Bangalore, Mysore, Mangalore, Hubli-Dharwad and Belgaum, respectively. Even the
ratio of fixed assets to owned funds was found to be highest in Mangalore (1.731) followed by
Hubli-Dharwad (1.367) and Bangalore (0.697). This indicated that the amount of borrowed
fund per rupee was higher in Hubli-Dharwad followed by Mangalore, Bangalore, Mysore and
Belgaum. This was because the amount pooled by the Hubli-Dharwad and Mangalore
markets was low when compared to other cities. On the overall across cities, it was 1.400
which indicates the soundness of the supermarket business in the state. The recent
conversion of traditional stores to modern type of supermarkets in these cities also made
these supermarkets to be more dependency on external funds. Therefore, the supermarkets
should taken care for improving the own funds and volume of business to the need of
improving financial strengths of the supermarkets.
Liquidity ratios
Liquidity ratio indicates the continuous operation of the supermarkets. These ratios
are used to measure the ability of an institution to possess adequate cash to meet immediate
obligations. The liquidity position of the supermarkets was examined using two ratios namely
liquid assets to total assets ratio and current assets to current liabilities ratio.
It was noticed from the table (Table 4.28) that in all the supermarkets the liquid assets
to total assets ratio was less than 0.5, which is 0.459 in Bangalore, 0.404 in Mysore, 0.399 in
Mangalore, 0.157 in Belgaum and 0.268 in Hubli-Dharwad and hence the overall was 0.337. It
indicated that more than 50 per cent of the assets were not in liquid assets form. Therefore,
all the units should increase the proportion of liquid assets in the total assets so as to improve
the liquidity status of all the supermarkets.

The current ratio (ratio of current assets to current liabilities) presented in the table
indicates that the ratio was more than one in all the cities supermarkets except Mysore,
wherein the ratio was 0.994. It means to say the supermarkets had more than one rupee of
current assets per rupee of current liabilities. The minimal acceptable level for value of this
ratio is two. Hence, there existed a need for improving the liquidity position of the
supermarkets by reducing its dependency on the short-term borrowings.
Profitability ratios
In the present study, the profitability ratios were analysed for measuring the efficiency
of the firms in utilizing their resources for generating profits. The profitability of the study
supermarkets in this case was analysed through net profits to fixed assets ratio, net profits to
total assets ratio, net profits to owned funds ratio and net profits to total sales ratio were
calculated and presented in Table 4.28.
Net profits to fixed assets ratio were found to be high in Mysore wherein the ratio was
1.297 and least in Bangalore (0.572) and in other cities also the ratio was more than 0.677.
This indicated that the profit generated per rupee of fixed assets was quite good in all the
cities in turn it indicates the efficient use of fixed assets by the supermarkets. Similarly, the
overall net profit to total assets was 2.499 which indicate that the profit generated per rupee of
total assets was nearly 2.50 rupees which indicated the improved efficiency of supermarkets
in utilizing the total assets. The ratio of net profits to owned funds ratio point out the net profits
for each rupee of own funds used in the business, which were 4.621 incase of Mangalore,
while 1.773 in case of Hubli-Dharwad and the least was observed in Belgaum (0.537). This
ratio shows that the supermarkets were quite able to protects its equity and hence generate
profits on the equity. Net profits to total sales were also found to be very significant in all the
cities across the state indicating more than a 0.170 rupee contribution to per rupee total sales
and still there is a need for improving capacity utilization and sales performances.
Turnover ratio
The turnover ratio indicates the operational efficiency of the supermarkets in the
study area. The efficiency of supermarkets in the selected cities was compared using the
indicators such as working capital turnover ratio and fixed assets turnover ratios.
The working capital turnover ratio indicated the efficiency of a supermarket in utilizing
its working capital for generating sales revenues. The ratio was highest of 5.156 in Belgaum
followed by 1.890 in Bangalore, 1.576 in Mangalore, 1.539 in Hubli-Dharwad and 1.331 in
Mysore supermarkets. This indicated the turnover per unit of working capital was higher in
Belgaum over all other supermarkets and good in all other cities. This shows the lack of
efficiency in sales even with higher working capital. In contrast, the fixed assets to turnover
ratios were higher in the order of Mysore, Hubli-Dharwad, Mangalore, Belgaum and in
Bangalore (6.784, 4.319, 3.971, 3.931 and 3.581, respectively). This was because these
supermarkets were able to achieve higher sales targets with less investment in fixed assets
accordingly.
The above all financial statuses of the retailers/supermarketers were similar to the
study conducted by Gustafson (2003). The study revealed that in Fargo, USA, on an average,
both food manufacturing and food retailing small businesses had positive financial
characteristics. Although, they were only marginally profitable and liquid, they were highly
solvent. Accounts receivable and inventory comprise nearly half of food manufacturers' total
assets and a third of food retailers' assets.
5.8 FACTORS CONSIDERED AND METHODS OF PRICE-
FORMATION IN SUPERMARKETS
The results of the Garret ranking analysis conducted in respect of factors considered
in pricing the products in supermarkets by the retailers (supermarketers) were presented in
Table 4.29 revealed that the Bangalore and Belgaum supermarkets attached significance
importance to quality of the products followed by price should ensure profitability because of
the sophisticated and high standard of living consumers in the city prefer quality products
rather than price of the product. At the same time, the firms will not fix too much higher prices
as it is undesirable from the point of rational consumers hence they will decide the price in

such a way that it should ensure profitability also. Next to these the factors considered were
nature of the product, competition, product life, price should not be high, availability of
product, price shall convince prospective consumers etc. In Mysore, supermarkets attached
first preference to nature of the product and least consideration to market segmentation. As
the supermarkets fixes the prices based on the nature of the products like perishability of the
product, demand for the product, seasonality of the product etc. Least importance was given
to market segmentation as the same products could not be differentiated just by fixing
different prices for different consumers. The other factors such as quality of the products,
availability of the product, price should not be high, competition etc were also considered next
to nature of the product. Both nature of the product followed by quality of the product were
considered as the prime factors considered in pricing at Mangalore supermarkets. The factors
like price should ensure profitability, competition and price should not be high were
considered in their order. In case of Hubli-Dharwad, quality of the products was considered as
the most important factor and long term pricing was given least importance in fixing the price
for the products at supermarkets.
In the state as whole, the quality factors like quality of the products, nature of the
product were considered as the most important ones which are mostly consumer oriented as
he decides the fate of the business, whereas competition, price should not be high, price
should ensure profitability were firm oriented as these factors decides his profit. The other
factors such as availability of the product, product life, relative price of the rival products,
market forces, price shall convince prospective consumers, market segmentation and longterm
pricing were considered as important respectively in the above stated order.
While firms compete along many dimensions, pricing strategy is clearly one of the
most important. In many retail industries, pricing strategy can be characterized as a choice
between offering relatively stable prices across a wide range of products. It was found from
Table 4.30 that absorption cost pricing and going rate pricing methods were adopted by cent
per cent of the Bangalore supermarkets. These methods were followed to gain some profit
from the business after meeting their operating expenses. The prices decided from these
methods are similar to the rivals’ products and more competitive. These results are coincides
with the results obtained by Rosecky and King (2000) while examining the prevailing prices
for commonly available supermarket products in France, United Kingdom and USA. The
result shows that some products have very similar or the same prices and other products
have very different prices. In addition to this, target pricing and discounting pricing were
adopted occasionally to attract customers by 66.67 per cent each of the supermarkets on
smaller set of goods. About 33.33 per cent followed loss leader pricing in times to try and
attract customers by charging below the cost price. Most of the organized supermarkets in
western cities are following this strategy. It was cent per cent, 66.67 per cent and 33.33 per
cent of the supermarkets in Mysore followed absorption cost pricing and going rate or market
pricing, and discounting method of pricing for the above mentioned reasons. All the
supermarkets in Mangalore adopted absorption cost pricing and going rate or market pricing
methods, whereas 66.67 per cent of them in the city also made use of loss leader pricing to
try and attract the customers. Apart from this, 33.33 per cent of the supermarkets also went
for penetration pricing, discounting and destroyer or destructor pricing methods occasionally
to acquire market share by pricing low to get hold of the product in the market if, it is new,
offering lower prices for a set of time especially during festivals and charging below average
to drive out competition as the case may be. The pricing in Belgaum supermarkets was done
through absorption cost pricing and going rate or market pricing methods by all the firms
together with discounting pricing by 33.33 per cent of the supermarkets occasionally at the
time of festivals. Similarly, the methods employed by the Hubli-Dharwad supermarkets were
absorption cost pricing, discounting pricing (in festivals) and going rate or market pricing
methods by almost all the supermarkets.
At an overall, cent per cent of the supermarkets in the state followed absorption cost
pricing and going rate or market pricing methods in pricing the products at supermarkets.
About 60 per cent followed discounting pricing during special days like festivals, while 33.33
per cent and 26.67 per cent adopted penetration pricing and loss leader pricing methods. A
small proportion (13.33 per cent and 6.67 per cent) of the supermarkets also adopted target
pricing for selected products and destroyer or destructor pricing methods were used to try and
attract customers for the shopping at supermarkets.

5.9 PROBLEMS FACED BY THE FOOD RETAILERS
The problems in the supermarket business were many but the variation were governed
by a few dimensions. In order to formulate appropriate policies, it was necessary to identify
and assess the magnitude of associations of these dimensions which provide deeper insights
in knowing the phenomenon.
In the present study, there were 38 variables identified and grouped to explain the
problems of retailers/supermarkets across cities in the state (Table 3.1). These indicators
were subjected to factor analysis (Principal Component Analysis). Out of them 25 indicators
were selected with factor loading (above 0.50) by applying the techniques of varimax rotation
and considered nine dimensions which together explained 92.38 per cent of the total variation
in the problems for interpretation.
Table 4.31 shows the factor loading of the each variable under different factors and
the percentage variation explained by each factor. The first dimension comprised of eight
indicators with higher factor loadings (above 0.5). Non availability of trained employees,
banks for sources of finance, demand for credit from the customers and bargain from the
customers were the key problems among them. As the supermarket business is new
approach towards organized marketing hence there may be a lack of availability of trained
personnel; as the business requires huge investments and uncertainty of the success may
restrain financial sector towards retailing business. The credit and bargains from the
customers are as usual in any business activities. This indicated that there is a need to train
the employees as per supermarkets requirement and bring confidence of the business in
financers to get the support. The other problems such as lack of government schemes for
finance towards this business, defaults from the customers and non-availability of the credit
facility from the wholesalers were found to be the other major problems. It indicates that there
is a need to frame some schemes by the government for this business as it is flourishing in
recent years, providing better services to the consumers’ in turn superior prices to the
farmers. It may alert the farmers towards production of quality produces. In contrast,
advertisement rate and coverage of area, WTO impact on profit margin and price of the
products and market information from the wholesalers have shown no impact.
The variables affecting the business such as lack of experience in the business, bad
timing of advertisement, damage of products from wholesalers, bribes to government
authorities, tax charged by the government and margin from the wholesalers were listed in the
second dimension.
The demand for discounts and offers from the customers, location of the
supermarket, WTO impact on competition and existing laws of the business were listed as the
third dimensional problems. It may be due to general tendency of the customers for discounts
and offers; as the world is opened for general competition it has an impact on the business;
every business has to undergo the prevailing rules and regulations and there is no quid pro
quo hence the retailers felt these things as the problems. Similar to this result, study
conducted by Connor et al (1999) shown that new forms of horizontal, vertical, and
geographic competition have appeared to challenge the supremacy of the supermarket format
in US grocery retailing.
The other problems quoted by the retailers listed in subsequent dimensions were
VAT charges, demand for new products from the customers, land and building and financial
resources, price variation by the wholesalers, storage facilities and agencies for supply of
products to supermarkets, delayed delivery from the wholesalers, existing location of the site
and availability of untrained employees have consequences on the problems of the retailing.
Nageshwar Rao and Bramhanandan (2003) in their study on problems of retail traders in
Guntur district of Andhra Pradesh found that rent on building was a problem of retail traders
(62 per cent) since they were facing many problems from the building owner side like high
rent, frequent repairs and demand for more good-will. Apart from these retailers (44 per cent)
also had faced many problems on media like high rates, inadequate information and coverage
of area and timing problems.

Looking into the listed problems the retailers must learn to cope up and solve the
problems efficiently to be the leader in the business. Rudolph et al (2000) in their study
suggested that the food retailers risk a loss of image or even a loss of the customer if they do
not learn to react effectively to failures and improve their service strategy.
5.10 FACTORS INFLUENCING THE CONSUMERS TO
PURCHASE THE FOOD PRODUCTS IN SUPERMARKETS
Due to urbanization, changing lifestyles, adoption of western styles, strong income
growth and favourable demographic patterns the food consumption habit of Indian consumers
has been changing over the years. The shift in consumption is in terms of cereals to noncereals,
home-prepared products to away from home food products like fast foods. The whole
concept of shopping has altered in terms of format and consumer buying behavior, ushering
in a revolution in shopping in India. The consumers are also shifting from traditional local
markets to modern supermarkets because of the shopping experience. In this regard an
attempt was made in this study to ascertain the factors influencing the consumers to purchase
the food products in supermarkets by opinion survey of the consumers across cities in the
state.
The results of the opinion of the consumers to purchase at the supermarkets in the
study area were collected using three point scale technique based on their importance as
most, medium and less preference. The opinions obtained in terms of scores were analyzed
using cluster analysis and the results are presented in Table 4.32.
It was observed that out of 30 variables, 13 variables were found in the first
aggregate cluster based on their similarity within the variables, among these 13 variables,
convenient location of the supermarket, range of products availability, convenient for
purchase, availability of quality products were considered as the prime factors influencing the
consumers to go for purchase at supermarkets most of these are concerned to the
accessibility and product oriented factors hence the group was named as accessibility and
product quality factors. Second aggregate cluster comprised of major factors such as
reasonable prices, parking facility, shopping is seen enjoyable at supermarkets, attractive
packing, schemes and offers, concern about health, welfare and the environment, influence of
peer group, availability of range of brands most of which influences the consumers to opt
purchases at supermarkets and hence the group was named as influencing factors. The third
clusters group was named as product promotion factors since it consists of promotional
factors like payment methods, interest and taste in eating foreign foods, home delivery facility,
new products market development, attractive advertisement, fresh fruits and vegetables and
fresh bakery products availability etc. This indicated the retailers to consider the consumers
views and make changes accordingly to attract prospective buyers for efficient and effective
retailing to make profit since consumer is the king who decides the fate of the supermarkets.

INTRODUCTION
VI. SUMMARY AND POLICY IMPLICATIONS
Food accounts for the largest share of consumer spending. Food and food products
account for about 53 per cent of the value of final private consumption. This share is
significantly higher than in developed economies, where food and food products account for
about 20 per cent of consumer spending. Significant spending on food and increasing out-ofhome
food consumption represent opportunities for food retailers and food-service companies
(www.tata.com) to cater to their needs.
Retailing is one of the largest industries in India and second largest employer after
agriculture. The retailing industry provides employment to over 18 million people. One out of
every 25 families in India is engaged in the business of retailing with the ownership and
management predominantly family controlled. However, in sharp contrast to developed
countries, unit average size of retail outlet in India is very small. Here, the majority of food
consumption is still at home. Nevertheless, out-of-home food consumption is increasing.
Traditional local markets and small-scale retailing continue to dominate India’s food retail
sector.
Unlike most other countries, Indian retail sector is highly fragmented and bulk of the
business is in the unorganized sector (97 per cent) like local ‘wet’ market vendors, roadside
pushcart sellers or tiny kirana (grocery) stores. However, the share of modern organized retail
sector is likely to grow from its current three percent to 15-20 per cent over the next decade.
Retail growth in the coming five years is expected to be stronger than GDP growth,
driven by changing lifestyles and by strong income growth, which in turn will be supported by
favorable demographic patterns and the extent to which organized retailers succeed in
reaching lower down the income scale to reach potential consumers towards the bottom of
the consumer pyramid. Growing consumer credit will also help in boosting consumer demand.
A large young working population with median age of 24 years, nuclear families in urban
areas, along with increasing working-women population and emerging opportunities in the
services sector are going to be the key growth drivers of the organized retail sector in India.
The structure of retailing will also develop rapidly. Shopping malls are becoming increasingly
common in large cities, and the number of department stores is growing much faster than
overall retail. Supermarkets have been taking an increasing share of general food and
grocery trade over the last two decades.
Organized food retailing is a relatively new phenomenon in India, with small Westernstyle
supermarkets only starting to appear since 1990s. The country has witnessed a retail
revolution in recent years. Significant development has been taking place in urban areas in
the form of organized retailing mega stores or malls more so in the south of the country in the
major cities of Bangalore, Chennai and Hyderabad, as well as New Delhi and Mumbai in the
North. It is expected that the tier II cities would take another five years to absorb modern
retailing opportunities. Moreover, the case for Indian retailers to explore rural markets is also
strong due to the size of rural population and agricultural income growth in last couple of
years. The major formats being followed for organized food retailing in India are
supermarkets, discount stores, fresh product outlets, specialty stores, convenience stores and
off price retailers.
The organized food retailing sector in India is on the verge of a boom and expected to
undergo further change with prospective new domestic and global foreign entrants and the
takeover or exit of some existing participants. Market analysts believe that hypermarket will
determine the future of organized food retailing over the short to medium term. Traditional
grocers are also gradually redefining themselves by increasing floor space and introducing
self-service format and value added services such as credit and home delivery (Anonymous,
2004).
The study conducted by the Rabo India Finance Pvt. Ltd. says that South Indian
states of Tamil Nadu, Andhra Pradesh and Karnataka have taken a lead role in establishing
modern food outlets. The growth of organized retailing has shown particular vigour in Chennai
and Bangalore where an estimated 40 per cent of their grocery requirements were met
through modern retail formats.

Karnataka is one of the leading states in organized retailing in India as there are more
than ten organized retailers (firms) with more than 100 outlets including Metro AG operating in
Bangalore city alone due to increasing urbanization and expanding service sectors like
software, banking, insurance and Business Process Outsourcing (BPO), which has taken a
metropolitan city status more recently has led to increase in income of the consumers. Apart
from Bangalore, cities such as Mysore, Mangalore, Hubli-Dharwad and Belgaum in Karnataka
are also growing rapidly in terms of urbanization, income and organized retailing with local
food marketers as they are converting unorganized retail outlets into organized form because
of strong demand for convenience products; and better educated consumers concerned
about health, nutrition, food safety, and the environment.
As income rose and shoppers sought both convenience and new tastes and
stimulation, supermarkets were able to expand the products offered. The global economy has
changed, consumer demand has shifted, and retailers operating system today are infused
with far more technology than was the case in the past. It was observed that lot of progress
have been achieved in the food retailing in the past decade through organized food stores
such as supermarkets, discount stores, fresh product outlets, specialty stores, convenience
stores and off price retailers. But still there is a lot of scope for the food retailing. The state is
experiencing rapid structural change with the emergence of huge retail firms with massive
buying power and concomitantly concentration in the manufacturing sector. Hence, an effort
was made in the state to study the entire business aspects of organized food retailing in
general and supermarkets in particular. In addition, consumers study was also undertaken to
know the factors to be considered while purchasing their food products in food retail outlets.
The specific objectives of the study were as follows:
1. To document the supermarkets existing in the study area
2. To study the Organizational structure in supermarkets.
3. To evaluate the investment pattern in supermarkets.
4. To evaluate the financial management of supermarkets.
5. To study the procurement management in supermarkets
6. To study the inventory management and its costs.
7. To study the management of processing/value addition in supermarkets.
8. To ascertain the methods of pricing in supermarkets
9. To study the constraints or problems faced by the retailers.
10. To identify the factors influencing the consumers to purchase the food products in
food supermarkets/food retail outlets.
Limitation of the study
The study was purely based on the data given by the owners/executives of the food
retailing companies/outlets who are generally suspicious of the motives of any investigation
because of fear of taxations and competition. In addition, due to non-availability of time series
data with respect to the business performance indicators over a period of time, only recent
year’s data (2006-07) was used to analyse the performance. Therefore, the investigation was
confronted with various drawbacks in ascertaining the data. In case of companies having
chain of outlets/units, only one unit/outlet data was used to assess the overall objectives of
the study. Hence, greater care was taken to collect the data and it was also cross checked to
get unbiased data as accurately as possible.
METHODOLOGY
The present study is mainly concerned with the food retailing activities of the
supermarkets across selected five cities in particular and Karnataka state in general.
To fulfill the objectives related to the supermarkets operations of the study a
multistage random sampling technique was used. In the initial stage, Karnataka state was
selected as it is one of the leading states in organized retailing in India. At the second stage,
five cities across Karnataka such as Bangalore, Hubli-Dharwad, Mangalore, Belgaum and

Mysore were selected as the majority of organized retailers were existed in these areas.
Recently, most of the local retailers in these areas also modernizing their stores in the form of
modern formats like supermarkets. In the last stage, three supermarkets (one outlet/ branch)
from each city were selected randomly, so, that the total sample size selected for the study
were 15. Among the number of supermarkets existing in these areas, only three
supermarketers who were agreed to provide the data are selected. However, supermarkets
which were in operation for at least two successive years were selected and their
performances were studied for the last financial year 2006-07.
In addition, to study the factors influencing the consumers to purchase food products
in these supermarkets/retail outlets, ten consumers from each selected supermarkets/retail
outlets (30 from each city) were interviewed randomly, so that the total number of consumers
accounts to 150.
Since, it is difficult to study the overall operations in all the products, only two
products from each agricultural commodity like rice and wheat in cereals, tur and green gram
in pulses, dry chilly and mustard which are bought and sold in small quantities, banana and
apple in fruits and finally tomato and onion in vegetables were selected based on their volume
of sales in supermarkets.
Data Collection
The detailed information required for the study was collected from both primary and
secondary sources in order to accomplish the various objectives of the study.
The primary data on roles and responsibilities of each individuals in the hierarchy and
the pattern of investments like fixed and working capital were collected in detail to know the
investment pattern and organizational structures of the supermarkets. The data on financial
management aspects like different assets and liabilities, owned fund, inventory, working
capital, sales and returns were collected from their records like Balance sheet, Profit and Loss
account and Trade account were collected to know the financial status of these supermarkets.
The information on procurement aspects like channels of procurement of raw materials,
quantity procured, costs of procurement and inventory aspects like quantity and value of
different inventories maintained at different stages and their cost of carrying were collected to
understand the procurement and inventory management in these markets. The information on
stages involved in processing, cost incurred in processing and the value addition per unit of
each selected products in different categories such as cereals, pulses, fruits, vegetables and
spices were collected from the supermarkets. Further, the various price determination
methods adopted and factors considered by these supermarkets were collected from the
concerned authorities of super markets to evaluate management of processing and price
determination. Similarly, the data on problems faced by the supermarkets were also collected
from the concerned authorities of these selected supermarkets.
Apart from these, the factors influencing the consumers to purchase food products
from the supermarkets/food retail outlets, the information regarding various factors such as
product factors -price, quality, packaging, labeling and other factors like range of products,
convenience, location, credit, home delivery, parking facility, service quality and schemes and
offers etc., were collected from the randomly selected consumers from each supermarkets
using the pre-tested schedule through the personal interview method.
The secondary data on area, population and education status of the selected cities
were collected from the respective Municipal Corporations.
Analytical techniques employed:
Several statistical techniques were applied to analyze the objectives of the study.
The tabular technique was used with the help of averages and percentages to calculate
investment pattern, costs of procurement, inventory costs and value addition aspects, and
summarized to obtain meaningful inferences. The financial ratio analysis technique was
considered in evaluating the performance of the supermarkets and they mainly point out the
relative importance of the selected items. The financial statements used in this study
correspond to the financial year of the supermarkets April to March of 2006-07. The ratio
analysis technique has been heavily relied upon, to test the solvency, liquidity, profitability,
turnover and sales of the supermarkets. The multivariate statistical technique, principal

component analysis was employed to ascertain the major problems faced by the
supermarkets in the business of food retailing. The cluster analysis is a formal multivariate
statistical procedure was used in identifying the factors influencing the consumers to
purchase food products at supermarkets.
FINDINGS OF THE STUDY
1. It was observed from the study that majority of the organized supermarkets (multi
outlets) existing and operating only in big cities like Bangalore and Mysore. These
organized supermarkets have multi outlets operating under the single management
and accounts for huge turnover. The un-organized recently established supermarkets
were found in Mangalore, Belgaum and Hubli-Dharwad. In these cities, the big local
and conventional store owners have converted their indigenous general stores into
the modern type of stores called supermarkets to cater the changing needs and
expectations of modern consumers which have consumer familiarity that runs from
generation to generation is one big advantage for the traditional retailing sector.
2. The more organized form of supermarkets found in Bangalore city based on their
number of outlets were Shubhiksha (40) followed by Foodworld (33), Fabmall (23),
S*mart (18), Namdhari’s Fresh (14) and Niligiri Dairy Farm Ltd (12). All these
supermarkets have their Head offices at Bangalore. The famous indigenous
supermarkets in the Mysore city were Loyal World, Arihanth Super Bazaar, Mohan
Bhandar, Shivananda Supermarket, A-Z Supermarket and Foodworld. However, the
organized supermarkets like Foodworld, Niligiri’s, Shubhiksha and Fabmall have
penetrated the city more recently and most of these had their head office at
Bangalore. The family owned un-organized supermarkets such as Baliga Stores
Supermarket, Andy’s supermarket; Apna Bazaar, Jimmy’s Supermarket, Misbah
Supermarket, Move N Pick, Noor Super Bazaar Ruby’s Supermarket, Sadhar Bazaar
were well known in the city. Pick ‘n’ Pay, Sangram Food Basket, Day 2 Day, Needz
Supermarket and Eshan Super Shoppe were the only five supermarkets in Hubli-
Dharwad city. Similarly, the supermarkets in the Belgaum city were Hans Raj
Supermarket, Neena Supermarket, Quality Supermarket, Rex Supermarket and
Shoppers Paradise.
3. The average area of the supermarket outlets in different cities were found to be
4333.33 square feet, 3133.33 square feet, 2833.33 square feet, 1833.33 square feet
and 1200 square feet in Bangalore, Mysore, Hubli-Dharwad, Mangalore and
Belgaum, respectively. Usually size is an advantage because a large store designed
and built has the capacity to deal with the expected number of customers in the
neighbourhood.
4. The fixed capital drastically varied from city to city, highest was found in Bangalore
(Rs. 258.30 lakh) and least in Mangalore (Rs. 13.00 lakh). However, the overall
average total fixed cost per outlet was Rs. 78.42 lakh for the state as a whole. In case
of working capital, raw materials were the prime costs contributed about 67 per cent
of the total capital as the retailing business (supermarkets) itself is to reselling of
commodities and quicker conversion of inventory into cash. At an overall, the average
total costs required to establish a supermarket in the Karnataka was Rs. 261.33 lakh.
The higher costs in big cities was due to higher labour costs, social security to
employees, high quality real estate, much bigger premises, comfort facilities such as
air-conditioning, back-up power supply, taxes etc., it is more so incase of organized
retailing.
5. It was observed that the organized supermarkets or supermarkets in multi outlet
(chain of supermarkets) firms/companies followed line, line and staff, and the
functional categories of organizational structures whereas line organization was
commonly followed in un-organized supermarkets or supermarkets not in chain. Most
of these un-organized supermarkets are family owned.
6. Two types of purchasing patterns such as centralized or store level purchasing
pattern were followed in supermarkets for procuring both groceries and fruit and
vegetable products. All the Bangalore supermarkets followed centralized purchasing
pattern due to their multi outlet operations and organized form of retailing. On the

other hand, Most of the supermarkets in other cities, followed store level purchasing
because of their single outlet operations and un-organized structure of retailing. In
Mangalore and Belgaum, cent per cent preferred store level purchasing. However,
66.67 per cent of supermarkets in Mysore, preferred store level purchasing and 33.33
per cent have gone for centralized purchasing and the reverse was found in Hubli-
Dharwad depending upon their mode and size of operation. In Mysore and Mangalore
fruits and vegetables purchased through wholesale market only.
7. No sale of fruits and vegetables were witnessed in Belgaum and Hubli-Dharwad
supermarkets due to lack of infrastructural facilities to handle fruits and vegetables,
competition from the existing local, traditional fruits and vegetables vendors, nonavailability
of fruits and vegetables regularly, fear of losses due to the perishability
nature of fruits and vegetables.
8. The overall monthly average quantity and value of products procurement across cities
in Karnataka revealed that the average frequency of purchase in groceries was
ranged from four to five times a month but it was only 2.2 times in mustard. The cost
per quintal was highest in chilli (Rs. 6,651.24) while least in rice (Rs. 1,665.51). It was
also reported that the APMC was the only source of purchase for grocery products as
it is the only governing body for marketing of agricultural commodities. The existing
policies of the government may also prevent from other sources.
9. With respect to fruits and vegetables in the state, the purchase frequency was more
in tomato (10.83) and banana (10.00) due to their perishability nature of the products
in general and tomato in particular and also to avoid wastages during storage. In case
of fruits and vegetables, tomato was procured in highest (14.63 quintals) quantity
followed by onion and banana (12.50 quintals each), and apple (5 quintals).
10. At an overall in the state, the quantity purchased was also found to be more in rice
(7.69 quintals) followed by tur dal (1.55 quintals), green gram (1.42 quintals), wheat
(1.09 quintals), chilli (0.21 quintals) and mustard (0.12 quintals). This is attributed to
the fact that the turnover in cereals and pulses was much more when compared with
spices, as these products are daily use items by the consumers and hence, the
demand was more in these commodities.
11. On the average, The quantity purchased was also more in rice (7.69 quintals)
followed by tur dal (1.55 quintals), green gram (1.42 quintals), wheat (1.09 quintals),
chilli (0.21 quintals) and mustard (0.12 quintals). The total amount spent found to be
much in rice (Rs. 57,715.31) due to its high quantity purchase. The main source of
purchase for groceries was APMC only.
12. State as a whole, rice (34.65 quintals) followed by tur dal (6.95 quintals), green
gram (6.36 quintals), wheat (4.91 quintals), chilli (0.65 quintals) and mustard (0.26
quintals) were the major groceries procured by the supermarkets as these are the
daily use items by the consumers and hence the demand was more in these cases.
Whereas, in case of spices such as chilli and mustard the quantity purchased was
very meager (less than 0.5 quintals/month) because of less turnover in these
commodities. In proportion to the quantity, the total costs were also found high in
respective commodities. The sales tax was found only in spices and it was Rs. 87.42
in chilli which is followed by mustard.
13. Similarly, in case of fruits and vegetables, the purchase was highest in case of
tomato (23.25 quintals) followed by banana (13.83 quintals), onion (9.33 quintals) and
apple (5.50 quintals). The total costs incurred were Rs. 24,148.15, Rs. 7,058.15 and
Rs. 12,070.33 for apple, banana, onion and tomato depending on their demand
prevalence.
14. In all the commodities, quantity procured and their unit costs were found high in
Bangalore alone. It may be due to higher average size of the supermarkets and high
turnover of the commodities. In contrast, the commodity procurement was found to be
less in Belgaum due to the existence small sized un-organized supermarkets and
their small turnover.
15. In fruits and vegetables, the quantity procured was maximum in banana (13.83
quintals) followed by was tomato (45.75 quintals) followed by banana (41.50

quintals), onion (28.00 quintals) and apple (11.00 quintals). It was depending upon
their existing demand, whereas, the cost per quintal and total costs incurred were
more in banana (Rs. 1,742.77/quintal and Rs. 72,325.00 total cost) followed by apple
(Rs. 5,495.00/quintal and Rs. 60,445.00 total cost), onion (Rs. 756.67/quintal and Rs.
21,186.67 total cost) and tomato (Rs. 539.26/quintal and Rs. 24,671.25 total cost). It
was also observed that fruits and vegetables procured from various sources such as
wholesale market, own production and direct purchase from farmers. Except
Bangalore, almost all the cities purchased fruits and vegetables from wholesale
market only. The transport costs detected high in tomato (Rs. 2,467.25) and banana
(Rs. 2,125.00) as the quantity procured was high in these commodities.
16. City-wise average monthly cost incurred in procurement of commodities by the
supermarkets found that the monthly total quantity procured was highest in Bangalore
(142.90 quintals) followed by Mysore (94.81 quintals), Mangalore (74.63 quintals),
Hubli-Dharwad (43.67 quintals) and Belgaum (25.29 quintals) depending on size
supermarkets and the turnovers in respective cities as the supermarkets size and the
turnovers were maximum in the city. Except tomato, total costs per quintal in all the
commodities were also found to be high in Bangalore only. This is mainly because of
the reason that the supermarkets in Bangalore procuring tomato from different
sources like direct procurement from the farmers and wholesale auction market like
Safal Company which is mainly dealing with auctioning of fruits and vegetables. Apart
from this, own production of fruits and vegetables were also observed in few
supermarkets.
17. The costs of inventory and preparing the products for sale in selected cities across
Karnataka revealed the short time period inventories maintained in different
commodities by the supermarkets in the state. The two inventory approaches
followed by these supermarkets are Material Requirements Planning (MRP) and Just-
In-Time replenishments. The inventory period was ranged from between four to 4.5
days in all the groceries except mustard where the storage period was 13.82 days. In
case of fruits and vegetables, the inventory period was one day to three days only
because of their perishability and demand for only fresh items by the consumers.
18. The average quantity of inventories maintained in groceries were high in rice (7.12
quintals) followed by tur dal (1.55 quintals), green gram (1.44 quintals), wheat (1.13
quintals), chilli (0.14 quintals) and mustard (0.11 quintals). Among inventories, the
finished product inventory was found to be highest both in terms of quantity and
storage period as the product should be ready for sales shelves to maintain regular
and accurate stocks for the consumers. Next to finished product inventory, most of
the product was detained at work in sales inventory.
19. The packaging material cost and labour charges for cleaning and packing were
found to be the major cost components of inventory management in all the
commodities as the packaging involve costly, durable, attractive material and printed
information on it to attract customers. The minor costs include interest on working
capital at the rate of 12.5 per cent and shrinkage/wastage of the product.
20. In fruits and vegetables, the quantity of inventories maintained and their values
were high in onion (1.26 quintals valued at Rs. 1078.81) and low in apple (0.24
quintals valued at Rs. 1548.97) due to their turnover and demand. The finished
product inventories were maintained in highest quantity for long period in onion
compared to other fruits and vegetables because of its non-perishability for some
time.
21. Shrinkage perceived to be the highest cost in apple (Rs. 159.96) followed by
banana (Rs. 135.38), onion (Rs. 79.90) and tomato (Rs. 59.67). The cold storage
cost was Rs. 32.70 in tomato, Rs. 27.28 in banana and Rs. 8.18 in apple and it was
used in few supermarkets only for tomato, banana and apple.
22. The quantity of inventory maintained was high in Bangalore (25.66 quintals)
followed by Mysore (17.65 quintals), Mangalore (12.26 quintals), Hubli-Dharwad
(11.95 quintals) and Belgaum (5.77 quintals), the average inventory period was
highest (6.13 days) in Belgaum followed by Mangalore (5.83 days), Hubli-Dharwad
(5.56 days), Bangalore (4.85 days) and Mysore (4.50 days). Among different

commodities, the quantity stored was maximum in onion (10.64 quintals in Bangalore,
7.48 quintals in Mysore and 7.00 quintals in Mangalore) in all the cities and minimum
in chilli (0.33 quintals in Bangalore, 0.16 quintals in Mysore, 0.12 quintals in
Mangalore, 0.04 quintals in Belgaum and 0.07 quintals in Hubli-Dharwad) depending
on the respective demand for the produce and turnover of the supermarkets.
23. In case of inventory costs, packaging materials followed by labour charges,
shrinkage and interest on working capital were identified as the cost components.
The higher packaging cost was due to use of good packaging material embossed
with trademark as most of the supermarkets have their own brand names. The
greater total inventory costs and total costs were also noticed in Bangalore in almost
all the products. But these costs were varied across cities and commodities.
24. In fruits and vegetables, the average quantity inventory maintained was high in
onion (23.09 quintals) and the next were tomato (1.39 quintals), banana (1.38
quintals) and apple (0.60 quintals) depending on the perishability nature and
prevailing demand for the products. the total inventory cost per quintal was highest in
apple (Rs. 756.35) followed by Rs. 268.49 in banana, Rs. 190.67 in tomato and Rs.
143.31 in onion due to high unit cost of the respective products.
25. The quantity of inventory maintained was high in Bangalore (25.66 quintals)
followed by Mysore (17.65 quintals), Mangalore (12.26 quintals), Hubli-Dharwad
(11.95 quintals) and Belgaum (5.77 quintals), the average inventory period was
highest (6.13 days) in Belgaum followed by Mangalore (5.83 days), Hubli-Dharwad
(5.56 days), Bangalore (4.85 days) and Mysore (4.50 days).
26. With respect to cost components, packaging costs were found to be the prime
constituent, on an average it accounts for Rs. 1,789.43 in Bangalore followed by Rs.
694.00 in Mysore, Rs. 685.22 in Mangalore, Rs. 982.33 in Hubli-Dharwad and Rs.
397.90 in Belgaum. The highest packaging cost attributed to the use of costly
material in packaging, which is durable, attractive and printed information (which
includes their trade mark and brand names) on it to attract the customers.
27. The results revealed that in the entire groceries dealings cent per cent of cleaning,
bagging and labelling and sticking were undertaken by all the supermarkets to
maintain good relationship with the consumers by providing good quality products. In
addition, it is very much necessary and the only way to compete with the conventional
stores. On the other hand, these activities help in market segmentation with price
differentiation. However, grading was observed in 66.67 per cent of the Bangalore
supermarkets but it was not seen in Belgaum supermarkets since most of the
supermarkets are un-organized in the city. In overall, cent per cent of supermarkets
across the Karnataka followed cleaning, bagging and labeling and sticking activities
whereas 26.67 per cent of the supermarkets undertook grading activities.
28. In fruits and vegetables cleaning activity was observed in all the supermarkets as it
is a basic thing to differentiate from other stores which are dealing with these
products because of the existence of local fruits and vegetables vendors in all the
cities. In contrast to this, all the Bangalore supermarkets followed grading, bagging,
and labeling and sticking activities since the consumers of these markets in the city
are highly sophisticated with high standard of living. At an overall, it accounts cent
per cent of supermarkets carried out cleaning activity and 33.33 per cent each
followed grading, bagging and labeling and sticking activities across the state.
29. It is observed that in Bangalore supermarkets, the average value added in case of
groceries was more in wheat (31.33 per cent) followed by rice (30.59 per cent),
mustard (28.05 per cent), tur dal (23.45 per cent), green gram (19.94 per cent) and
chilli (17.52 per cent) due to higher prices obtained and relatively lower percent of
wastages.
30. On the other hand, in fruits and vegetable category the per cent value addition in
Bangalore supermarkets was found to be highest in tomato (64.78 per cent) as
against 20.65 per cent in apple. This indicated the benefits of use of different sources
of purchase for the produce such as direct procurement from the farmers and own

production will obviously enhances realization especially in case of vegetables like
tomato.
31. At the overall supermarkets across the state, the higher per cent of value addition
was noticed in mustard (27.68 per cent) among groceries and tomato (49.21 per cent)
in fruits and vegetables. The higher price realization from mustard was due to
absence of cleaning, grading of these produce in other markets as it is less
demanded from the consumers. However, out of the selected cities, the maximum
value addition in both groceries, and fruits and vegetables were found in Bangalore
because of higher prices of the produces in this market.
32. The ratio of total liabilities to owned funds was found to be 0.798, 0.600, 1.905,
3.535, 0.345 in Bangalore, Mysore, Mangalore, Hubli-Dharwad and Belgaum,
respectively. The ratio of fixed assets to owned funds was found to be the highest in
Mangalore (1.731) followed by Hubli-Dharwad (1.367) and Bangalore (0.697).
33. It was noticed that in all the supermarkets, the liquid assets to total assets ratio was
less than 0.5, which is 0.459 in Bangalore, 0.404 in Mysore, 0.399 in Mangalore,
0.157 in Belgaum and 0.268 in Hubli-Dharwad and hence the overall was 0.337. It
indicated that more than 50 per cent of the assets were not in liquid assets form.
34. The current ratio (ratio of current assets to current liabilities) presented in the table
indicated that the ratio was more than one in all the cities supermarkets except
Mysore, wherein the ratio was 0.994. It means to say the supermarkets had more
than one rupee of current assets per rupee of current liabilities.
35. Net profits to fixed assets ratio were found to be high in Mysore wherein the ratio
was 1.297 and least in Bangalore (0.572) and in other cities also the ratio was more
than 0.677. This indicated that the profit generated per rupee of fixed assets was
quite good in all the cities in turn it indicates the efficient use of fixed assets by the
supermarkets. Similarly, the overall net profit to total assets was 2.499 which indicate
that the profit generated per rupee of total assets was nearly 2.50 rupees which
shown the improved efficiency of supermarkets in utilizing the total assets. The ratio
of net profits to owned funds ratio point outs the net profits for each rupee of own
funds used in the business, which were 4.621 incase of Mangalore, while 1.773 in
case of Hubli-Dharwad and the least was observed in Belgaum (0.537). This ratio
shows that the supermarkets were quite able to protect its equity and hence generate
profits on the equity. Net profits to total sales were also found to be very significant in
all the cities across the state indicating more than a 0.170 rupee contribution to per
rupee total sales.
36. The working capital turnover ratio was highest of 5.156 in Belgaum followed by
1.890 in Bangalore, 1.576 in Mangalore, 1.539 in Hubli-Dharwad and 1.331 in Mysore
supermarkets. This indicated the turnover per unit of working capital was higher in
Belgaum over all other supermarkets and good in all other cities. In contrast, the fixed
assets to turnover ratios were higher in the order of Mysore, Hubli-Dharwad,
Mangalore, Belgaum and in Bangalore (6.784, 4.319, 3.971, 3.931 and 3.581,
respectively). This was because these supermarkets were able to achieve higher
sales targets with less investment in fixed assets accordingly.
37. State as whole, the factors considered while pricing the products at supermarkets
attached significance importance to the quality of the products and nature of the
products which are mostly consumer oriented as he decides the fate of the business,
whereas competition, price should not be high, price should ensure profitability were
firm oriented as these factors decides his profit.
38. It was found that absorption cost pricing and going rate pricing method were
adopted by cent per cent of the Bangalore supermarkets. All the supermarkets in
Mangalore adopted absorption cost pricing and going rate or market pricing methods,
whereas 66.67 per cent of them in the city also made use of loss leader pricing to try
and attract the customers. The pricing in Belgaum supermarkets was done through
absorption cost pricing and going rate or market pricing methods by all the firms
together with discounting pricing by 33.33 per cent of the supermarkets occasionally
at the time of festivals. Similarly, the methods employed by the Hubli-Dharwad

supermarkets were absorption cost pricing, discounting pricing (in festivals) and going
rate or market pricing methods by almost all the supermarkets.
39. At an overall, cent per cent of the supermarkets in the state followed absorption
cost pricing and going rate or market pricing methods in pricing the products at
supermarkets. About 60 per cent followed discounting pricing during special days like
festivals, while 33.33 per cent and 26.67 per cent adopted penetration pricing and
loss leader pricing methods. A small proportion (13.33 per cent and 6.67 per cent) of
the supermarkets also adopted target pricing for selected products and destroyer or
destructor pricing methods were used to try and attract customers for the shopping at
supermarkets.
40. The problems in the supermarket business were many but the variation were
governed by a few dimensions. Non availability of trained employees, banks for
sources of finance, demand for credit from the customers and bargain from the
customers were the key problems among 38 variables considered. As the
supermarket business is new approach towards organized marketing hence there
may be a lack of availability of trained personnel; as the business requires huge
investments and uncertainty of the success may restrain financial sector towards
retailing business. The credit and bargains from the customers are as usual in any
business activities. In contrast, advertisement rate and coverage of area, WTO
impact on profit margin and price of the products and market information from the
wholesalers have shown no impact.
41. The other problems quoted by the retailers listed in subsequent dimensions were
VAT charges, demand for new products from the customers, land and building and
financial resources, price variation by the wholesalers, storage facilities and agencies
for supply of products to supermarkets, delayed delivery from the wholesalers,
existing location of the site and availability of untrained employees have
consequences on the problems of the retailing.
42. It was observed that convenient location of the supermarket, range of products
availability, convenient for purchase, availability of quality products were considered
as the prime factors influencing the consumers to go for purchase at supermarkets
most of these are concerned to accessibility and product oriented factors. Influencing
factors cluster comprised of major factors such as reasonable prices, parking facility,
shopping is seen enjoyable at supermarkets, attractive packing, schemes and offers,
concern about health, welfare and the environment, influence of peer group,
availability of range of brands most of which influences the consumers to opt
purchases at supermarkets and the third clusters group was named as product
promotion factors since it consists of promotion factors like payment methods,
interest in eating foreign foods, home delivery facility, new products market
development, attractive advertisement, fresh fruits and vegetables and fresh bakery
products availability etc.
Policy Implications
1. It was observed from the study that the organized supermarkets were performing
better than the unorganized supermarkets and most of the existing supermarkets in
the state are un-organized, hence, there is a lot of scope for the supermarket
business to shift from un-organized to organized form of retailing to cater the
changing needs of the modern customers.
2. It would be better if large sized supermarkets created at the outset because size is
an advantage or a necessity. A large store is designed and built have the capacity
to deal with the expected number of customers in the neighbourhood but a small
grocery store could not compete effectively in price and selection with other nearby
supermarkets.
3. It was found from the study that the investments in establishment, modernization
and expansion are capital intensive in supermarkets. Therefore, the joint ventures
between local companies and local-foreign companies will be the suitable
strategies than the purely foreign ones in the fledgling organized India's retailing
industry.

4. Due to an ongoing process of increasing organization and implementation of
information technology, the retail sector has to adopt a new form of relationship with
suppliers, and needs to develop a wide range of knowledge regarding the habits of
different consumers in accordance with their changing needs toward the transfer of
power in the productive chain, from industry to retail.
5. In order to establish and effectuate an uniform procedure for the handling of
purchasing matters; to obtain the most suitable services and commodities at the
lowest price; and to promote the best possible means of exercising financial control
over expenditures, the centralized purchasing system should be adopted by the
supermarkets having multi outlets/chain of outlets as it was yielded better
performance in the selected organized supermarkets in the study. It optimizes
multi-store inventory control from one central location to manage Just-In-Time
replenishment. Those firms operating in within these environments need an astute
understanding of the chains, the hierarchy of channel members and their relative
position.
6. It was noticed from the study that all the retailers /supermarkets purchased grocery
items from the Agricultural Marketing Produce Market Committee (APMC) only.
Hence, the government /APMC’s should give more emphasis on strengthening and
more effective functioning of the regulated markets in terms of creation of
infrastructural facilities, value addition, packaging etc., to get hold its position.
7. As it was observed from the study that the total costs incurred in procurement of
tomato was less at Bangalore when compared to other cities because of the use of
various sources like direct procurement from the farmers and own production. It is
highly recommended that the supermarketers to go for these sources to get
wholesales’ margin plus concession as they buy in bulk and are also the producers.
If, it is from the farmers, it alerts them about the importance of production of quality
produce in turn for their benefits.
8. Special emphasis must be placed on the computerization of the sector, which help
to improve the efficiency in operations of procurement and inventory management
which is in turn providing greater knowledge on product flows, and efficiency gains
in the producer-retailer chain as it was detected in the study that the organized
supermarkets have already adopted Just-In-Time (JIT) and Material Reassessment
Planning (MRP) approaches in maintaining procurement and inventory
management aspects and hence they are controlling costs efficiently and effectively
in the business.
9. It was revealed from the study that even after accounting the quality and nature of
the products, competition and supply side characteristics, demographical
characteristics such as density of the population, average food expenditure, income
of households, average household size, number of stores in the area, size of the
store etc., should be taken care before making pricing decisions in the
supermarkets as these factors plays a significant role in the choice of the products
by the consumers.
10. The solvency and liquidity ratios of the supermarkets were found to be very
negligible and hence they should be taken care for improving the own funds,
volume of business and liquidity position to the need of improving financial
strengths of the supermarkets.
11. The results from the Principal Component Analysis shown that the availability of
trained employees, credit and bargains from the customers, lack of government
schemes for finance, repayment from the customers, credit facility from the
wholesalers, electricity and advertisement were the key problems in the
supermarket business. Therefore, it is cautioned the food retailers risk a loss of
image or even a loss of the customer if they do not learn to react effectively to the
problems encountered in the process of the business, which may lead to failures.
Hence, they should concentrate to the latest retailing strategies to improve their
services to the customers and to make profits.

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Appendix I: Ranking of the Factors Considered by Supermarketers in Pricing the Products in Supermakets
Factors
Sum*
Hubli Mangalore Belgaum
Mean
Score/Avg
Rank Sum*
Mean
Score/Avg
Rank Sum*
Mean
Score/Avg Rank
Nature of products 298.38 99.46 4 299.50 99.83 1 298.05 99.35 5
Market forces (S & D) 297.60 99.20 6 297.23 99.08 7 295.10 98.37 9
Product life 297.72 99.24 7 295.97 98.66 8 296.33 98.78 8
Competition 299.10 99.70 2 298.17 99.39 4 299.26 99.75 1
Long-term pricing 293.76 97.92 12 293.76 97.92 12 294.58 98.19 11
Market segmentation 294.08 98.03 11 294.89 98.30 11 294.57 98.19 12
Relative prices of the producers 295.38 98.46 9 295.39 98.46 10 297.72 99.24 6
Price should not be high 298.68 99.56 3 297.93 99.31 6 298.74 99.58 2
Price should ensure profitability 297.28 99.09 8 298.68 99.56 3 298.62 99.54 4
Price shall convenience prospective
consumers
294.61 98.20 10 295.67 98.56 9 294.68 98.23 10
Quality of the products 299.39 99.80 1 298.87 99.62 2 298.74 99.58 3
Availability of the products 298.05 99.35 5 297.97 99.32 5 297.64 99.21 7
* = The sum of the opinions of the supermarketers converted into scores (Garret table scores),
** = The value of the sum divided by the total number of respondents.
Contd…….

Factors
Sum*
Mysore Bangalore Overall
Mean
Score/Avg
Rank Sum*
Mean
Score/Avg
Rank Sum*
Mean
Score/Avg**
Nature of products 299.51 99.84 1.00 299.03 99.68 3 1494.47 99.63 2
Market forces (S & D) 295.39 98.46 10.00 294.08 98.03 11 1479.40 98.63 9
Product life 297.47 99.16 6.00 297.76 99.25 5 1485.25 99.02 7
Competition 298.16 99.39 5.00 298.05 99.35 4 1492.74 99.52 3
Long-term pricing 293.80 97.93 11.00 293.76 97.92 12 1469.66 97.98 12
Market segmentation 293.76 97.92 12.00 294.40 98.13 10 1471.70 98.11 11
Relative prices of the producers 296.36 98.79 9.00 296.38 98.79 9 1481.23 98.75 8
Price should not be high 298.51 99.50 4.00 297.66 99.22 6 1491.52 99.43 4
Price should ensure profitability 296.57 98.86 7.00 299.26 99.75 2 1490.41 99.36 5
Price shall convenience
prospective consumers
296.38 98.79 8.00 296.78 98.93 8 1478.12 98.54 10
Quality of the products 299.50 99.83 2.00 299.27 99.76 1 1495.77 99.72 1
Availability of the products 298.62 99.54 3.00 297.60 99.20 7 1489.88 99.33 6
* = The sum of the opinions of the supermarketers converted into scores (Garret table scores),
** = The value of the sum divided by the total number of respondents.
Rank

Appendix II: Component Matrix of Different Dimensions on the Problems of Supermarkets
Variables PC1 PC2 PC3 PC4 PC5 PC6 PC7 PC8 PC9
Land and building 0.1938 -0.1521 -0.0246 0.5233 0.2849 -0.3063 0.1058 0.5185 -0.2171
Transportation 0.5561 -0.6319 -0.4132 0.1435 -0.1411 0.0950 0.0343 0.2002 -0.0601
Storage 0.0699 -0.2594 -0.5182 0.2955 0.2139 0.6345 -0.1149 -0.2443 -0.1053
Electricity 0.5232 0.3217 0.0842 0.2593 0.3312 0.0092 0.4499 -0.0864 0.3783
Insurance 0.4866 -0.2126 -0.3160 0.0050 -0.5219 -0.1529 0.1611 -0.1297 -0.0720
Location of the site 0.3809 0.4636 0.3020 0.2273 0.2839 0.0935 -0.2763 -0.4656 0.2796
Trained employees 0.7973 0.3168 -0.1010 0.0313 0.1382 0.1566 -0.1809 -0.2233 0.0570
Un trained employees -0.0815 0.4911 0.1039 -0.4321 0.3211 -0.1278 0.1352 0.2381 0.5366
Agencies -0.0378 -0.1210 0.0803 -0.5020 0.4000 0.5987 -0.0157 -0.0948 -0.0645
Banks 0.7881 -0.2822 -0.0631 -0.0909 -0.3038 0.1763 -0.1346 0.1437 0.0749
Govt. schemes 0.6652 0.3102 -0.4228 -0.0741 0.0446 -0.0939 -0.3620 0.2317 0.0462
Rate -0.4172 -0.2763 -0.2731 0.3089 0.1313 0.3225 0.3421 -0.0330 0.2637
Coverage of area -0.5568 -0.4406 0.2213 0.0701 0.3161 0.4091 0.2190 0.3321 -0.0330
Timing 0.1039 0.6687 0.0727 -0.3710 0.0717 0.1938 0.2628 0.4469 -0.1209
Information -0.1328 0.5205 -0.5735 0.1144 -0.1921 0.2939 -0.2810 -0.1673 -0.2516
Financial resource -0.0675 0.3378 -0.3577 0.4899 0.4018 -0.1357 0.0448 -0.2830 -0.0919
Experience 0.1979 0.6772 -0.5137 0.1704 0.1502 0.0286 0.1282 0.2375 0.0095
Location -0.1362 -0.3059 0.5932 -0.1795 -0.0909 0.5008 -0.3425 0.1465 0.0252
Contd…..

Competition 0.0095 0.3489 0.5928 0.4683 0.0390 -0.0363 0.0774 0.1237 -0.3014
Price of the product -0.7112 0.3525 0.2160 0.3347 0.1790 0.3373 -0.0515 0.0317 0.0027
Margin -0.5589 0.3914 0.0360 -0.0064 0.4288 0.1563 -0.2237 0.0632 -0.0044
Charges 0.2643 -0.0792 0.3752 0.7235 -0.1956 0.3293 0.1404 -0.0649 -0.1803
Credit facility 0.5551 -0.5403 -0.1845 -0.0535 0.3529 0.1060 -0.0835 0.1984 0.0423
Damage of products -0.1482 0.6575 0.2198 0.0700 -0.5619 -0.0489 -0.1210 0.0934 0.0086
Margin 0.3119 0.4861 -0.0670 -0.1640 -0.4620 0.3247 0.1088 0.0222 0.1455
Bargain 0.6970 0.0306 0.2045 0.4770 0.0868 0.2741 0.0804 0.0137 0.2811
Credit facility 0.7428 0.0855 0.5073 -0.0409 -0.1529 -0.1510 0.0648 -0.2930 -0.0367
Discounts & Offers 0.4536 -0.2001 0.6713 0.1776 0.1742 -0.2617 -0.2234 0.0586 -0.1363
Demand for new products 0.0333 -0.4011 0.3231 0.5576 0.1618 -0.2297 -0.2042 0.1883 0.1930
Repayment 0.5937 -0.1430 0.3475 -0.3639 0.5522 0.0681 0.0145 -0.0425 0.1510
Opinion 0.2487 0.4982 0.2680 -0.3429 -0.0134 0.0632 0.5183 -0.0490 -0.3993
Tax charges 0.4513 0.5829 -0.0888 0.2176 0.3184 0.0768 -0.3572 0.1123 -0.2534
Laws 0.1948 -0.0863 0.4599 -0.3634 0.1724 0.0692 0.3372 -0.3185 -0.3418
Bribes 0.4263 0.6504 -0.0765 -0.0342 -0.0061 0.1084 0.1755 0.2873 0.0374
Procedures 0.0351 0.1572 0.2022 0.4902 -0.5479 0.3539 0.3893 0.1032 0.0963
Price variation -0.4087 0.3204 -0.1671 0.2252 0.5486 -0.3593 0.2030 -0.2003 -0.1223
Delivery 0.2937 -0.4528 -0.3968 -0.0044 0.1958 -0.0709 0.6480 -0.1180 -0.0141
Market information -0.5876 0.1861 0.1468 0.1614 -0.4139 -0.1250 0.0788 -0.1620 0.3742

Appendix III. Extent of Variation Explained by Different Dimensions on the Problems of
Supermarkets in Karnataka
Initial Eigenvalues
Extraction Sums of Squared
Loadings
Variables
Total
% of
Variance
Cumulative
%
Total
% of
Variance
Cumulative %
Land and building 7.2869 19.1760 19.1760 7.2869 19.1760 19.1760
Transportation 6.0213 15.8454 35.0214 6.0213 15.8454 35.0214
Storage 4.1966 11.0437 46.0651 4.1966 11.0437 46.0651
Electricity 3.7153 9.7770 55.8421 3.7153 9.7770 55.8421
Insurance 3.5814 9.4247 65.2668 3.5814 9.4247 65.2668
Location of the site 2.5345 6.6697 71.9366 2.5345 6.6697 71.9366
Trained employees
Un trained
2.3534 6.1932 78.1298 2.3534 6.1932 78.1298
employees 2.0703 5.4482 83.5780 2.0703 5.4482 83.5780
Agencies 1.7864 4.7010 88.2790 1.7864 4.7010 88.2790
Banks 1.5608 4.1074 92.3863 1.5608 4.1074 92.3863
Govt. schemes 0.9450 2.4868 94.8731
Rate 0.8874 2.3352 97.2083
Coverage of area 0.5814 1.5301 98.7383
Timing 0.4794 1.2617 100.0000
Information 0.0000 0.0000 100.0000
Financial resource 0.0000 0.0000 100.0000
Experience 0.0000 0.0000 100.0000
Location 0.0000 0.0000 100.0000
Competition
Price of the
0.0000 0.0000 100.0000
product 0.0000 0.0000 100.0000
Margin 0.0000 0.0000 100.0000
Charges 0.0000 0.0000 100.0000
Credit facility
Damage of
0.0000 0.0000 100.0000
products 0.0000 0.0000 100.0000
Margin 0.0000 0.0000 100.0000
Bargain 0.0000 0.0000 100.0000
Credit facility 0.0000 0.0000 100.0000
Discounts & Offers 0.0000 0.0000 100.0000
Demand for new
products
0.0000 0.0000 100.0000
Repayment 0.0000 0.0000 100.0000
Opinion 0.0000 0.0000 100.0000
Tax charges 0.0000 0.0000 100.0000
Laws 0.0000 0.0000 100.0000
Bribes 0.0000 0.0000 100.0000
Procedures 0.0000 0.0000 100.0000
Price variation 0.0000 0.0000 100.0000
Delivery 0.0000 0.0000 100.0000
Market information 0.0000 0.0000 100.0000

Appendix-IV
Hierarchical cluster analysis for factors influencing the consumers to purchase food products
in supermarkets
Dendrogram using complete Linkage

Appendix V. Clusters Classification and Casewise Statistics Based on Discriminant Analysis
Case
Number
Highest Group
Actual
Group
Predicted
Group
P(D>d |
G=g)
P(G=g
| D=d)
Squared
Mahalanobis
Distance to Centroid
Second
Highest Group
Group P(G=g
| D=d)
Squared
Mahalanobis
Distance to Centroid
Discriminant Scores
Function
1
Function 2
p df
1 1 1 0.698 2 1 0.718 2 0 364.393 -6.876 8.075
2 1 1 0.532 2 1 1.262 2 0 405.957 -5.611 8.716
3 1 1 0.661 2 1 0.829 2 0 402.488 -7.53 9.32
4 1 1 0.961 2 1 0.079 2 0 386.857 -6.698 8.627
5 2 2 0.595 2 1 1.039 1 0 386.784 -12.403 -9.92
6 2 2 0.47 2 1 1.512 1 0 350.517 -12.786 -8.804
7 3 3 0.662 2 1 0.826 1 0 1545.461 31.133 -1.711
8 2 2 0.802 2 1 0.442 1 0 372.157 -13.39 -9.194
9 2 2 0.926 2 1 0.154 1 0 400.529 -13.809 -9.808
10 3 3 0.913 2 1 0.182 1 0 1611.504 31.885 -2.105
11 2 2 0.913 2 1 0.182 1 0 412.51 -13.372 -10.282
12 1 1 0.358 2 1 2.053 2 0 439.053 -7.345 10.196
13 3 3 0.059 2 1 5.676 1 0 1436.431 29.91 -0.831
14 1 1 0.497 2 1 1.398 2 0 352.049 -7.304 7.881
15 3 3 0.881 2 1 0.255 1 0 1561.813 31.146 -2.412
16 1 1 0.159 2 1 3.679 2 0 459.417 -5.066 9.881
17 2 2 0.104 2 1 4.534 1 0 481.577 -14.764 -11.509
18 2 2 0.917 2 1 0.172 1 0 392.583 -13.006 -9.882
19 2 2 0.637 2 1 0.903 1 0 434.118 -13.461 -10.807
20 3 3 0.409 2 1 1.789 1 0 1646.172 31.818 -3.786
21 1 1 0.711 2 1 0.682 2 0 381.037 -7.529 8.752
22 1 1 0.718 2 1 0.663 2 0 367.674 -7.261 8.301
23 1 1 0.079 2 1 5.072 2 0 376.991 -4.894 7.587
24 2 2 0.436 2 1 1.658 1 0 351.835 -13.519 -8.574
25 2 2 0.962 2 1 0.078 1 0 398.468 -13.692 -9.797
26 1 1 0.529 2 1 1.272 2 0 414.718 -7.568 9.648
27 3 3 0.05 2 1 5.993 1 0 1647.233 31.447 -4.9
28 3 3 0.024 2 1 7.469 1 0 1781.828 34.197 -1.474
29 1 1 0.329 2 1 2.225 2 0 410.263 -8.006 9.66
30 1 1 0.547 2 1 1.205 2 0 421.766 -5.648 9.152

APPENDIX-VI: Proximity Matrix of Squared Euclidean Distance for the Clusters Classification
Case 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
1 73 50 66 129 203 176 157 173 372 203 85 367 230 341 91 202 248 156 395 82 64 85 142 195 72 311 325 69 79
2 73 55 61 110 166 145 124 148 301 160 64 298 199 282 68 171 201 107 338 73 65 64 95 178 67 242 246 58 64
3 50 55 48 113 195 166 129 165 354 195 67 355 214 333 73 200 232 134 389 76 66 65 130 207 66 283 293 65 71
4 66 61 48 101 161 160 97 135 322 165 65 335 204 305 61 164 194 108 355 72 60 47 104 185 54 257 265 61 65
5 129 110 113 101 132 161 122 130 213 108 128 234 229 214 112 125 141 103 242 93 111 122 97 122 105 222 218 90 88
6 203 166 195 161 132 189 142 128 195 82 208 166 305 176 170 115 151 119 176 183 187 190 107 120 183 214 180 168 146
7 176 145 166 160 161 189 133 125 174 149 181 179 268 159 129 120 186 122 185 170 180 185 126 177 164 137 137 167 153
8 157 124 129 97 122 142 133 90 205 132 144 242 263 196 116 125 155 101 234 133 121 116 99 134 111 186 184 120 102
9 173 148 165 135 130 128 125 90 181 104 184 178 279 160 148 107 153 105 186 145 159 174 85 120 151 182 170 156 132
10 372 301 354 322 213 195 174 205 181 129 371 87 388 49 267 132 170 156 57 306 354 361 170 149 328 137 109 311 281
11 203 160 195 165 108 82 149 132 104 129 192 116 281 138 156 83 99 105 108 163 189 194 91 100 171 142 124 160 140
12 85 64 67 65 128 208 181 144 184 371 192 366 205 364 94 203 207 149 406 87 59 54 119 208 61 282 294 62 70
13 367 298 355 335 234 166 179 242 178 87 116 366 419 92 298 127 171 195 62 309 349 370 171 152 331 144 108 324 296
14 230 199 214 204 229 305 268 263 279 388 281 205 419 401 185 262 286 226 429 220 212 205 230 281 202 335 335 209 209
15 341 282 333 305 214 176 159 196 160 49 138 364 92 401 262 129 167 153 74 297 347 354 165 156 315 172 136 304 268
16 91 68 73 61 112 170 129 116 148 267 156 94 298 185 262 141 171 101 304 103 83 76 105 178 79 208 216 84 90
17 202 171 200 164 125 115 120 125 107 132 83 203 127 262 129 141 102 108 121 158 192 191 86 103 168 163 149 165 159
18 248 201 232 194 141 151 186 155 153 170 99 207 171 286 167 171 102 146 161 190 216 209 100 121 184 173 155 183 167
19 156 107 134 108 103 119 122 101 105 156 105 149 195 226 153 101 108 146 195 124 128 119 70 127 112 165 157 121 111
20 395 338 389 355 242 176 185 234 186 57 108 406 62 429 74 304 121 161 195 331 397 400 193 152 363 152 108 356 320
21 82 73 76 72 93 183 170 133 145 306 163 87 309 220 297 103 158 190 124 331 74 77 94 187 72 273 267 63 63
22 64 65 66 60 111 187 180 121 159 354 189 59 349 212 347 83 192 216 128 397 74 43 104 191 52 289 299 59 67
23 85 64 65 47 122 190 185 116 174 361 194 54 370 205 354 76 191 209 119 400 77 43 105 206 35 278 286 58 70
24 142 95 130 104 97 107 126 99 85 170 91 119 171 230 165 105 86 100 70 193 94 104 105 103 94 173 157 93 85
25 195 178 207 185 122 120 177 134 120 149 100 208 152 281 156 178 103 121 127 152 187 191 206 103 187 198 174 176 170
26 72 67 66 54 105 183 164 111 151 328 171 61 331 202 315 79 168 184 112 363 72 52 35 94 187 261 273 51 57
27 311 242 283 257 222 214 137 186 182 137 142 282 144 335 172 208 163 173 165 152 273 289 278 173 198 261 24 270 248
28 325 246 293 265 218 180 137 184 170 109 124 294 108 335 136 216 149 155 157 108 267 299 286 157 174 273 24 270 242
29 69 58 65 61 90 168 167 120 156 311 160 62 324 209 304 84 165 183 121 356 63 59 58 93 176 51 270 270 18
30 79 64 71 65 88 146 153 102 132 281 140 70 296 209 268 90 159 167 111 320 63 67 70 85 170 57 248 242 18

FOOD RETAILING IN KARNATAKA - A CASE OF
SUPERMARKETS
RAMAPPA, K. B 2007 DR. H. S. S. KHAN
Major Advisor
ABSTRACT
Globally, retailing is a big business. It is one of the largest industries in India and
second largest employer after agriculture. The share of organized retail is more in developed
countries but bulk of this business is unorganized (97%) in India. In recent times, retail sector
has been growing rapidly with the multitude of factors viz., increasing sophistication,
modernization of the life-style of households and increasing globalization of trade. Hence, an
effort was made in the state to study the entire business aspects of organized food retailing
particularly in supermarkets using both primary and secondary data collected from various
sources.
The study found that majority of the organized supermarkets existing and operating
only in big cities with multi outlets operating under the single management and accounts for
huge costs and turnover.
The centralized purchasing pattern was followed in most of the organized
supermarkets whereas store level purchasing was noticed in un-organized retailing. The
purchase frequency was found to be more in fruits and vegetables but the cost/quintal was
highest in chilli and least in rice. The quantity procured and their unit costs were found high in
Bangalore alone due to higher average size of the supermarkets and turnover. Short-time
period inventories were observed in all supermarkets.
Higher percent of value addition was noticed in mustard (27.68%) among groceries,
and tomato (49.21%) in fruits and vegetables. At an overall, all supermarkets in the state
followed absorption cost pricing and market pricing methods by attaching significance
importance to the quality and nature of products.
Non-availability of trained employees and demand for credit and bargains from the
customers were the key problems among different variables considered. Finally, the primefactors
influencing consumers to go for purchase at supermarkets were grouped in three
clusters such as accessibility and product oriented, influencing, and product promotion
factors.