SMEDA Superstore

Pre-Feasibility Study

SSuuppeerrssttoorree

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

LDA Plaza, 8th Floor , Egerton Road, LahoreTel: (042) 111-111-456, Fax: (042) 5896619, 5899756

[email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

8th Floor,LDA PlazaEgerton Road,

Lahore.Tel: (042) 111-111-456

Fax: (042) 5896619, [email protected]

5TH Floor, BahriaComplex II, M.T. Khan Road,

Karachi.Tel: (021) 111-111-456

Fax: (021) [email protected]

Ground FloorState Life Building

The Mall, Peshawar.Tel: (091) 9213046-47


Bungalow No. 15-AChaman Housing Scheme

Airport Road, Quetta.Tel: (081) 831623, 831702


April, 2005

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject

matter and provide a general idea and information on the said area. All the material

included in this document is based on data/information gathered from various sources and

is based on certain assumptions. Although, due care and diligence has been taken to

compile this document, the contained information may vary due to any change in any of

the concerned factors, and the actual results may differ substantially from the presented

information. SMEDA does not assume any liability for any financial or other loss

resulting from this memorandum in consequence of undertaking this activity. Therefore,

the content of this memorandum should not be relied upon for making any decision,

investment or otherwise. The prospective user of this memorandum is encouraged to

carry out his / her own due diligence and gather any information he/she considers

necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or other

form.

DOCUMENT CONTROL

Document No. PREF-9

Revision 1

Prepared by SMEDA-Sindh

Approved by Provincial Chief - Sindh

Issue Date April, 2005

Issued by Library Officer

1 PURPOSE OF THE DOCUMENT............................................................................................... 1

2 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 1

3 PROJECT PROFILE.................................................................................................................... 1

3.1 OPPORTUNITY RATIONALE ...................................................................................................... 13.2 PROJECT BRIEF ....................................................................................................................... 23.3 MARKET ENTRY TIMING ......................................................................................................... 23.4 PROPOSED BUSINESS LEGAL STATUS ....................................................................................... 23.5 PROJECT INVESTMENT............................................................................................................. 33.6 PROPOSED PRODUCT MIX........................................................................................................ 33.7 Key Success Factors.............................................................................................................. 33.8 PROPOSED LOCATION.............................................................................................................. 5

4 INDUSTRY ANALYSIS ................................................................................................................. 7

4.1 INDUSTRY OVERVIEW ............................................................................................................. 74.2 PROFIT MARGINS .................................................................................................................... 74.3 LEGAL ISSUES REGARDING INDUSTRY ..................................................................................... 8

5 MARKET INFORMATION ......................................................................................................... 8

5.1 MARKET POTENTIAL ............................................................................................................... 85.2 TARGET CUSTOMERS .............................................................................................................. 8

6 BUSINESS OPERATIONS........................................................................................................... 9

6.1 INVENTORY PROCUREMENT..................................................................................................... 96.2 PRODUCT MIX OFFERED.......................................................................................................... 96.3 PRICING STRATEGIES .............................................................................................................. 96.4 CAPITAL EXPENDITURE ......................................................................................................... 106.5 BAR CODE FACILITY ............................................................................................................. 106.6 DISTRIBUTOR ANALYSIS ....................................................................................................... 11

7 LAND & BUILDING REQUIREMENT .................................................................................... 11

7.1 LAND REQUIREMENT ............................................................................................................ 117.2 RECOMMENDED MODE.......................................................................................................... 117.3 UTILITIES REQUIREMENT ...................................................................................................... 12

8 HUMAN RESOURCE REQUIREMENT................................................................................... 12

9 DISTRIBUTORS ANALYSIS....................................................................................................... 3

10 KEY ASSUMPTIONS................................................................................................................. 13

10.1 REVENUE ASSUMPTIONS ....................................................................................................... 1310.2 PILFERAGES AND DAMAGES .................................................................................................. 1410.3 DAYS OPERATIONAL.............................................................................................................. 14

11 PROJECTED FINANCIAL STATEMENTS ............................................................................. 15

11.1 INITIAL INVESTMENT........................................................................................................... 16511.2 INCOME STATEMENT ............................................................................................................. 1611.3 BALANCE SHEET .................................................................................................................. 1711.4 PROJECTED CASH FLOW STATEMENT..................................................................................... 18

Pre-FeasibilityStudy____________________________________________________________Super Store

PREF-9/April, 2005/Rev1

1

11 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, production, marketing, finance and business management. The document also provides sectoral information, brief on government policies and international scenario, which have some bearing on the project itself.

This particular pre-feasibility is regarding a supermarket which comes under the trade sector. Before studying the whole document one must consider following critical aspects, which forms the basis of any investment decision.

22 CCRRUUCCIIAALL FFAACCTTOORRSS && SSTTEEPPSS IINN DDEECCIISSIIOONN MMAAKKIINNGG FFOORR IINNVVEESSTTMMEENNTT

Before making any investment decision, it is advisable to evaluate the associated risk factors by taking into consideration certain key elements. These include availability of resources, academic knowledge, past experience and specific managerial and technical skill set. At times evaluation and analysis of strengths, weaknesses, opportunities and threats (SWOT) for a particular project serves the purpose of a basic tool in investment decision making. The most critical factor in this project would be to generate sufficient demand. The superstore sector is based on high volumes and low margins. If a smooth flow of customers can be arranged the business is most likely to succeed. This pre-feasibility study tries to capture all the important factors that can play an instrumental role in the success of a project but all factors should be evaluated by the investor for their own specific project design with its unique parameters.

33 PPRROOJJEECCTT PPRROOFFIILLEE

33..11 OOppppoorrttuunniittyy RRaattiioonnaallee

In order to cater to the changing taste and growing needs of the consumers, different companies have emerged with top quality products. For that reason the demand for super markets is ever increasing which plays a vital role in making the product available from the manufacturer to the final consumers.

Furthermore the increase in the living standards of people has increased the consumption of imported goods, which leaves a good profit margin to entrepreneur. Furthermore the provision of sponsors and schemes held by different companies also generates a good amount of revenue for the entrepreneurs.

Supermarkets, which are expanding at the expense of traditional wet markets and small independent shops, account for 10 percent of all retail food sales. Media exposure and increased awareness about packaged and hygienic food has also shifted people from Kiryana / general stores to super markets.



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Karachi is one of the fastest growing metropolitan cities of the country. Customers are looking for convenient, safe and relaxed shopping places. They prefer to walk in the store and pick their choice of merchandise. This itself will be a benefit to super market as self-shopping increase impulsive buying which in result increase in sales.

The Pakistani economy is almost evenly divided between the commodity sector and the services sector. The total contribution of services sector to real GDP is 48.7% of which contribution of Wholesale and Retail is 15.4 %.

Supermarket is also one of the low risk businesses at the present scenario. Major investment is either the land or sellable merchandise. Both have high cash liquidity in case of severe economic problems.

33..22 PPrroojjeecctt BBrriieeff

The proposed project will give a detail analysis of the investment criteria of a supermarket. The project will shed light on the key factors to be considered in the starting of this business. The required covered area of the land/space is 150 square yards.The project will also require knowledge about the distributors, which play a vital role in transferring the goods from the manufacturer to the retailer, the benefits if any provided by them, their supply method etc.

33..33 MMaarrkkeett EEnnttrryy TTiimmiinngg

There is no specific timing required to start this business as it is not a seasonal business. With the influx of more and more imported and local goods the demand for supermarkets is ever increasing which plays a vital role in making the product available from the manufacturer to the final consumer.

However it is noted that sales of supermarket rises in the months of October—March, this is primarily due to the occurrence of different traditional occasions like Ramzan, Eid-ul-Fitr, Eid-ul-Azha and peek wedding seasons. Also another trend in the sales of supermarket is the starting of the month effect where the first week of the month registers a phenomenal increase in the sales as households are stocking their pantries with their monthly groceries.

33..44 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss

Selection of the business status is totally dependent on the choice of the entrepreneur. Since the scope of this project is relatively small, the business can be launched as a sole proprietorship or as a partnership with relative ease.



3

33..55 PPrroojjeecctt IInnvveessttmmeenntt

Initial Financing Rs. in Actual Debt 4,888,879 Equity 4,888,879 Total Investment 9,777,758

33..66 PPrrooppoosseedd PPrroodduucctt MMiixx

Supermarket is defined as a place where following products are available under one roof, and customer can select and pick his/her desired product by himself/herself. Following is the standard list of super market products along with its shelf-space required in terms of percentage.

Category Shelf space %

GroceriesFood 21Non Food 11Snacks 5Frozen Food 11

Toiletries 10House hold cleaning 7Personal care 6Cosmetics 5Medicine 8Childcare 3Tobacco 1Books/Magazine 2Toys 3Household products/Appliances 7

100%

33..77 KKeeyy SSuucccceessss FFaaccttoorrss//PPrraaccttiiccaall TTiippss FFoorr SSuucccceessss

Before making any investment decision, it is advisable to evaluate the associated risk factors by taking into consideration certain key element. In order to run the business effectively and efficiently strategic planning plays a vital role to be successful. This section will provide the entrepreneur with detail information relating to the strategic tips, which will act as a basic tools in order to run the business successfully.



4

The marketing concept states to sell a product keeping in view the customers needs and wants. Super market being the product of the entrepreneur should be marketed accordingly to be competitively successful. These can be done on the following basis:

33..77..11 DDIISSPPLLAAYY

As now-a-days most customers indulge in self-shopping, the product should be displayed in such a manner so that they are easily accessible. Keeping the large size product both breathe wise and length wise should be kept on the ground, major selling product should be kept on the second and third panel of the shelf so that it is easily accessible.

33..77..22 CCOOUURRTTEESSYY OOFF TTHHEE SSTTAAFFFF

The staff hired should be well mannered and well trained in dealing with the customers. Any complaints by the customers should be immediately noted down and action should be taken.

33..77..33 KKNNOOWWLLEEDDGGEE OOFF TTHHEE SSTTAAFFFF

The staff hired should have in-depth knowledge of all the products so that they are able to provide information if any required by the customers. Special care should be taken in hiring chemist for the medical section. A simple way to overcome this problem is by assigning aisles to the sales staff.

33..77..44 SSPPOONNSSOORRSS FFRROOMM CCOOMMPPAANNIIEESS

The entrepreneur should try to gain sponsors from different companies so that they advertise their products by giving free samples and also set up stalls outside the super market so that customers get attracted.

33..77..55 RREENNTT--OOUUTT SSHHEELLFF SSPPAACCEE TTOO CCOOMMPPAANNIIEESS

One-way of earning is to rent shelf space to different companies for the display of their products. Usually the entrepreneurs rent a small portion of there shelf to companies where they can display their own products and also allow the companies to place their own stands and thus pay the required amount of rent.One can sell shelf space from Rs. 1000 – Rs. 5,000 per month depending upon the product and the season.



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33..77..66 RREENNTT AADDVVEERRTTIISSEEMMEENNTT SSPPAACCEE TTOO CCOOMMPPAANNIIEESS

The entrepreneur also can rent advertisement space to companies where the companies are allowed to place hoardings, banners, posters, sign boards consisting of the companies product and also carrying the name of the super market.Inside board space can be rented out to companies from Rs. 15,000 – Rs. 30,000 for a quarter.

33..77..77 DDEECCRREEAASSEE TTHHEE LLOOSSTT SSAALLEESS DDUUEE IINNVVEENNTTOORRYY SSHHOORRTTAAGGEESS

The entrepreneur should be able to stock his inventory in such a way that he covers most of the demands of the target customers. It casts a very negative image on the customers perception of the shop if they are turned away with an excuse that a certain product is not available either because of a sell-out or the shop doesn’t carry the product. To minimize this problem the purchase section of the shop has to be managed efficiently.

33..88 PPrrooppoosseedd LLooccaattiioonn

Location plays a vital role in the starting of this business. Our proposed areas include Clifton, Gulshan-E-Iqbal, Ghulistan-E-Johar, & North Nazimabad. These areas are selected based on heavy population and a clutter of houses/apartments. The detail analysis of the feasibility for opening a super market in these areas will be covered latter in this report. The approximate no. of households in these areas are as follows:

Area Households A & B supermarketsGulshan-e-Iqbal 30,000 8-10Gulistan-e-Johar 40,000 6-8North Nazimabad 25,000 7-8Clifton/Defence 12,000 15-20

The number of households in these areas include only A-B class households, with monthly expenditure of around Rs. 2500-3000 on groceries and spending around Rs.100-150 on daily purchases.

With a total investment of around 6 million (60 lacs) for shop purchasing with a total covered area of 150 sq.yd. at Rs.40,000 per sq yd, the following areas will be suitable for investment:

GHULSHAN-E-IQBAL

GHULISTAN-E-JOHAR

NORTH NAZIMABAD

P.E.C.H.S



6

It is estimated that at any given time minimum of 4-5 customers may be present at the shop. Therefore an ample space of 3-4 cars must be available either outside the supermarket or very near.

The safety and security element must also be kept in mind in identifying the location. Following are the five important elements to be considered in selecting the supermarket location

SIZE

PRESENCE OF COMPETITION

PROFILE OF CUSTOMER RESIDENTS

PARKING SPACE

SOCIOECONOMIC LEVEL OF RESIDENTS

It is suggested that the super market should be opened in a densely populated area where these services are not being provided. Apart from that it should be opened in the center so that it also covers the near by areas.

It is not advisable to open a super market in an area, which already comprises of number of super markets since the market can become saturated, and also because the customers may have become loyal to the existing super markets so that it will be difficult to win/pull those customers.

Since this feasibility is based on A–class super market, our target is to achieve a 30% market from small general stores and kiryana stores. A detail analysis of number of households per supermarket will give the benefits of opening a supermarket in these areas.

Area Households A & B supermarkets

Households/ supermarkets

Gulshan-e-Iqbal 30,000 8-10 3000

Gulistan-e-Johar 40,000 6-8 5000

North Nazimabad 25,000 7-8 3125

Clifton/Defence 12,000 15-20 600



7

44 IINNDDUUSSTTRRYY AANNAALLYYSSIISS

44..11 IInndduussttrryy OOvveerrvviieeww

Supermarket is defined as a place where following products are available under one roof, and customer can select and pick his/her desired product by himself/herself.

The retail industry has emerged to be one of the most rapid growing industries thus attracting a substantial amount of investment in the business. Retail outlets like Naheed Superstore, ARY Cash & Carry, Agha’s Supermarket, Paradise Supermarket, Imtiaz Supermarket and Pace Supermarket are few modern style retail business.

According to a recent study by the United States embassy in Islamabad, the value of processed retail food sales has grown 12 percent annually in Pakistan during the past decade. Currently it is estimated at about $1.1 billion (about Rs 68 billion), including $250 million (Rs 15.5 billion) for imported consumer food.

The Pakistani economy is almost evenly divided between the commodity sector and the services sector. The total contribution of services sector to real GDP is 48.7% of which contribution of Wholesale and Retail is 15.4 %.

As more and more retail outlets are opening and consumer buying has shifted towards packaged/branded products. Companies are coming with top quality products and with the increase in production level the employment also increases.Thus creating a need for retail store to sell the product.One window trend has already emerged in Pakistani market, where the consumer would like to buy groceries, food/non-food, toiletries and household products under one roof.

44..22 PPrrooffiitt MMaarrggiinnss

Margins in supermarket merchandise varies from 7-20 percent, depending upon the product category. It is safely estimated that average margin of 12-15 percent can be calculated for the purpose of feasibility study.

Items Percentage Margin

Food 7-10

Non-food 15

Medicine 10-15

Toiletries 10

Cosmetics 15-20

Household products 15

Average Margin 15

The income statements and profitability are prepared on the basis of 15 percent margin.



8

44..33 LLeeggaall IIssssuueess RReeggaarrddiinngg IInndduussttrryy

Legal environment plays a crucial role in the workings of any sector. In Pakistan awareness about regulations and policy framework is very minimal and limited access to information effects negatively on the business operations. All Retail shops in Sindh have to be registered with the City government. However most of the shops running their businesses do not apply for the registration. Previously the shops were being registered with the DHO but after the deregulation the Town offices are now also empowered by the government to issue the Trade license. Additionally each shop operating as a medical outlet has to be in possession of a license, which is issued by the office of Chief Drug Inspector/ Regional Drug Inspector. In addition to such an outlet, the dispensing and the compounding of medical prescriptions must be personally supervised by a pharmacist.

55 MMAARRKKEETT IINNFFOORRMMAATTIIOONN

55..11 MMaarrkkeett PPootteennttiiaall

According to a survey report there are about 125,000 retail shops/outlets in Pakistan, out of which 30,000 are located in major cities. Out of these about 50,000 are universal stores/outlets. These are further sub-divided into the following categories:

Retail Industry AnalysisCategory Size No.Of Outlets Type

A Very Large 300-500 Modern Trade outletB Upscale 5000-7000 Large General StoreC Medium 10000-15000 Small ShopD Very Small 50,000 + Kiryana/Corner Shop

Stores in the latter three categories are usually owned by the sole proprietorship. In addition hundreds of government-owned utility stores sell food and household items and serve as a mechanism for restraining inflationary price increase by following the government line on pricing.

55..22 TTaarrggeett CCuussttoommeerrss

Since according to our analysis this is a class-A super market our target customers will be according to that i.e. our customers will be those who spend around Rs. 2500-3500 in monthly grocery purchase and also a visit of around 200 customers spending around Rs.100-200 on daily purchase.



9

66 BBUUSSIINNEESSSS OOPPEERRAATTIIOONNSS

66..11 IInnvveennttoorryy PPrrooccuurreemmeenntt

In the prevailing market dynamics the individual retailers are buying their goods from two sources, one is through the delivery vans of the distributors who visit the outlet after a certain specified time. The other mode of purchasing is done through the traditional wholesale markets like Jodia Bazaar where the retailers purchase their depleted stocks. It is worth mentioning that the delivery vans of the distributors do not visit the micro level retailers due to the high cost of distribution attached to the transactions.

66..22 PPrroodduucctt MMiixx OOffffeerreedd

Managing the merchandising mix involves decision about what products to carry, styles, models, colors, sizes, and price ranges, and how many units of each product to have in inventory. Many customers select one store over another because of the variety or assortments of goods available.

The decision about size and content of any store is largely determined by the space available. Adequate space to display an assortment of products is important for customers’ comfort. Thus, an important decision involves the range of products that are essential to satisfy the customers’ needs. A small number of products will probably account for a large amount of sales volume. These products deserve special attention and need to be stocked. Being out of preferred and highly demanded goods creates a negative customer impression of the retailer.

In addition to a wide assortments of products on hand, retailers must also have stock depth, that is, sufficient quantity of each product on hand to support sales.

66..33 PPrriicciinngg SSttrraatteeggiieess

Pricing decisions are a major challenge for most of the retailers. Price is a major factor in dealing with competition from other retailers.

Many lines of merchandise have what is accepted as a market-level price. It is common to find prices for normal general and medical items to be based on a standard markup percentage that is similar for all competitors. Supermarkets often adhere to almost identical prices so that competitors usually do not have a price advantage.

A retailer can adopt both a high pricing strategy or a low pricing strategy. In some cases a store may offer something that permits it to set its prices higher than its competitors do.

Pricing below market levels is used by retailers who have decided to focus on lower expenses, less service, and less ambience.Such a retail store attracts customers who are extremely price conscious but tend to purchase their entire months grocery from these type of retail stores.



10

66..44 CCaappiittaall EExxppeennddiittuurree

This section will provide a detail analysis of the estimates of the cost of furniture and fixtures required to set the business. These will include items like:

The cost of one isle can be calculated on the basis of per Kg cost. The size of the isle can be around 5 ft in width, 8 ft height and 1. 8 ft in depth. At least a 200 Kg isle will be required to carry the weights of the items. Around 6 isles will be required. Further more the cost of one split (2 ton) will cost around Rs. 35000-40000 with installation. Like wise the cost of one refrigerator is around Rs, 26000-30000, and that of deep freezer is around Rs.15000-20000. The cost of one tube light is around Rs. 60-65 and at least 25-30 tube lights will be required. The table below will give a detail cost of these items.

Type of Equipment Quantity Value in RsIsles 6 60,000Bar Code Equipment 1 219,000Air conditioners(split type) 2 70,000Refrigerators 2 90,000Deep Freezers 2 40,000Fixed Isles 5 50,000Genset 1 80,000Fans 4 6,000Tube lights 25 1,500Cash Machines 2 25,000Front Glass Doors 1 27,000Sign Board 1 30,000

66..55 BBaarr ccooddee ffaacciilliittyy

All products can be entered into a computerized database using specific inventory software. Bar codes will be issued at each product sku. Two bar code reader and two computers linked together will be used. Once the data has been properly entered into the database, then every product must carry a sticker with a barcode. This will increase the performance of cash counter and organize the inventory in a better and proper form.

The cost of setting up the barcode reading system is estimated at Rs. 219,000. This is an additional option but carries with it great benefits.The first and foremost benefit is that it tremendously enhances the managements ability to tracks the depleted stocks so that purchase orders can be placed with the suppliers timely in an effective and efficient manner.Secondly this facility also enables the management to trace inventory



11

pilferages.All in all this bar code facility enables the management to keep a complete overview of the activities of the business.

Bar Code System Cost in Rs.Customized Software 50,000

Two Computers 45,000Server Machine 47,000Barcode reader 30,000

Data Entry 50,000Total Cost 222,000

66..66 DDiissttrriibbuuttoorr AAnnaallyyssiiss

Distributors play a vital role in transferring the product from the manufacturer to the retailer and finally to the end consumer thus maintaining an integral part in the value chain delivery.

Foreign companies considering marketing their products in Pakistan may choose to use the services of local distributors or may develop their own distribution chain. Distributors in urban areas generally deal on an exclusive basis. Some market consultants estimate that the services of 100-300 distributors would be required for nationwide coverage. One very large multinational company selling consumer products employ 500 distributors to reach a significant portion of Pakistan’s small towns and villages.

As a matter of policy, most companies do not provide credit to distributors and distributors in turn generally sell on a strictly cash basis to retailers. Smaller distributors often do provide credit to retailers, but the volume of such transaction is relatively insignificant.

It is ideal to get the required merchandise from various distributors. It is also possible to have different payments arrangement with different distributors, such as, strictly cash, credit, and bill-to-bill.

77 LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

77..11 LLaanndd RReeqquuiirreemmeenntt

Land of approximately 150 square yards is required for setting up a medium sized superstore in ‘A’ class Category.

77..22 RReeccoommmmeennddeedd MMooddee

The preferable mode of acquisition for the land and building would be to purchase the land because rented premises would be insecure and could lead to problems in the long run. Purchasing the land is actually the real investment in this business next to inventory.



12

If careful sight selection is observed a corner plot off the main road can be acquired at a reasonable price.

77..33 UUttiilliittiieess RReeqquuiirreemmeenntt

In supermarket the only direct utility cost will be electricity and telephone charges.The consumption of electricity will be lower in the winters as compared to the summers since the air-conditioning will be shut, this will result in savings directly to the business.

88 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT

In the business of running a super store the utilization of Human resource is a crucial factor as each employee adds to the cost of doing business and such small operations can not take great strains in the monthly costs.

Staff Description Rate Qty Monthly Yearly

Cashier 7000 2 14000 168000

Purchaser 5000 1 5000 60000

Salesman 4500 3 18000 162000

Helper 3500 2 7000 84000

Security Guard 5000 2 10000 120000

Total Yearly Salary 594000

Cashier will be responsible to make all the payments and receipts for purchases and sales respectively. Also they will ensure that no counterfeit notes are forwarded into the cash register of the store.

A purchaser will be commissioned to ensure that the depleted stocks are replaced as quickly as possible. To achieve this target the purchaser will be required to receive the distributor’s goods arriving in delivery vans in the morning and go to the whole sale market in the evening to purchase emergency stocks and imported stuff.

Salesman will be required to price the goods and stack them in the shelves according to their specifications. Furthermore they will assist the customers in locating the products.A trained salesman is required to deal with the pharmacy section.

Helpers are next in place to the salesman who will assist them in their activities. Their core job description will be to dust the products twice daily so that the customers don’t get a negative image of the store. Additionally they will be required to help the cashiers pack the goods in plastic bags.



13

Security guards are essential for cash businesses like a retail store. Daily cash before being deposited in the bank or used to purchase inventory in vulnerable to being lifted by thieves.

99 DDIISSTTRRIIBBUUTTOORRSS AANNAALLYYSSIISS

Distributors play a vital role in transferring the product from the manufacturer to the retailer and finally to the end consumer thus maintaining an integral part in the value chain delivery.

Foreign companies considering marketing their products in Pakistan may choose to use the services of local distributors or may develop their own distribution chain. Distributors in urban areas generally deal on an exclusive basis. Some market consultants estimate that the services of 100-300 distributors would be required for nationwide coverage. One very large multinational company selling consumer products employ 500 distributors to reach a significant portion of Pakistan’s small towns and villagers.

As a matter of policy, most companies do not provide credit to distributors and distributors in turn generally sell on a strictly cash basis to retailers. Smaller distributors often do provide credit to retailers, but the volume of such transaction is relatively insignificant.

It is ideal to get the required merchandise from various distributors. It is also possible to have different payments arrangement with different distributors, such as, strictly cash, credit, and bill-to-bill.

1100 KKEEYY AASSSSUUMMPPTTIIOONNSS

1100..11 RReevveennuuee AAssssuummppttiioonnss

The entire feasibility is based on the following assumption:

Total household in the vicinity: 1000

Customer Category

Customer volume Daily

Merchandise Value

Daily Sales Monthly Sales

Category A 25 1,000 25,000 750,000Category B 50 500 25,000 750,000Category C 100 100 10,000 300,000Category D 100 50 5,000 150,000Total Annual Sales 23,400,000

Annual customer traffic growth rate:5%

Average merchandise value per customer growth rate:10%



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This will make up approximately Rs. 60,000 – Rs. 65,000 sales every day. It must be noted that the sales numbers are calculated at a lower side. The potential of such type of supermarket sales can go upto Rs. 90,000-125,000 per day within a small period of time.

One should also keep in mind that in such a business it is almost impossible to maintain an error free inventory. Chances of pilferage and damages increases due to large number of sizes and variety of products. It is estimated that minimum 1 percent of total cost of sale will be account for such purpose.

1100..22 PPiillffeerraaggeess aanndd DDaammaaggeess

One should also keep in mind that in such a business it is almost impossible to maintain an error free inventory. Chances of pilferage and damages increases due to large number of sizes and variety of products. It is estimated that minimum 1 percent of total cost of sale will be account for such purpose.

1100..33 DDaayyss OOppeerraattiioonnaall ::

The superstore will have to operate at full operational capacity as possible.It will have to remain open for all days except gazetted public holidays under compliance with the Shops and Establishment act.



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1111 PPRROOJJEECCTTEEDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS

Statement SummariesInitial Investment

Capital Investment Rs. in actualsLand 6,000,000 Building/Infrastructure 489,000 Machinery & equipment 1,080,000 Furniture & fixtures 83,200 Office vehicles - Office equipment 224,500 Pre-operating costs 168,000 Training costs - Total Capital Costs 8,044,700

Working Capital Rs. in actualsEquipment spare part inventory - Inventory 1,611,458 Upfront land lease rental - Upfront building rent - Upfront machinery & equipment lease rental * - Upfront office equipment lease rental * - Upfront office vehicles lease rental * - Upfront insurance payment 21,600 Cash 100,000 Total Working Capital 1,733,058

Total Investment 9,777,758

Initial Financing Rs. in actualsDebt 4,888,879 Equity 4,888,879 Lease - Export re-finance facility - * Provisioning for the first year installments



16

1111..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

Statement Summaries SMEDAIncome Statement

Rs. in actualsYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 22,750,000 25,095,000 27,716,850 30,649,150 33,939,500 37,616,950 41,737,500 46,348,050 51,512,650 58,114,000Cost of goods sold 20,337,784 22,429,495 24,766,222 27,377,479 30,304,776 33,573,955 37,233,884 41,325,815 45,905,719 51,725,568

Gross Profit 2,412,216 2,665,505 2,950,628 3,271,671 3,634,724 4,042,995 4,503,616 5,022,235 5,606,931 6,388,432

General administration & selling expensesAdministration expense - - - - - - - - - - Rental expense - - - - - - - - - - Utilities expense - - - - - - - - - - Travelling & Comm. expense (phone, fax, etc.) - - - - - - - - - - Office vehicles running expense - - - - - - - - - - Office expenses (stationary, etc.) - - - - - - - - - - Promotional expense 22,750 25,095 27,717 30,649 33,940 37,617 41,738 46,348 51,513 58,114 Insurance expense 21,600 19,440 17,280 15,120 12,960 10,800 8,640 6,480 4,320 2,160 Professional fees (legal, audit, etc.) 22,750 25,095 27,717 30,649 33,940 37,617 41,738 46,348 51,513 58,114 Depreciation expense 163,220 163,220 163,220 163,220 163,220 163,220 163,220 163,220 163,220 163,220 Amortization expense 33,600 33,600 33,600 33,600 33,600 - - - - - Property tax expense - - - - - - - - - - Miscellaneous expense 227,500 250,950 277,169 306,492 339,395 376,170 417,375 463,481 515,127 581,140

Subtotal 491,420 517,400 546,702 579,730 617,054 625,423 672,710 725,877 785,692 862,748 Operating Income 1,920,796 2,148,105 2,403,926 2,691,941 3,017,670 3,417,571 3,830,906 4,296,358 4,821,239 5,525,684

Other income 8,898 27,864 58,955 96,348 140,938 197,389 267,113 348,048 440,517 641,564 Gain / (loss) on sale of assets - - - - - - - - - - Earnings Before Interest & Taxes 1,929,694 2,175,970 2,462,881 2,788,289 3,158,608 3,614,961 4,098,020 4,644,406 5,261,756 6,167,249

Interest expense 519,414 476,417 428,444 374,920 315,202 260,328 213,512 161,278 103,000 37,979 Earnings Before Tax 1,410,281 1,699,553 2,034,437 2,413,370 2,843,406 3,354,633 3,884,508 4,483,128 5,158,756 6,129,270

Tax 366,098 467,344 584,553 717,179 867,692 1,046,622 1,232,078 1,441,595 1,678,064 2,017,745 NET PROFIT/(LOSS) AFTER TAX 1,044,182 1,232,209 1,449,884 1,696,190 1,975,714 2,308,011 2,652,430 3,041,533 3,480,691 4,111,526

Balance brought forward 522,091 1,754,301 3,204,185 4,900,375 6,876,089 9,184,100 11,836,531 14,878,064 18,358,755Total profit available for appropriation 1,044,182 1,754,301 3,204,185 4,900,375 6,876,089 9,184,100 11,836,531 14,878,064 18,358,755 22,470,281Dividend 522,091 - - - - - - - - - Balance carried forward 522,091 1,754,301 3,204,185 4,900,375 6,876,089 9,184,100 11,836,531 14,878,064 18,358,755 22,470,281



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1111..22 PPrroojjeecctteedd BBaallaannccee SShheeeett

Statement Summaries SMEDABalance Sheet

Rs. in actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

AssetsCurrent assets

Cash & Bank 100,000 344,901 1,048,313 1,899,437 2,917,980 4,128,911 5,740,563 7,615,110 9,787,280 12,238,562 19,839,660Accounts receivable - - - - - - - - - - - Finished goods inventory - - - - - - - - - - - Equipment spare part inventory - - - - - - - - - - - Raw material inventory 1,611,458 1,777,563 1,963,277 2,170,981 2,404,048 2,664,534 2,956,406 3,282,987 3,648,813 4,116,408 - Pre-paid annual land lease - - - - - - - - - - - Pre-paid building rent - - - - - - - - - - - Pre-paid lease interest - - - - - - - - - - - Pre-paid insurance 21,600 19,440 17,280 15,120 12,960 10,800 8,640 6,480 4,320 2,160 -

Total Current Assets 1,733,058 2,141,904 3,028,870 4,085,538 5,334,988 6,804,245 8,705,609 10,904,576 13,440,413 16,357,130 19,839,660

Fixed assetsLand 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 Building/Infrastructure 489,000 464,550 440,100 415,650 391,200 366,750 342,300 317,850 293,400 268,950 244,500 Machinery & equipment 1,080,000 972,000 864,000 756,000 648,000 540,000 432,000 324,000 216,000 108,000 - Furniture & fixtures 83,200 74,880 66,560 58,240 49,920 41,600 33,280 24,960 16,640 8,320 - Office vehicles - - - - - - - - - - - Office equipment 224,500 202,050 179,600 157,150 134,700 112,250 89,800 67,350 44,900 22,450 -

Total Fixed Assets 7,876,700 7,713,480 7,550,260 7,387,040 7,223,820 7,060,600 6,897,380 6,734,160 6,570,940 6,407,720 6,244,500

Intangible assetsPre-operation costs 168,000 134,400 100,800 67,200 33,600 - - - - - - Legal, licensing, & training costs - - - - - - - - - - -

Total Intangible Assets 168,000 134,400 100,800 67,200 33,600 - - - - - - TOTAL ASSETS 9,777,758 9,989,784 10,679,930 11,539,778 12,592,408 13,864,845 15,602,989 17,638,736 20,011,353 22,764,850 26,084,160

Liabilities & Shareholders' EquityCurrent liabilities

Accounts payable - - - - - - - - - - - Export re-finance facility - - - - - - - - - - - Short term debt - - - - - - - - - - - Other liabilities - - - - - - - - - - -

Total Current Liabilities - - - - - - - - - - -

Other liabilitiesLease payable - - - - - - - - - - - Deferred tax - 61,500 (66,000) (193,500) (321,000) (448,500) (613,800) (779,100) (944,400) (1,109,700) (1,275,000) Long term debt 4,888,879 4,517,313 4,102,750 3,640,214 3,124,154 2,548,376 2,143,809 1,692,427 1,188,810 626,916 -

Total Long Term Liabilities 4,888,879 4,578,813 4,036,750 3,446,714 2,803,154 2,099,876 1,530,009 913,327 244,410 (482,784) (1,275,000)

Shareholders' equityPaid-up capital 4,888,879 4,888,879 4,888,879 4,888,879 4,888,879 4,888,879 4,888,879 4,888,879 4,888,879 4,888,879 4,888,879 Retained earnings - 522,091 1,754,301 3,204,185 4,900,375 6,876,089 9,184,100 11,836,531 14,878,064 18,358,755 22,470,281

Total Equity 4,888,879 5,410,970 6,643,180 8,093,064 9,789,254 11,764,968 14,072,980 16,725,410 19,766,943 23,247,634 27,359,160TOTAL CAPITAL AND LIABILITIES 9,777,758 9,989,784 10,679,930 11,539,778 12,592,408 13,864,845 15,602,989 17,638,736 20,011,353 22,764,850 26,084,160

Note: Total assets value will differ from project cost due to first installment of leases paid at the start of year 0- - - - - - - - - - 0



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1111..33 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt- - - - - - - - - - 0

Statement Summaries SMEDACash Flow Statement

Rs. in actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activitiesNet profit - 1,044,182 1,232,209 1,449,884 1,696,190 1,975,714 2,308,011 2,652,430 3,041,533 3,480,691 4,111,526 Add: depreciation expense - 163,220 163,220 163,220 163,220 163,220 163,220 163,220 163,220 163,220 163,220 amortization expense - 33,600 33,600 33,600 33,600 33,600 - - - - - Deferred income tax - 61,500 (127,500) (127,500) (127,500) (127,500) (165,300) (165,300) (165,300) (165,300) (165,300) Accounts receivable - - - - - - - - - - - Finished good inventory - - - - - - - - - - - Equipment inventory - - - - - - - - - - - Raw material inventory (1,611,458) (166,104) (185,714) (207,705) (233,066) (260,486) (291,872) (326,581) (365,826) (467,596) 4,116,408 Pre-paid building rent - - - - - - - - - - - Pre-paid lease interest - - - - - - - - - - - Advance insurance premium (21,600) 2,160 2,160 2,160 2,160 2,160 2,160 2,160 2,160 2,160 2,160 Accounts payable - - - - - - - - - - - Other liabilities - - - - - - - - - - -

Cash provided by operations (1,633,058) 1,138,558 1,117,975 1,313,660 1,534,604 1,786,708 2,016,219 2,325,930 2,675,787 3,013,176 8,228,014

Financing activitiesChange in long term debt 4,888,879 (371,566) (414,563) (462,536) (516,060) (575,778) (404,567) (451,383) (503,616) (561,894) (626,916) Change in short term debt - - - - - - - - - - - Change in export re-finance facility - - - - - - - - - - - Add: land lease expense - - - - - - - - - - - Land lease payment - - - - - - - - - - - Change in lease financing - - - - - - - - - - - Issuance of shares 4,888,879 - - - - - - - - - - Purchase of (treasury) shares - - - - - - - - - - -

Cash provided by / (used for) financing activities9,777,758 (371,566) (414,563) (462,536) (516,060) (575,778) (404,567) (451,383) (503,616) (561,894) (626,916)

Investing activitiesCapital expenditure (8,044,700) - - - - - - - - - - Acquisitions - - - - - - - - - - -

Cash (used for) / provided by investing activities(8,044,700) - - - - - - - - - -

NET CASH 100,000 766,992 703,412 851,124 1,018,544 1,210,930 1,611,652 1,874,547 2,172,171 2,451,281 7,601,098

Cash balance brought forward 100,000 344,901 1,048,313 1,899,437 2,917,980 4,128,911 5,740,563 7,615,110 9,787,280 12,238,562Cash available for appropriation 100,000 866,992 1,048,313 1,899,437 2,917,980 4,128,911 5,740,563 7,615,110 9,787,280 12,238,562 19,839,660Dividend - 522,091 - - - - - - - - - Cash carried forward 100,000 344,901 1,048,313 1,899,437 2,917,980 4,128,911 5,740,563 7,615,110 9,787,280 12,238,562 19,839,660



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The following are the list of few distributors operating in Karachi city:

PREMIER DISTRIBUTOR

24. M.A Jinnah road Muslimabad tele # 4946223

APEX MARKETING SERVICES

Plot no. L-28-C, block no. 21, Federal B Area, KarachiTele # 021-6376712-3-4-5

M/S GIZRI CORPORATION

Maqbool Manzil, 43/4-D, block 6, S. Abdul Latif Road, P.EC.H.S, Karachi.Tele 0214553132 / 4386617

M/S THE CHANNELS:

F-53/1, Block # F, North Nazimabad KarachiTele# 021 – 6678881-2

DISTRIBUTION NETWORK Pvt Ltd:

C-8 C Area Blk –7/8 K.C.H.S.U S/Millat Rd Tele # 021-452890

IBL Pvt Ltd

41 O Block 6., Dr. Mehmood Hussain Rd. P.E.C.H.S, KarachiTele # 111828282

DISTRIBUTORS SERVICE Ltd

Mehar Sons Estate Talpur Rd.Tele # 021-2411523

SMEDA Superstore

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Transcript of SMEDA Superstore