Economics of a Store

this is a blind shot... but let me try. I am interested in learning the economics of a small grocery store, AKA corner shop, Mum'n' Pop store, in India (not large metros but Class B and C cities).

If I sell Rs 100 of goods in one month, how much of the revenue i would pay for rent, electricity/water, salaries. Any other costs i should take into account?

V_V,

Here're some of the things I know,
- Most of shops buy their supply from wholesale dealers in cities.
- most corner shops in India are usually owned by people. Renting is usually rare.
- If you sold goods worth 100Rs, typically your profit is 15-20Rs depending upon the size of your store.
- Salary for helping hands is about 1200-1500 in medium size cities, and about 900 Rs in villages. Since the salary eats into profits, shops usually do not have helpers (or at the most 1).

wow concoran, thanks for that!!! anyone else willing to share their 2c?

Few people in India pay for electricity and water.

merchant, i kind of know that, but i am looking at it from my own angle and i want to know all potential costs

Also a lot of tax evasion so that may be why the buzz on introducing a value added tax. You may find it useful to break costs into fixed and variable and include into fixed costs implicit costs such as the owner/operator's time and the interest forgone on their investment. Don't forget some chai money for various gov't people. You need a computer with bar code reader according to a shop owner I know in a bustee of Secunderabad. His strategy for labor costs was to marry 2 women and have children by each. Also, operates an illegal cable operation. Long hours, so I don't know how he managed the children but hey who needs sleep..

interesting point, edwardseco: if the store is family run, and the wife (or wives) help out as sales assistant, would the owner allocate lower wages to them (women) than what he whould have incurred should sales assistants have been independent males?

bar coding- my hypothetical store is over-the-counter

Merchant, it is not fully correct. Electricity bill is one of the highest monthly bills any household pay, may be next to the home mortgage. Yes part of your answer is correct in a different context. A big section of the society is given heavily subsidized or free electricity. This is a state affair and each places has its own policy of price subsidy and all. On an average a lower middle-middle-upper middleclass strata of the society pays about Rs3 to Rs8 per unit (kWH). And in many of the states the poorest (less than say 10unit/month) get free electricity. And the next class gets it for about 35ps per unit. And the rate increases upward as the consumption rate goes up. Mostly for the smalltime farmers also special rates (or free) are offered.

Without any question they would come and disconnect if you haven’t paid the dues to the electricity company. Most of them are running in loss due to the subsidy than the theft.

Theft is a different story altogether. It can happen at any place say from the very large industrial units to the local farming community. It’s serious and offenders are dealt with sternly. There are different penal legislations for the electricity theft related malpractices.

An average user can’t get it free or steal it easily. Hookers are not uncommon though.

For industrial units and shops also the prices are different. It is higher than the regular household rate. Much higher for larger industries. (rs15/unit)

And the retail business is a different ballgame altogether. The huge chains never worked here. There are a number of them at the larger cities though. The vegetable people can buy from the roadside vendor is always cheap and fresh. And never this ran out of stock. The competition is fierce. Their business model and value chain is totally different than the conventional business system. In one of my trainings a professor (who is a statistician) told that the best business forecast is done by the illiterate lady vendors selling perishable vegetables near the Bandhra railway station. She is deadly accurate and cant afford to go wrong. Only thing is that it is a very casual thing for her.

She buys different kinds of vegetables from the wholesale market (no one gives her credit) and get it sold off perfectly by the evening. Imagine what would happen if she land up with an unsold stock. There is no refrigeration, no buy back nothing…But they know by heart what vegetable to stock and how much to stock. I’ve been thrown into such places during my training days to ‘understand’ them.
I got the shock of my life when I talked to a female selling different kind of semi-grown sprout at Ferguson College road, Pune. She had at least 5 types of beans, which are soaked and germinated. The unsold quantity cannot be sold the next day, as none of our ‘ladies’ would buy overgrown sprout (it tastes less). And soaked sprout grows hour by hour. And I felt like a kid when this female explained me her ‘strategy’.

But all these happen at a cost too.

Fruits and vegetables are a totally on a farm to kitchen kind of supply model as there are not much of ‘corporations’ involved in managing the supply, though there are some kind of middle agents & societies operating everywhere.

In many of the towns, an important area (street) is the wholesale market before the dawn. The vegetables and fruits come there by overnight trains and trucks. The wholesale sellers buy them truck load and sell it immediately to the retail vendors there itself. But there are wholesale markets also. And none of them have any cold storage facilities. This generates a lot of wastage. There was an estimate of this sometimes last year by one of the agri organizations here. The quantity of fruits and vegetables India is wasting (from pest eating to getting perished during transit) is larger than the Briton’s annual consumption quantity.


And if you don’t want to pay tax, do agriculture in India. That is the only income where you need not have to pay income tax, irrespective of how much money you earn!

The Khadi & Village products organization owns the largest retail area in India in the metros, cities, small towns… put together.

The retail giant MERTO started their operations in Bangalore with a big bang. It created a lot of mess and chaos on entering. They offered things, which are way below the regular retail prices. They obviously sold things at a loss (either as a publicity stunt or to suffocate the other retailers). And there were so much of protests and agitations against it. Now days no one is talking about them. I don’t know what happened later on.

http://www.rediff.com/money/2003/nov/14metro.htm

Having two wives and all may reduce cost (?) but increase his headache . Many stores appoint women becouse they are more efficient in that kind of jobs. (I'll tell a story of a women only industry later. Men in that village compete to marry those girls for a peculiar reason)
Enough…I cant type too much with my 2 fingers

Paying wages to family members? Unlikely, regardless of their gender.

Merchant, what i was asking is: if i employ a family (husband and wife) instead of two independent people (most likely two men), would i save money because the family would expect lower combined wages?

digvijay, yr post is REALLY helpful, although it is not me who is getting into small retail, and i already have a friend in Delhi who ran her own restaurant... let me get back to you with possibly more questions

yes, and Particia!! i've just got her most recent album Sexe Forte (2003) have you heard it yet?

Volga, if the workers are family members of the owner the answer depends on whether you are doing economic or accounting costing. For the former at cost of alternative wages and for the latter nothing which help prove accounting is garbage.

Let me explain bar code readers, this isn't for big business anymore. It keeps track of inventory, is used to generate data for price elasticity and to restock as well as pay taxes. All of that done by the busti store keeper I know. Still, maybe not at startup for a newbie to biz.

I think I see the direction volga is taking, interesting..