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THE
UBIQUITOUS
PAANWALAH
Contents
Topics
Page No
Objective
Background
Details of Paanwalah
Methodology
Primary Observations
i)
Product Portfolio
ii)
Store Layout
iii)
iv)
Source to store
Inferences
Recommendations
Appendix
10-14
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Objective
To study and analyze the distribution network of the FMCG goods sold by a paanwalah from source
to store
Background
MANY a marketer in India would swear by the fact that had it not been the ubiquitous paanwalah,
they would be struggling to sell their FMCG product. Yet, amid all the brouhaha about the countrys
retail explosion, most paan shops remain oblivious as sometimes blocking footpaths or shabbily
jutting out of the boundary walls of government buildings - quotes a famous business magazine in an
article on the topic of growing interest of FMCG giants in studying and utilizing the business model
of the Indian paanwalah as he is increasingly becoming the 5th P of marketing after product, price,
promotion and place.
FMCG companies are increasingly leveraging the spread and consumer-connect of paanwalah to sell a
growing array of products. Industry estimates show that there are about 14 million paanwalah in India
and many companies are using them to diversify their product portfolio like ITC did through its huge
distribution network of paan shops to diversify into candy and snack food. The secret behind it is that
paanwalahs provide a few significant advantages over any other retail store .The primary advantage
is the location because paan shop is not very difficult to spot and are located near roads, parking lots
which are frequently visited by people. So it is a very convenient point for impulse purchases for
candies, biscuits and beverages. This study is mainly concerned with the distribution network of the
paan shop business model which is helping them to reach a huge range of customers through the wide
spectrum of the products at right time in right quantity at right place.
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Methodology
The methodology followed to conduct the survey for this project is as follows:
Identification of Paanwalah: The first step in the process was to identify the paanwalah
around whom our project would be based. The project was concerned with understanding the
flow of FMCG products and that is why it was important for us to identify a paanwalah which
stocked a decent quantity and variety of FMCG products. Also, since the project would
involve us asking questions pertaining to his business, we chose someone whom we have
interacted with before to avoid the instance of the paanwalah being apprehensive to answer
questions.
Literature review: A literature review was primarily done to understand the current
functioning of the paanwalah. Before we could move further into the project, it was important
for us to have a basic understanding of the kind of challenges that the paanwalahs face and
what kind of policies do they generally follow. This was to ensure we had the right questions
to be asked and since at any time of the day there are a lot of customers, the shopkeeper
should not feel irritated. The background study also helped to get an idea of the kind of
questions that needed to be asked to the retailer. Since the project is related with some key
aspects of the concerned persons business, the questions had to put forward in a specific way
so as to not deter the paanwalah from answering.
Preparing the questionnaire: After doing the needful research, we made a questionnaire
which would help us analyze and execute rest of the project. The questionnaire was divided
into 3 categories for the different sets of people:o Paanwalah
o Salesman
o Customer
The different questionnaires were primarily to get different perspectives and also reason and find
out what are the causes for a particular action being taken by one party over another.
(APPENDIX 2)
Conducting the Interviews: The interviews that were conducted are listed below:
Retailer The retailer was visited thrice. In the first visit, general questions were asked about
his background, sales performance and general questions that would make the retailer more
forthright while answering questions. This was to ensure that he develops a minimum level of
trust which would also aid the smooth progress of the project. The second visit was to ask him
more detailed questions pertaining to the project. The last visit was done during the time of
the salesman visit and some of the questions were asked in front of the salesman to gauge the
relationship that he shares with the salesman.
Salesman The salesman was interviewed once when he had arrived. He was asked questions
some of which were similar to that asked to the retailer. This was done to get an idea of the
authenticity of information received from the retailer. He was also asked some questions
which were regarding his distribution of goods in the particular area and those which were
pertaining to the project.
Customer On all three visits any random customer was picked up and asked questions
regarding to the products that he/she prefer to buy from the given shop. They were also asked
about certain specific preferences they have while making a purchase and the availability of
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the desired products. A video was recorded to capture how a customer shops and what the
consumer preferences are during a purchase and how do they do secondary purchases.
Primary Observations
PRODUCT PORTFOLIO
The way the products are stocked in the shop varies category wise. The shopkeeper displays the
products depending on the propensity to sell. If a product is new, the product would be displayed in
front so that it is easily spotted by the consumer while purchasing. Products that contribute to standard
sales volume every day are kept at a convenient place so that the customer can see the availability of
the product and it also takes lesser time for the shopkeeper in serving the customer. The description of
the way the shopkeeper stocks products is given below:Candies & Toffees: All the toffees and chewing gums are stocked in separate containers and kept
right in front so that the buyer doesnt hesitate when such a product has to be picked up after a
cigarette is bought. This is often regarded as a secondary or dependent sale due to its relation with the
primary product sale.
Brands Stocked: Cadbury Eclairs, Candyman Eclairs, Pulse, Juicy Jelly, Chingles, Melody, FundaGol
Replenishment: Most of these candies are replenished almost every week when the salesman
comes. In case during a particular week the sale for a particular variety is not good, they do not
take up new set till the time the existing container finishes.
Biscuits: Biscuits are stocked up horizontally on the shelves that are there in the shops, and also the
fast moving brands such as Parle-G, Marigold are kept in such a way that they are easily visible. The
other biscuits such as bourbon etc. are also kept there but are not easily visible.
Brands Stocked: Mainly Britannia and Parle form the major players in this segment. There is no
local private label in this segment. In Britannia, the variants are Good-Day (Rs.5/10/20 SKUs; the
Rs.10 SKU sells the most), 50-50 (Rs. 5 SKU), Maska-Chaska (Rs. 10 SKU). In Parle, there are
many more variants Parle G, Top, Bourbon, Happy-Happy, Monaco Marie, Crack-Jack (all
Rs.10 SKU).
Replenishment: The biscuits are replenished weekly by the wholesalers. For the most selling SKUs
like Parle G, Britannia Good-day they stock up 30-40 pieces weekly.
Sweets: Some of the containers which contain sweets typically sourced from local manufacturers are
kept right in front of the shop which is just about a little ahead of the containers carrying toffees and
chewing gums. The off-takes of those products are not too high and keeping them in front gives them
a perception that consumers would be more willing to buy them once they are spotted.
Mouth Fresheners: Mouth fresheners are usually hung from a convenient place inside the store to
ensure that they do not occupy any shelf space and also easily torn and provided to the customers.
Along with them, the shopkeeper also hangs the typical Pan Masala that is used in making Pan.
Brands Stocked: Pass Pass, Chutki, Baba Elaichi, Centerfruit, Orbit, Minto-Gol, Polo
Replenishment: Weekly replenishment is done
Cigarettes: The cigarettes are stacked on a shelf which is located behind the shopkeeper. It has a
board of the major cigarette brands such as Classic or Gold Flake which houses the packets. Some
cigarettes which are usually sold at a faster rate are kept loose because predominantly, the buyers
come for and purchase cigarettes loose. This is to reduce the time to serve the customer.
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Brands Stocked: This paanwalah stocks mainly ITC (Classic Mild, Gold Flake Light) and
Marlboro (Four Squares)
Replenishment: Every day the company salesman comes to replenish stocks (10 packets on an
average)
STORE LAYOUT
Refer APPENDIX 1
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customer segment. Earlier they would come asking for scotch brite (steel). He understood what they
needed it for and realized he would have a better margin if he sold Colgate toothbrushes.
Most of his customers addressed him by his name which showed the kind of relation he had
established with the customers.
Before telling him about my project, I bought a paan from him. Meanwhile I was looking at his shop.
After I ate the paan, he offered me a piece from the newspaper to clean my hand. This was a gesture I
would remember and I guess this is how he builds the relationships.
Interview with a customer:
Time: 9.30 A.M
Questionnaire has been added to the appendix. (APPENDIX 2)
Customer asked the paanwalah for a Sunsilk black. The customers name was Pareeta.
I asked her what her age was. She said she was 16 years old. She always bought the same Sunsilk
shampoo on every Sunday and sometimes when her father was happy with her he would give her
extra money to buy sweets.
Also she addressed him as uncle. The relationship of the paanwalah with the customers is such that
he can convince the customer to try something new and they would listen to the advice readily.
SOURCE TO STORE
Suppliers
There are majorly 5 suppliers to our Paan-wala which help in his endeavor to provide the customer
with the FMCG products they desire when they visit his shop.
On emergency basis an inter-shop transfer from other retail stores occur to fulfill the demand for the
loyal customers. As he does not keep any cold drinks, his suppliers are limited. The reason for not
stocking cold drinks is the proximity of a bar right next to it, which can fulfill the need of the
prospective customers.
Go-down
The Paanwalah does not hold any other inventory apart from the shelf inventory, which he keeps on a
rolling basis. His only space of storage is his shop.
Money transfer terms
Due to low demands from this channel, mostly the credit is not offered; the Paanwalah offers money
in exchange for the goods he buys then and there itself for all channels of purchase. The customers are
offered products on credit terms because on the relationships they have with the owner and proximity
of their homes to the shop.
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II.
III.
On the Spot delivery and emergency orders The products that fall into this category are
cigarettes, mints, candies and biscuits/cakes respectively. Cigarette delivery is on the stop
itself whereas emergency orders have to be conveyed to the salesman before-hand, so that the
replenishment can be provided at the time he arrives. The after mint and candies come on a
daily basis also. The billing and payment terms are on the spot payments and no credit policy
from the Paanwalah. The sales man offers those bills for emergency orders and a receipt for
sale of cigarettes.
Two day replenishment- Parle G, Britannia, ITC all offer two day delivery cycles to the
customer, where he places an order for a week. They visit him once a week to take order,
which are feed in hand-held devices, consolidated for a whole area when synced with the
computers. The billing and packing occurs the next day followed by dispatch in a Tata 407
the next day.
Daily replenishment for other selling brands- The Paanwalah offers many other products such
as sweets, agarbattis, cream filled biscuits apart from Parle G and Britannia, detergent sachets,
toothbrush, shampoos and soaps for whom he does not have a salesman to fulfill his demand,
as his requirement is too low. For such purposes he is dependent on the wholesaler. The
wholesaler based on the cumulative trends and using his volition picks up stuff from the
Andheri market and service the need of the Paanwalah on the availability and need basis. His
transactions are on the spot without any bills being procured. He services many other retailers
and Paanwalahs in the area on similar basis. The relationship is based on trust and mutual
respect.
He does not believe in procuring goods directly from the wholesale markets as he does not have the
quantity to make it a feasible option nor the space to accommodate all the products.
Distribution Channels
Three different channels are used by the Paanwalah for replenishment for his goods.
I. One day delivery channel for cigarettes, mints/candies & chewing gums (APPENDIX 3)
The model was pretty commonly followed earlier for most FMCG products, but now is now cigarettes
and candies only. The long term understanding and dealing between Paanwalahs and salesman for
these products provide a good idea about the requirements. So the salesman assuming an aggregate
demand carries with a certain amount of inventory for delivery for cigarettes and mints. If certain
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orders come on an emergency basis for products like biscuits and cakes they are also catered too on
similar basis. If any shortfall or backorders are there, those are carried additionally the following day.
It is a daily replenishment system that is to a great extent very accurate as per our interactions with the
Paanwalah and the sales persons. These daily interactions help reduce the demand supply gap as well
as improve sales, by building good customer relationships for the sales person. No credit or minimum
credit policy followed in this case. Ordering policy is defined by the paanwalah at that very moment,
delivery depends on correct forecasting seeing past trends and availability. The ordering pattern is
similar to fixed time period model, where the shelf space acts an indicator for maximum order and
current inventory levels, the difference between them is replenished on the fixed period.
II. Two day delivery for biscuits, cakes and chips by ITC, Britannia and Parle G i.e. generic
FMCG delivery model (APPENDIX 4)
This is the model currently in place that is used by all FMCG companies for order replenishment. It
occurs over a cycle of 2 days, where on the day 0 a company salesman comes to take the order from
the area in his hand held device for biscuits, candies, mints, cakes and chips. He goes back the next
day to sync it with the computer of the distributor, where a consolidated order is generated and
prepared for delivery. On the third day, through a milk run the orders are delivered along with money
collection to close the deal. There is no scope for guess work involved, it is purely based on the pull
of the market forces. By aggregating the demand the distributor saves his logistics cost.
Ordering pattern is once a week, wherein the order and delivery happens on a month wise basis. The
shelf space acts a maximum order quantity basis, seeing the lead time consumption and periodic
review period consumption the Paanwalah places an order. No credit policy is followed here also.
III. Distribution through Wholesaler for smaller quantity products & sweets (APPENDIX 5)
The distribution through a wholesaler is similar to the first mode of distribution discussed. The
wholesaler picks up goods from the Andheri wholesale market based on past trends for a specific area
and loads on his Tata 407, which he calls his godown. He goes and provides products according to
needs of the paanwalah with a transaction occurring there itself. Because of the addition of another
level of transportation the margin for the Paan-Wala reduces by 5-6%, but he gets the branded
products and sweets that he cannot procure from the salesman himself because of low volume
requirements. This is essential for him as it helps him satisfy the needs of the consumer and increase
his revenues. The products coming through channel are detergents, soaps, sweets, shampoos,
toothbrush and biscuits.
If any shortfall or backorders are there, those are carried additionally the following day. It is a daily
replenishment system that is to a great extent very accurate as per our interactions with the Paanwalah
and the sales persons. These daily interactions help reduce the demand supply gap as well as improve
sales, by building good customer relationships for the sales person. No credit or minimum credit
policy followed in this case.
The ordering pattern is similar to fixed time period model, where the shelf space acts an indicator for
maximum order and current inventory levels, the difference between them is replenished on the fixed
period.
Metric Comparison between Channels (APPENDIX 6)
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Inferences
The paanwalah system has revolutionized the mode of selling FMCG products and has shown, over
the years, immense capability in influencing buyers to choose one particular brand over another. Their
art of developing can be attributed some unique procedures that they follow while pushing products
and the way they work. Their plethora of expertise and capability in building and maintaining
relationships have not only made distributors rely on them but also provide them with sufficient
incentives to ensure they stay loyal. Some of the key inferences can be listed below:o
o
o
o
o
o
o
o
Most of the FMCG companies rely on Paanwalahs for their intense consumer connect
The Paanwalahs have evolved from their traditional stocking of satches to larger SKUs and
also offer a wide range of products like shampoos, biscuits etc.
The increasing regulations concerning the sale of cigarettes, have not discerned the retailers
as their reliability has shifted to FMCG products which offer marginally higher margins than
cigarettes.
There is an increasing need for stocking local brands to gain higher margins
The retailers understand the importance of maintaining a good relationship with customers,
distributors and wholesalers.
The high capability to influence buyers to shift from one brand to another
The higher interaction with customers gives them an advantage over modern retail stores
while interacting with price-sensitive customers
The retailers do not gain a significant margin when it comes to the products that it pushes and
hence they are more focussed towards stocking products which are fast moving so that they
can avail the discounts when purchasing in bulk
RECOMMENDATIONS
From the observations and inferences drawn from our study, it can be concluded that the product
portfolio of Prakash is limited only to candies, after mint, biscuits and confectionaries. But compared
to his neighboring paan-shops, he is losing out on certain products which could have enhanced his
margins. One of the lost opportunities is sale of cold drinks which is not possible because of the very
small area of the paan shop and there is not enough space for installing the refrigerator. Secondly, its
location gives its maximum revenues from the Raj palace customers whose demand for cold drinks is
met by Raj palace itself or otherwise met by the neighboring paan-shops. So to improve his profit
margins, there are certain recommendations which we can suggest for:
a) Sale of condoms:
There has been an increasing trend of countrys leading pharmaceutical companies to channel the sale
of condoms through paan shops. The primary reason behind that is the easy accessibility and one on
one interactions of the paanwalah with the customers. From the customer profile, we can see that the
customers of Prakash are primarily from lower strata and the age group is between 18-35.From
secondary researches, it was found that this particular segment of customers is highly sexually active,
has low disposable incomes and has a high condom usage rate. Again, these lower income groups are
highly sensitive towards price points. From the psychological point of view, there is a certain degree
of difficulty and hesitation on the part of customers to ask for a condom directly from the
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pharmaceutical stores. Moreover they have a tendency to buy unknown brands because they hesitate
to ask for the condoms by brand name from the shop and it is in the retailers discretion as to what
brand to give. So if condoms are sold through a channel which they trust, where their late night
purchase could be encumbered and where they can ask for the desired brands, there cannot be a better
option than the paanwalah. The fact that such channeling has been successful is evident form the fact
that 10% of TTK-LIG sales-marketers of Durex and Kohinoor condoms nationally come from
paanwalah. From the sale and distribution point of view, there are 5-6 medical stores nearby and the
initial business can be started by contacting with the medical representatives and salesman of those
stores. Moreover, sale of condoms does not require any license like other pharmaceutical products and
hence this idea is quite feasible.
b) Mobile Recharge coupons
Prakash can also venture into selling mobile recharge coupons which is appropriate for the category of
customers he serves since the penetration of online recharge practices among this lower income group
and customers with lower education level. The margin is 4-5% which is pretty decent and profitable.
APPENDIX
Appendix 1(Store Layout)
RIGHT SHELF(Biscuits)
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BACK SHELF (Cigarettes)
Appendix 2(Questionnaire)
For Paanwalah
1. For how long you had been running this shop and what is your monthly income?
2. Does anyone help you in your business?
3. What all do you stock in FMCG products?
4. Tell us something about the frequency and quantity of purchase of products and also about the product
preferences of the customers.
5. What is your approximate margin in different products?
6. Do you buy on credit?
7. Who supplies you the goods?
6. How is your relationship with the salesman?
7. How do you replenish your stock and how frequently?
For Salesman
1.
2.
3.
4.
5.
6.
7.
8.
9.
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For Customer
1. What is your age and where do you stay?
2. When do you buy the shampoo and from where?
3. Why do you buy a sachet and not a bottle?
4. Do you buy only shampoo from here?
5. What are the other things you want the uncle to store?
6. Would you buy a new shampoo if he asks you to try once?
Salesman
Factory
Distribution/
Stockist
Distribution
Centre
Inventory
On the spot
order &
delivery
Pull
Push
On the spot delivery and emergency orders
Hand
Held
Device
Salesma
Factor
y
Distributio
n Centre
Places
order
Push
Normal FMCG distribution Channel
Pull
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Distribution/
Stockist
Distributio
n Centre
Factor
y
Same day
delivery of goods
Push
Pull
Wholesaler Channel
Channel I
Cigarettes, mints, candies
Channel II
Biscuits, cakes, chocolates,
chips
Channel III
Detergents, soaps,
shampoos, sweets,
toothbrush
Companies
ITC, Marlboro
Flow of Money
Flow of Information
Margins for Paan-Wala
Accuracy of Forecast for
Channel
Backorders
Credit policy
POS data
Bills
Hand Held devices used
Scope for Emergency Orders
Revenue generation
On the Spot
On the Spot
High
High
On the Spot
No way of tracking
Medium
Medium
Medium
NA
Available
Available
Yes
Yes
High (12-15%)
No scope
NA
Available
Available
Yes
No
High (12-15%)
High
Possible
NA
NA
No
Yes
Medium (8-10%)
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