RETAIL BUSINESS PLAN

GROUP MEMBERS
CHANDNI THAPAR, SACHIN SEBASTIAN, SAMPATH
SOUNDAPPAN, TANIKA NAIK, UJAANI BARUA
COMPANY PROFILE
NAME: KALIKA SILKS

ADDRESS: Bazaar Street, Salem – Tamil Nadu

FORM OF ORGANISATION: Partnership Firm

OWNERS: Mr.Sampath Soundappan, Ms.Chandni Thapar, Ms.Ujaani Barua Ms.Tanika

Naik, Mr. Sachin Sebastian

EXECUTIVE SUMMARY
Salem is a town in Tamil Nadu that derives around 60% of its income from the silk
manufacturing industry. It’s a town where there are lots of power loom silk saree manufacturers
thus, making it a suitable place of B2B silk saree selling. Sarees are distributed to various states
from here, some being Karnataka, Andhra, Kerala and other parts of Tamil Nadu.
Although Salem is a hub for silk saree manufacturing, there are very few retailers who have
made their presence well known. Most of these retailers source their goods from Salem and
other areas in and around Tamil Nadu. Since these are big retailers and have to source their
goods from outside they have additional logistics costs, this adds to the selling price of the
saree and finally the selling price of the saree ends up at least 1.5-2 times their purchasing price.
This gives an opportunity for a manufacturer to start his/her own business and provide the same
sarees at a much lower cost. We are looking forward to tapping this opportunity and start a
retail chain there.

Why Powerloom Silk saree?

 Powerloom silk from Salem is given a higher priority as compared to Powerloom silks
manufactured in any other geographical area.
 The amount of significance Salem holds with respect to Powerloom sarees influences
the customers to go for it without any second thoughts about the same.
 Permanence of lustre
 Extra ordinary quality
 Tested zari
 Non-crush quality
 Washable & durable

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VISION: To showcase quality and well-constructed fashion.

MISSION: To achieve a growth rate of 20% year on year that will help in rapid expansion of
our business in the other parts of India.

OBJECTIVES

Short-term

 To create brand awareness in order to acquire a significant amount of customers.

 To get into the considerations set of our customers in terms of retailing.
 To offer quality saree’s at reasonable prices and focus on low pricing to attract more
customers.

Long-term

 The primary long term goal would be to gain sufficient market share in the silk saree
retailing business.
 After three years, expansion will include looking at newer markets and providing a
higher level of service.

BACKGROUND & PURPOSE

History of Silk in Indian Subcontinent

Silk has a long history in India. It is known as "Paat" in eastern India, Pattu in southern parts
of India, and Resham in north India. Recent archaeological discoveries in Harappa and Chanhu-
daro suggest that sericulture, employing wild silk threads from native silk worm species,
existed in South Asia during the time of the Indus Valley Civilization dating between 2450 BC
and 2000 BC, while "hard and fast evidence" for silk production in China dates back to around
2570 BC. Shelagh Vainker, a silk expert at the Ashmolean Museum in Oxford, who sees
evidence for silk production in China "significantly earlier" than 2500–2000 BC, suggests,
"people of the Indus civilization either harvested silkworm cocoons or traded with people who
did, and that they knew a considerable amount about silk.
India is the second largest producer of silk in the world after China.

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Silk in the Indian subcontinent is a luxury good. In India, about 97% of the raw silk is
produced in the five Indian states of Karnataka, Andhra Pradesh, Tamil Nadu, West
Bengal and Jammu and Kashmir. The North Bangalore regions of Muddenahalli and
Kanivenarayanapura, the upcoming sites of a $20 million "Silk City" and Mysore contribute to
a majority of silk production. Another emerging silk producer is Tamil Nadu where mulberry
cultivation is concentrated in Salem, Erode and Dharmapuri districts. Hyderabad, Andhra
Pradesh and Gobichettipalayam, Tamil Nadu were the first locations to have automated silk
reeling units.

CURRENT SITUATION

The Product:

The material ‘Silk’ always spells luxury, elegance, class and comfort. Everyone loves this
shimmering fibre of unparalleled grandeur from the moment Chinese Empress Shiling Ti
discovered it in her tea cup. It withstood many a daunting challenges from other natural and
artificial fibres and yet, remained the undisputed Queen of Textiles since centuries.

Exquisite qualities of Silk saris like the natural sheen, inherent affinity for dyes and vibrant
colours, high absorbance, light weight, resilience and excellent drape etc. have made silk, the
irresistible and inevitable companion of the eve, all over the world. They are often created with
zari (fabric woven with thin gold and silver wires) work on them. There are a wide variety of
silk sarees available in the Indian market today, some of the most popular one’s are as follows:

 Kancheepuram silk sarees

 Mysore Silk Sarees
 Konrad Silk Saree
 Thanchoi Silk Saree
 Ikkat and Patola Silk Saree
 Paithani Silk Saree
 Chanderi and Maheshwari Silk Saree
 Baluchari Silk Sarees
 Tussar Silk Saree

Power Loom Sarees

These sarees are named so because of the process and technology used while producing them.
These are machine woven sarees characterized by high precision and can be made available in
bulk quantities to the customers. They are developed and designed by using top quality fabrics
and latest machinery in keeping mind the latest market trends. They are available in a host of
attractive designs and different patterns / colours. The offered silk sarees are very comfortable
to wear and are finely designed by experts who have vast knowledge of latest fashion trend.

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SWOT ANALYSIS
STRENGTHS
- In house production
- In house designs
- Knowledge about local trends
- Established name among local
B2C retailers
- Lower selling price
OPPORTUNITIES
- Foray in to B2C
- Expanding into new
markets
- Other sarees in showcase
- Tie-ups with other
manufacturers
WEAKNESSES
- New to retailing
- Only silk sarees
- Lack of sufficient funding
- No modern technology
used
THREATS
- Saturated market
- B2C retailers cannot be
relied upon
- Foray into B2C is difficult
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COMPETITOR ANALYSIS

Following is the list of the existing major competitors in the market:

 ARRS Silks
 Sri Murugalaya Silk house
 SKC Silks
 Chennai Silks
 Nalli silks
 RVP silks
 RATHI Silks
 PSA Silks

PORTER’S FIVE FORCES MODEL ANALYSIS

BARGAINING POWER OF SUPPLIERS

We our manufacturing the product ourselves and hence this aspect of bargaining power of
suppliers does not really come into picture. The raw materials include China silk for WARP,
Sikkilkatta and Kanakapura for WEFT and tested Zari which are purchased mostly from
suppliers in Bnagalore certified by Central Silk Board. The prices are fixed by Central Silk
Board and hence there is no room for bargaining here. All the equipments and machinery
required for manufacturing the saree are in-house.

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RIVALRY AMONG EXISTING FIRMS

There would quite a high pressure in this aspect. Presently there are close to 250-300 retailers
including both small and large scale retailers. Penetrating into the market will be a difficult
task due to the number of options available to the customers. Most of the existing retailers are
well established and have a considerably good foot hold in the market.

BARGAINING POWER OF BUYERS

Buyers have a good bargaining power owing to the numerous players in the market.

THREAT OF SUBSITUTES

There are a couple of Indian products themselves that provide a substitution threat including
Kaancheevaram, Varanasi silk etc. Also owing to the economic environment the buyers could
also shift to cheaper alternatives like Polyester and Synthetic.

THREAT OF NEW ENTRANTS

There are greater chances of our designs getting copied by others. Bigger manufacturers could
imitate our business model and come up with their own line of retail chains operating at a much
larger scale.

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OPERATIONS PLAN

SILK FABRIC & SAREES

Product: Power Loom Silk Sarees

Production of product: Annual production of Power Silk Sarees shall take place at our factory
which is established in Salem itself. The details of the production is as follows:

PRODUCTION
Year 1 Year 2 Year 3
Machines 15 15 19
saree per day per machine 2 2 2
saree per week per machine 9 9 9
saree from 30 machines 135 135 171
Production per year 6,075 6,075 7,695

Demand for the product: The demand for silk sarees fluctuates throughout the year. The peak
demand for the same occurs mainly at the time of special occasions such as weddings, festivals,
house warming ceremonies etc. For the remainder of the year the demand is fairly low and
unpredictable.

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 Thus, in order to estimate the demand for our first year of operations, we have decided to take
into account the number of marriages that take place annually in Salem as well as the demand
for sarees during most popular festivals such as Diwali, Pongal, Mariyamman.

DEMAND ESTIMATION

No of marriages in salem per year 10000

Sarees purchased per marriage 25
Total no of sarees 250000
Target population 2%
Expected Demand 5000

Value Chain / Distribution Network

Manufacturers Transportation (17 Retail Store/

km approx.) Warehouse

Manufacturers: The silk saree manufacturing business was started in 2009 with a machine
capacity of 2. Currently we own 30 power loom machines and manufacture 12,000 sarees a
year. Our customers are wholesalers, distributors and retailers in and around Salem. In the last
two years we have looking forward to expanding our business and reach out to retailers and
distributors in other parts of Tamil Nadu and even in states like Andhra and Karnataka.
On gaining customers from these parts we realize that we had to have a proper setup for
showcasing our products to our B2B customers. Thus the idea of a retail store was born. The
store is under construction and the expected month of opening is October / November 2015.
Necessary Supply Chain Responsiveness: Low as we are manufacturers. We are not buying
the sarees from outside. It is made in-house and it is based on weekly refilling. Customer
demand uncertainty is low.

Necessary Supply Chain Efficiency: Supply chain efficiency can be kept high as product
variety is low to an extent.

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MARKETING PLAN

Segmentation

 Geographic: Salem, Tamil Nadu

 Demographic: Females aged 18 – 65
 Socio – Economic: Middle Income earning Rs. 30,000 p.a to Upper Middle Income
earning Rs. 50 lac p.a

Targeting

Women aged 25 – 65 who are willing to spend especially at the time of occasions.

Positioning

At Kalika Silks, we will be offering 100% authentic silk power loom sarees which are a fusion
of ethnic designs and high quality fabric. We will provide our customers with a wide palette of
colourful and latest varieties which suit every budget.

The sarees can be used for the purpose of gifting on any occasion, be it a house-warming or a
wedding gift.

Product
Pure silk sarees is the product. Design for the saree is done in-house with a dedicated designer.
The selling price of the sarees from production ranges from ₹3,000 - ₹7,000. There are over 64
designs of sarees made in-house with over 10 colour combinations for each of the designs.
The procurement of raw material for the saree is done from Bangalore. Purchasing was done
on a six month basis.
Place
Salem, Tamil Nadu
Salem is a town in Tamil Nadu that derives around 60%
of its income from the silk manufacturing industry. It’s a
town where there are lots of power loom silk saree
manufacturers thus, making it a suitable place of B2B silk
saree selling. Sarees are distributed to various states from
here, some being Karnataka, Andhra, Kerala and other
parts of Tamil Nadu.
Although Salem is a hub for silk saree manufacturing,
there are very few retailers who have made their presence
well known. Most of these retailers source their goods
from Salem and other areas in and around Tamil Nadu.

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Since these are big retailers and have to source their goods from outside they have additional
logistics costs, this adds to the selling price of the saree and finally the selling price of the saree
ends up at least 1.5-2 times their purchasing price.
This gives an opportunity for a manufacturer to start his/her own business and provide the same
sarees at a much lower cost. We are looking forward to tapping this opportunity and start a
retail chain there.

Price

SELLING PRICE DERIVATION

Factors Year 1 in ₹ Year 2 in ₹ Year 3 in ₹
Building and Land 80,00,000
Camera 87,000
Fire Extinguisher 50,000
Licence and registration and electricity 10,00,000
advance
Total 91,37,000
Cost per saree for regaining capital 502 502 502

Electricity 84,000 92,400 1,01,640

Labour salary 15,36,000 16,89,600 18,58,560
Bamboo Handle bag 10,000 11,000 12,100
Plastic bags printed 5,000 5,500 6,050
Cardboard box printed 24,300 26,730 29,403
maintenance utilities 20,000 22,000 24,200
Advertising cost 20,00,000 24,00,000 28,80,000
Transparent bags 3,125 3,438 3,781
Total 36,82,425 42,50,668 49,15,734
Cost per saree for 1st year expenses 606 700 639

Cost of saree from production 4,000 4,000 4,200

cost per saree for regaining capital 502 502 502
Cost per saree for 1st year expenses 606 700 639
Cost of one saree 5,108 5,202 5,341
Margins 15% 15% 15%
Selling price 5,874 5,982 6,142

Promotion

 Television Advertisements: In order to create awareness and convey the value

proposition to the target segment advertising will mainly be done through Television
Commercials, mainly the regional channels like CTN, Polimer, Tamilan TV. Brand
awareness shall be rooted via this channel since the customers shall become familiar
with our brand
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  Advertisement in Theatres: Cinema advertising allows direct marketing to the target
audience. On screen advertising gives an unparalleled access to large, highly captive
audience which other advertising formats cannot begin to match. The ads will be
displayed atleast 2 times before each movie and another 2 times during the intermission
of each movie. This repetitiveness of the advertisement will give us a platform to reach
out to the target audience multiple times within a two and a half our period.

 Posters and pamphlets: Posters and pamphlets provide a logical and cost-effective
way of communicating to a particular target market. People who are viewing posters
are already actively engaging in their surroundings. Hanging multiple posters in one
location will increase brand visibility.

Packaging

Our product shall be packed in a transparent plastic bag which will protect the quality of silk.
This packaged saree would then be placed in good quality specialised card board boxes with
the stores name printed on it. This box shall then be placed in a paper bag with the stores name
and other details

MANAGEMENT PLAN

The manufacturing firm “Shri Sound Saree’s “has ventured into B2C retailing of Powerloom
silk saree’s named “KALIKA SILKS” with the following model.

FOUNDER

OPERATIONS HEAD FINANCE HEAD MARKETING & SALES HEAD

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The founder shall be assisted by the operations, finance and manufacturing head for the retail
operations. These heads are the unpaid partners of the retail outlet who have invested in the
retail business.

FLOOR PLAN

AREA PLANNING
Total plot area: 1600 sq.ft

Ground floor Area in Top floor Area in

square feet square feet
Front hall 350 Unpolished saree storage 800
Office 200 Polished saree storage 450
Wash room 50 Packaging area including stairs 300
Back hall including stairs 500 Wash room 50
Room 1 250
Room 2 250

Total cost of land plus building: ₹62, 00,000

Interior work (racks, bed, tables, lightings, flooring, toilets, paint, etc.): ₹18, 00,000

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Ground floor showcase capacity

Front hall (3+1+2)*6*15 540

Back hall (1+4+5+1)*6*15 990
Room 1 (2+2+2)*6*15 540
Room 2 (2+2+2)*6*15 540
TOTAL 2610 units

Top floor storage capacity

Polished saree storage (3*8)*6*15 2160

Unpolished saree storage 5,000 approx
TOTAL 7160 units

CAMERAS
Front hall 1
Office 1
Entrance 1
Back hall 2
Room 1 1
Room 2 1
Packaging area 2
Polished saree storage 2
Unpolished saree storage 2
TOTAL 13

Total cost for cameras, storage and network: ₹87,000

HUMAN RESOURCE PLANNING

Store area Number of employees

Front hall 2+1
Back hall 3
Room 1 2
Room 2 2
Top floor 3
TOTAL 13

The personnel for the store shall be recruited by the founder and other partners. The basic
criteria for selection is specified as: prior experience in saree retailing, basic knowledge of
sorting and product handling.

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FINANCIAL PLANNING
PROFIT AND LOSS STATEMENT
1st year 2nd year 3rd year
Units sold @ 20% growth YoY 5,000 6,000 7,200
Revenue 293,72,112 358,91,946 442,22,278
Cost of goods bought 243,00,000 243,00,000 255,15,000
Packaging cost 42,425 46,668 51,334
Gross Margins 50,29,687 115,45,279 186,55,944
Admin expenses 16,40,000 18,04,000 19,84,400
Selling expenses 20,00,000 24,00,000 28,80,000
Capital expenses 91,37,000 10,000 50,000
EBIT -77,47,313 73,31,279 137,41,544
Tax - 21,99,384 41,22,463
VAT 11,74,884 14,35,678 17,68,891
Service TAX 30,54,700 37,32,762 45,99,117
PAT -77,47,313 51,31,895 96,19,081
Cumulative loss/profit -26,15,418 70,03,663

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