Degree

Master of Business Administration Executive

Faculty / School

Faculty of Business Administration (FBA)

Year of Award

2015

Project Type

MBA Executive Research Project

Access Type

Restricted Access

Executive Summary

This research was conducted to develop a feasibility study of an online fruit shop. The idea of an online fruit shop was initially based on two factors. 1) Large and growing market of fruits and 1) proliferation of online businesses in the neighboring countries and its potential in Pakistan. The proposed idea of online fruit business was based on the assumption that it would be possible to sell fruits online I through an app at a profit. As the project progressed, it was established that Pakistan's market is still not ready for an online fruit shop. Hence the research objectives and questions were modified to include task that would help in establishing the feasibility of a brick and mortar fruit retail business. The research objectives were as follows: 1. Identify potential of online fruit retailing in Pakistan 2. Identify total market size of fruits in Pakistan a. Urban and Rural Share b. Shares of Major cities c. Karachi, Lahore Faisalabad d. Share of High Income Areas i. Defense I Clifton 3. Develop a detailed feasibility study of a brick and mortar fruit shop 4. Identify the initial response of the target market to a fruit marketing app through a survey The research aimed to answer the following research questions 1. What is the potential of online fruit retailing in Pakistan? 2. What is the total market size of fruits in Pakistan? a. Urban Market size b. Rural market size c. Market size of various urban cities d. Market size of high income areas in Karachi 3. What is the financial feasibility of a brick and mortar fruit retail store? 4. What is the initial response of the target market to the business concept? a. Value of the convenience offered by the business b. Value of the quality proposition c. Willingness to bear the delivery cost The secondary research established that the concept of internet retaining is relatively new in Pakistan and will only take off in the conventional categories initially like electronics and books. Growth in the food and groceries segment will only take off after the internet retailing industry in Pakistan has

relatively matured. In this back drop, an online-only fruit shop doesn't seem like an attractive business proposition. The primary research conducted to gauge the response of the target market to an online fruit marketing app also yielded similar findings. Most households buy fruits at least once a week. Value of each fruit purchase is mostly above Rs 300. Parents generally do the household fruit shopping. People are generally not keen to order fruits online or through an app. Key value proposition in an online fruit shop would be consistency and quality. Preferred destination for supply would be home. People would not be willing to pay extra delivery charges. The primary research conducted to gauge the margins in fruit retailing yielded very attractive results. The mean primary margin was calculated at 44% whereas the median primary margin was calculated at 47%. The highest margin was 67% on Angoor (DHA, Bahadurabad) whereas the lowest margin was 14% on Aroo (Gulzar-e-Hijri). These primary margin figures are much higher than the general grocery margins (4% - 10%) and consistent with the primary margin of food companies listed on the Karachi stock exchange which averaged 45% during 2011-14. Margins for fruit retailing are strong enough for a brick and mortar retail setup. Fruit consumption has been growing at a rapid pace in Pakistan. While hard data is not available, spending of Pakistani's on Fruit consumption was estimated at PKR356bn in FY14 as part of this study, which amounted to 1.6% of overall consumption expenditure of consumers in Pakistan. Fruit consumption in Karachi was estimated at PKR61bn in FY14. Furthermore, fruit consumption in Jamshed town was estimated at PKR10.1bn in FY14, whereas fruit consumption in Gulshan e Iqbal and Clifton cantonment was estimated at PKR7.1bn and 3.4bn respectively. These market sizes are attractive for a brick and mortar fruit shop. A financial feasibility of the business was prepared. Investment requirement was calculated at PKR 12mn. The business will become profitable in the ih month, will have a payback period of 2.45 years, NPV of PKR34mn and IRR of 81%.

Pages

43

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