Market structure of vegetable market

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Managerial Economics – Market Visit

Mettupalayam Anna Market

Date of Visit: 05/09/2015

Submitted by,

1. ABHIRAMI. P 15MBA090

2. AGNEL SUJIN. A 15MBA092

3. ARUN. S 15MBA102

4. INDHUJA 15MBA114

5. KARTHICK. P 15MBA116

Submitted to

Course Faculty: Ms. P. Nalini Srinivasan

Class: J4

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Table of Contents

1. Introduction 1

2. History 2

3. Wholesale market 2

3.1. Vegetable varieties 3

3.2. Transactions 4

3.3. Pricing strategy 5

3.4. Loading and unloading 5

3.5. Challenges 6

4. Retail market 6

4.1. Vegetable varieties 7

4.2. Transactions 8

4.3. Types of shops 9

4.4. Shop allocation 9

4.5. Pricing 10

4.6. Marketing strategy 10

4.7. Profit 11

4.8. Peak and slack sales 11

4.9. Inventory management 12

4.10. Types of customers 12

4.11. Negotiation 12

4.12. Labours 12

4.13. Competitors 13

4.14. Challenges 13

5. Learning 14

6. Experience of vendors 15

7. Conclusion 16

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1. Introduction:

The Mettupalayam Anna market is one of the busiest places in Mettupalayam and is

located in the heart of the city. The Anna market comprises of two markets, the

wholesale market and the retail market. Various transactions takes place in this market

and people such as farmers, brokers, wholesalers and the consumers meet. All kind of

vegetables from different places are bought to this market and from here it is shipped to

various other markets in different cities and also sold locally.

Various kind of business activity takes place in this market such as selling, negotiation,

procurement, logistics, etc. This is the only market in Tamil Nadu which functions 24/7.

A scrap market which is located near the vegetable market is also a part of Anna market.

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2. History:

This market has been functioning for about 45 years, during the initial period the

vegetables were sold on the road side, i.e. there were no permanent shops. Eventually

due to the intervention of the government the permanent shops were established in the

wholesale market. The retail market has been functioning for 25 years.

Initially the vegetables were bought from various villages with the help of bullock cart

and gradually due to technological improvements the vegetables were bought to the

market with the help of vehicles. Most of the sellers here has been running this business

for generations and a very few has established this as a new business.

3. Wholesale market:

The wholesale market is active from 10:00 pm to 6:00 am every day. Vegetables like

lady’s finger, snake guard, bottle guard, small onions, brinjal, etc are bought from

various villages like Annur, Pettikuttai, Sirumugai, etc which are located around

Mettupalayam are bought to this market. Whereas vegetables like carrot, beetroot,

cauliflower, cabbage, capsicum, potato etc. are bought from Ooty and Kothagiri.

Mettupalayam wholesale vegetable market

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3.1. Vegetable Varieties:

There are two types’ vegetables that reach the market namely organic and hybrid. The

cultivation of organic variety takes around 3 – 4 months; therefore the supply of this

variety is seasonal, whereas the cultivation of hybrid variety takes only about a month,

so this variety has a regular supply. Wide variety of vegetables are available in the

market such as Tomato, brinjal, onion, beans, carrot, etc. i.e. all the common vegetables

are available here.

The various vegetables available, the source and destination is mentioned in the table

below:

Vegetables Source Destination

Tomato Local villages, Hosur, Mysore and Gundlupet

Ooty, kotagiri, Coonoor, Coimbatore and Kerala

Brinjal Local villages, Coimbatore, Oddanchatram, Mysore and Hosur


Snake Gourd Local villages, Coimbatore, Oddanchatram, Mysore and Hosur


Bottle Gourd Local villages, Coimbatore, Mysore and Gundlupet


Flat Beans Local villages, Coimbatore, Mysore and Gundlupet


Big Onion Coimbatore, Mysore and Pune Ooty, kotagiri, Coonoor, Coimbatore and Kerala

Small Onion Coimbatore, local villages, Mysore, Tirupur and Pune


Carrot Ooty and kotagiri Coimbatore, Kerala and Tirupur

Ooty Beans Ooty and kotagiri Coimbatore, Kerala and Tirupur

Beetroot Ooty, kotagiri and Mysore Coimbatore, Kerala and Tirupur

Peas Ooty Coimbatore, Kerala and Tirupur

Capsicum Ooty and Mysore Coimbatore

Cabbage Ooty, Mysore and Coimbatore Kerala

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Lady’s Finger Coimbatore, Mysore and Oddanchatram

Ooty, Coonoor, kotagiri and Tirupur

Pumpkin Karamadai and Mysore Ooty, Coonoor, kotagiri and Tirupur

3.2. Transactions:

Vegetables from various villages and other major markets are bought to this market.

Here there will be direct interaction between farmers and the brokers (middlemen).

The farmers bring the vegetables cultivated out of their own farm and sell it to the

brokers, the shipping of the vegetables are taken care by the farmers themselves.

During the shipping 4 – 5 farmers join together and bring their vegetables to the

market. Vegetables like lady’s finger, cabbage, pumpkins are bought from other major

markets in oddanchatram, mysore, tirupur, etc. Apart from shipping the vegetables from

wholesale market to various cities, a considerable amount is sold to the retail market,

where the consumers (public) purchase the vegetables.

The hierarchy shown below exhibits the flow of vegetables in the retail market:

Farmers

Brokers

(Middlemen)

(

Retailers

Other Markets

Other Markets

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Various transactions happening in the market

3.3. Pricing strategy:

The prices of vegetables varies everyday depending on the demand and the supply,

brokers usually have a profit margin of 10 – 15%.

3.4. Loading and Unloading:

Loading and unloading of vegetables here are labour intensive and time consuming.

Unloading of vegetables from the local villages i.e. vegetables from farmers starts from

12 pm to 3 am, whereas the unloading from Coimbatore, Oddanchatram, and other

markets takes place from 4 am to 5 am. The loading of vegetables from the market to

various other markets takes place from about 4 am to 6 am. The following figure shows

the loading and unloading of vegetables to be despatched to various markets.

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Loading and unloading of vegetables

3.5. Challenges:

There are various challenges faced by the sellers in the wholesale market, the major

ones include climatic changes, competitors, less supply and price hikes. Climatic

changes like heavy rain adversely affect the supply of vegetables, during this time the

net profit goes down for both the vendors and the wholesalers.

The main competitor for the Mettupalayam Anna market is the Karamadai market,

which functions once in a week. During this time the farmers give preference to sell

their yield in Karamadai market, which results in less supply for this market.

The third major challenge that the sellers face is the price hike, for example onion price

hike has resulted in reducing their net profit. Some other challenges include lorry

strikes, market union strikes, etc

4. Retail market:

The retail market is situated near the wholesale market, which is active from morning 5

am to 10 pm, here the retailers direct interact with the consumers (end-users). The

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vegetables for this market are supplied from the wholesale market which in turn is sold

to the consumers. The land space for this market is provided by the municipality. This

retail market totally has 140 shops, in which only 100 shops are occupied and the rest is

vacant.

Mettupalayam retail vegetable market

4.1. Vegetable varieties:

Almost all kinds of vegetables are available here, as mentioned earlier a few shops are

specific to a particular variety of vegetables and the majority of the shops focus on the

different varieties of vegetables.

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Different variety of vegetables available in the market

4.2. Transactions:

The supply of vegetables to the retail market is from two different sources, the

wholesale market and procurement from various farms. As mentioned earlier the

majority of the supply is from the wholesale market, which is located near this market.

Apart from wholesale market, the vegetables are bought from different villages around

different like Ooty, Mysore, Coimbatore, etc. Here the shop owners themselves take care

of the logistics using their own vehicles. The transportation cost is around 5% of the

vegetable cost.

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The hierarchy shown below exhibits the flow of vegetables in the retail market:

4.3. Types of shops:

Majority of the shops in this market has different kinds of vegetables and a few shops

are specific to a particular variety of vegetable such as onions, garlic, ginger, lemon etc.

4.4. Shop allocation:

As mentioned above the space for the market is provided by the municipality, totally

there are 140 shops in this market in which only 100 are occupied and the rest is

vacant. All the shops are leased for a fixed rent per month, which is decided by the

municipality.

The rent for the shops varies depending on the location, i.e. the rent for the shops

located in the front is high and reduces gradually as we move in. This rent fixing is

based on the fact that lesser customers visit the shops that are interior to the market.

Wholesalers

Retailers

Consumers

Farms

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Different shop in the retail market

4.5. Pricing strategy:

The prices of vegetables are determined chiefly based on the demand. Usually the price

of the vegetables is fixed 20% above the purchase cost, i.e. a profit of around 20% is

made in vegetable sales. Considering wastages, wages to the labours, etc. the net profit

comes around 8 – 10%. The net profit may go above this figure during special occasions.

4.6. Marketing strategy:

The sellers here adopt different marketing strategy here; the major ones include quality,

arrangement and persuading skills. Quality is a prime factor in all the shops in this

market, according to Mr. Hameed, GMR vegetables, quality is the one and only

expectation of the customer, so better the quality more the sale.

Arranging the vegetables in an orderly fashion gives an aesthetic look to the customers

and also plays an important role in attracting new customers. Persuading skills such as

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talking in an attractive manner is crucial in retaining the existing customers and

attracting new customers.

Marketing strategy - arranging the vegetables in a regular fashion

4.7. Profit:

The difference between price and cost of vegetables yields a profit of 20% for the

sellers, but considering factors like handling, wastage, wages, etc about 8 – 10% is

yielded. The profit margin may also go below this value during rain, less supply etc.

4.8. Peak and slack sales:

The sales in this market are never constant; it varies based on numerous factors such as

seasons, supply, occasions, etc. The peak sales is usually observed during special

occasions and festivals, during which the prices may increase or decrease depending on

the supply. Monsoon is a major factor disrupting the supply of vegetables, during this

period the yield and quality are less and hence the sellers are forced to reduce their

margins.

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4.9. Inventory management:

Vegetables that are bought from the wholesale market and from the farms are stored for

in the shops for selling for the next 2 or 3 days. Since the quality of vegetables degrades

in time, prices of the vegetables differ every day depending on the quality. In general

there are three qualities of vegetable namely: superior, medium and low quality

vegetables, the former two are sold directly to the consumers, whereas the later is sold

to road side hotels for a narrow margin.

4.10. Types of customers:

The main customers here are the general public, hotels and departmental stores located

in and around the city. The majority of the customers here are the general public which

accounts for about 80% of the sale and the rest are hotels and departmental stores.

Here in all the shops about 60 - 70% of the customers are regular, whereas the rest are

new. The sellers maintain a good relationship with the customers in order to retain

them; also they use selling strategies like providing quality products, persuasion by

talking and arranging the products in an orderly fashion to give an aesthetic look, to

attract new customers.

4.11. Negotiation:

The common challenge faced by the sellers is the negotiation by customers. Usually the

customers demand for a discount on vegetables, which results in lesser net profit for the

customers. Discounts are generally given to the customers who purchase in bulk such as

10 – 20 kg and to hotels and departmental stores, who usually do purchases in bulk. The

prices are fixed to those who purchase in lesser quantities. The sellers generally keep a

buffer in their margins for negotiation.

4.12. Labours:

The owners of the shops employ one or two labours depending on the size of the shop.

They take care of the majority of the work such as unloading the vegetables, interacting

with the customers, etc. The wages for the labours are paid according to the sales

volume.

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Interacting with the labours regarding the sales of business

4.13. Competitors:

In this market the competitors are nothing but the neighbouring shops, the competitive

advantage that a shop has is the way they talk to the customers, the quality of the

vegetables that they sell and the unique variety of vegetables. In spite of the competition

the sellers have a common pricing system, i.e. the prices of the vegetables are constant

throughout the market.

4.14. Challenges:

There are many challenges faced by the sellers in the retail market, which includes

irregular supply, heavy monsoon, hike in prices, difference in quality, lorry strike,

political issues, etc. Irregular supply arises mainly due to monsoon, competition from

markets in other cities and few others. The hike in prices adversely affects the sales, for

example the recent hike in onion prices has resulted in decrease in sales, reduced

margins and increase in cost.

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5. Learning:

The market visit gave us a detailed idea about how the vegetable market works and the

various transactions that happen every day. We were able to watch various business

activities in real time like procurement, logistics, inventory management, cost fixing,

marketing strategies, selling techniques, negotiation, promotion strategy, various

challenges in a business environment and many others. We were also able to map the

flow of goods and services and the flow of money between various parties in the

business. Also evident from the study is the role of various parties in the business such

as farmers, brokers, wholesalers, retailers and consumers, and how goods and money

are transferred between these parties. As an overall picture we were able to map the

entire business transaction from the farmers to the consumers.

Understanding various business strategies in the retail market

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6. Experience of vendors:

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Mr.Ahamed is the commission agent; he buys goods from

the farmers directly and sells with a considerable profit

margin.

Mr.Subaiyyan and Mr.Ramasamy shared the experience

about how they transfer the vegetables, cultivated in their

farm. A group of farmers combine their yield and one

representative takes the lead and brings the vegetables to

the market, sells them and shares the profit among the

other farmers. The price of the vegetables brought to the

market is fixed by the brokers or commission agents.

Mr.Kumar is the coriander supplier. He is from Annur,

has been in the business for more than 25 years. He

does not sell his goods for the broker instead he directly

deals in the supply. The rate of the coriander leaf on

that day was Rs.5.

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7. Conclusion:

The study of Mettupalayam Anna market gave an understanding about the overall

structure of the market and the transactions that takes place in the wholesale and retail

market. This study provided a real time experience on various business activities and

how the transactions in every market affect the economy as a whole such as varying

prices of vegetables.

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Documents

Market structure of vegetable market