Operation and Management

of CSI Market Outlet

TERMS OF REFERENCE

Royal Government of Bhutan Ministry of Economic Affairs

Department of Cottage and Small Industry

April 2020

1. Background According to the Enterprise Survey Report 2010, it was pointed out that “Access to Market” was

one of the constraints faced by enterprises during establishment and operation. Notably, limited

infrastructure (market outlet and land) and transportation has been the major challenges faced

by CSIs. The CSIs is identified as one of the jewels for economic development. However, not

much has been achieved in terms of marketing of CSI products, be it domestic or outside.

Thus, during the 12 FYP under the Flagship Program, the department will establish a dedicated

CSI market place at Changzamtog Service Center, Thimphu to market CSI products in

particular. The primary aim of such establishment is to promote CSI products in the market

(both domestic market as well as for visiting tourists); to have a dedicated and permanent

space to CSI products with proper management & operation, and to improve competitiveness of

CSI products through quality, standard, image and branding.

2. Functions of the CSI Market The primary functions of the Market Outlet are;

Providing a marketplace for the Made in Bhutan Products to be sold from

Become an easily accessible retail outlet to purchase Made in Bhutan products for both

Bhutanese and Tourists

Become a prime location for tourists (a to-do-list on the itinerary) to visit and buy Made

in Bhutan products

Create a platform for offline and online selling of Made in Bhutan Products

Add value to the Made in Bhutan Products for better marketability

2.1 Legal Establishment of CSI Market The CSI Market will be an asset of the DCSI. The CSI Market will be operated by a Private

Entity. The CSI Market Management Committee (MMC) of DCSI will monitor the performance

of the CSI Market and will be the point of contact for the Suppliers and Operators.

2.1.1 Organizational Structure of the CSI Market

DCSI

CSI Market

Management

Committee

Operator

Regulation:

Tariff setting

Service standards

Environmental

monitoring

Re

por

tin

g

Market Outlet

Investment

And Major Maintenance

O

&

M

Product

Acceptance/Rejection

Individual Contract

and Payment Terms

Suppliers

2.1.2 Proposed Structure of the Private Operator for CSI Market

Note:

The Open Restaurant will be a modest space (7x7m) at the right side inside the mall with 3-4

tables. It will only be used to sell fast-food that have been approved by the MMC (i.e. Hygienic,

completely authentic Bhutanese products) from prospective Suppliers. The other products that

are on sale such as Tea and Snacks will have to be included in the menu other than the fast-

food. The operator will not be allowed to cook and sell fast food on his own.

Sales Staff-1

Manager (Head)

DCSI (CSI Market Management

Committee)

Accounts and

Administration

Sales

Division

Marketing/

Logistics

Open

Restaurant

Accountant

and Admin- 1 Sales Staff-2 Marketing

Manager- 1

Logistics

Manager-1

Cashier-2

Restaurant

Space

2.2 Products to be sold The consultants and DCSI after rounds of consultation concluded to the following list with

regard to the products that will be allowed to be sold through the CSI Market;

1. In general, all products that are produce or manufactured in Bhutan will be allowed to be

sold.

2. Depending upon the product, where applicable, manufacturers/ producers will need to

demonstrate that adequate safety and hygiene certifications are obtained from

Bhutanese competent authorities (minimum) or international certification agencies.

Examples include, BAFRA Food Handler’s Certificate, BAFRA Food Safety License,

BAFRA – ACD, FSSAI/FDA certifications etc… However, items such as fruits and

vegetables will not have to produce any certificates.

On a broad scale, the products may be categorized as;

Sl.No. Classification Details

1. Everyday household/food items

1. Candles 2. Cheese and Butter 3. Cookies, Snacks and Chips 4. Dairy Products 5. Floriculture/ Flowers 6. Furniture Making 7. Honey 8. Incense and Perfumes 9. Lamp Shades 10. Mushroom Items 11. Noodles 12. Organic Fruits 13. Pickles and Spices 14. Sanitary Pads 15. Soaps and Detergents 16. Soups 17. Tea and Beverages 18. Toiletry Items [Bathing, Toilet Papers]

2. High value edible items

1. Cheese and Butter 2. Collocates and Candies 3. Essential Oils 4. Honey 5. Pickles and Spices 6. Rice and derivatives 7. Tea and Beverages 8. Traditional Medicines

3. Gifts and Souvenir items

1. 3-D Art works 2. Artisanal Products 3. Bhutanese papers 4. Candles 5. Children’s toys 6. Cloth Bags/ Puches, Purse and Folders 7. Educational Toys 8. Handmade Ceramics 9. Incense and Perfumes 10. Jewelry Items 11. Lamp Shades 12. Masks 13. Recycled papers/waste souvenirs 14. Recycled Plastic Bags 15. Soaps and Detergents

4. Paintings and art items

1. Embroidered items 2. Paintings and Sketches 3. Paintings (Thangkas, Wall Hangers) 4. Statues

5. Food Items 1. Homemade fast food 2. Fruits and Vegetables

The above list is only for indicative purpose and based on the EOIs received from time to time

from the Suppliers and depending upon the sales progress at the CSI Market, may be

appropriately modified at the discretion of DCSI.

Note: The above list is only indicative and prospective entrepreneurs who wish to sell through the CSI Market are welcomed with other products not covered above. It is however, preferred that those items that have better market access through other channels such as Craft Bazaar in Thimphu are not sold through the CSI Market to avoid unwarranted competition and damage to the Craft Bazaar/ Handicraft Business.

2.3 Product Selection Criteria The general criteria for product selection are prescribed below;

i. Is a unique product with majority of raw materials from Bhutan ii. Is well packaged/ has appealing presentation iii. Product faces issues with market access iv. Fulfills safety requirements for consumption (if applicable)

2.4 For Suppliers The idea is that the CSI Market itself will function as an institution for product improvement and will require that entrepreneurs/business improve their product to be sold through the CSI Market. Therefore, it is required that the interested entrepreneurs/business are;

i. Highly innovative, adapting to evolving market preferences and aspires to compete with the best in the world.

ii. Actively engage in product development and work with the Product Specialists from the MMC.

iii. Commit to attend the training programs required by the organizers iv. Commit to respect the brand integrity of Bhutan Authentic! and comply with

branding rules v. Ensure a pricing policy that is fair and advantageous to both its suppliers and

consumers

2.4.1 Flow Chart for Selling through CSI Market

In case the products are not approved during one submission, the entrepreneur/business are allowed to resubmit the product by incorporating the changes recommended by the CSI-Market Management Committee (MMC). The MMC will review the products at least once in every three months. However, the approval by MMC does not a guarantee sales through the CSI Market.Depending upon the existing stock of similar product with the Operator and the Operators purchasing power will be considered by the Operator before entering into contract with the new suppliers. Further, products that have high wholesale price (greater than Nu. 500 per unit) will be subject to the purchasing power of the Operator. For such products the Operator and Supplier are suggested to work out the strategies. The Operator will periodically review the products and submit the records of saleability of the particular product to the MMC who may then depending upon the marketing strategy of the CSI Market recommend for the product to be removed from the CSI Market so that the overall quality of the products is maintained.

Product Accepted

Product Not- Accepted

Entrepreneur/ Business submits

EOI Application to DCSI

DCSI’s MMC makes a judgement

of the application

Operator and Supplier sign

formal contracts

Operator submits Sales

Reviews to Supplier and

MMC

Supplier improves on

product quality with

support from MMC

MMC provides

reasons for rejection

and Offers Support for

Improvement

Operator and Supplier continue

agreement and renew based on

mutual agreements Product Selling Well

Product Not Selling Well

3. Basic Modality DCSI will provide a Ready-to-Move-in CSI Market Outlet with the following;

a. A renovated building

The fully renovated with design concept and theme including interiors to suit the CSI

Market Outlet. This includes the main outlet space, a warehouse/ storage area, office

space and space for open cafeteria and restrooms.

b. Display racks of different designs and types to accommodate the products

c. Major equipment required for smooth functioning of the CSI Market such as

refrigerators, coolers

d. Office establishment furniture and equipment

e. A two user Point of Sale system including all accessories and peripherals.

f. CCTV

g. Functional utilities (electricity and water) connections

The following facilities will have to be provided by the Operator on his own;

a. Purchasing of the products from different entrepreneurs and stocking in the CSI

Market.

b. Any other equipment necessary for smooth functioning of the CSI Market as

deemed necessary or as a result of the observation made by the MMC during

operation stage.

Such equipment purchased by the Operator will be the sole property of the Operator and shall

be taken back in the event the contract validity is over. (Non-renewal, Expiry of Contract,

Termination).

The purpose of CSI Market is greater than being just an outlet, it will be a contributing agency

for the transformation of Made in Bhutan products through a cycle of continuous product

improvement and development and through enhanced sales. The Operator must work in the

best interest of the CSI Market and improve its performance through new and innovative ideas.

4. Description of Responsibilities and Rights of DCSI 4.1 Responsibilities of DCSI

The responsibilities of DCSI includes (but not limited to);

Infrastructure and Equipment (Initial Investment)

i. Re-modification of the building including redesign and reconstruction.

ii. Providing of a safe and secured warehouse with proper ventilation and storage space.

iii. Providing of adequate numbers of restrooms with water supply connection for the

Operator as well as the customers.

iv. Providing adequate and reliable electricity and water to the market place. (The monthly

charges to be paid by the Operator)

v. Purchasing of relevant equipment and installation for smooth functioning of the outlet

and warehouse.

Contract with Operator

i. Develop the Terms of Reference for the selection and recruitment of an Operator.

ii. Evaluate the proposal received from the prospective Operators.

iii. Revise and modify the contract terms and conditions based on new developments and

recommendation from the MMC.

iv. Review and make appropriate decisions on the request solicited by the Operator based

on the new developments during the period of operations.

v. Ensure that the required and proposed man power is employed by the Operator and

that relevant labour obligations as per the Labour Act and Regulation is fulfilled.

vi. Set tariffs on the rental charges based on the notification received from RGoB on the

revision of rental charges.

vii. Help alleviate customer/competitor issues including non-payment or poor sales.

viii. Ensure that the service delivery standards are met at all times.

ix. Collection the monthly rental charges from the Operator.

Selection of Products

i. Develop the Expression of Interest for the selection of the Suppliers.

ii. Evaluate the EOIs received from the prospective Suppliers.

iii. Select or Reject the items based on the defined criteria set in the EOI.

iv. Provide recommendations to the Suppliers whose products have not been selected.

v. Provide guidance on the product improvement.

4.2 Rights of DCSI The Authority (DCSI) shall retain all rights and powers relating to the operation and

maintenance of the Facility not specifically granted to Operator under this Agreement (the

“Retained Rights”), including the following rights and powers (but not limited to);

i. Review and determine general policies and procedures not delegated to the Operator;

ii. Ensure that the pricing of the commodities is kept at reasonable rate.

iii. Approve all press releases and publicity material relating to the Agreement or the

Facility;

iv. Approve commitments to incur expenditures in relation to any major renovation and

modifications;

v. Approve any amendment to, waiver or revision of or termination of the Contract and

clauses;

vi. Approve the products to be sold from the Market Outlet.

vii. Conduct or resolve any dispute in relation to the Contract (other than the Agreement in

relation to the Operator);

viii. Review performance of any obligations of the Operator and take action if Operator fails

to perform such obligations

ix. Other than routine and ordinary course matters regarding the operation and

maintenanceof the Market Outlet, notify and communicate with Government Authorities

regarding the Market Outlet;

x. Access rights to enter and inspect the Market Outlet by DCSI Officials or agents with

regard to the equipment and facilities of the Market Outlet.

xi. Access to financial statements of the Operator.

5. Description of Responsibilities and Rights of the Operator 5.1 Responsibilities of the Operator

The salient responsibilities of Operator include (but not limited to);

Operations

i. Undertake the operation and management of Market Outlet for the period specified in

the Agreement

ii. Operate, manage, repair the Market Outlet and risk during the operations period in

accordance with the provisions hereof, including the specifications and standards set by

DCSI from time to time, the Applicable Laws, and Good Industry Practice;

iii. Ensure that the equipment and the facility is well taken care of. Equipment deployed for

operating Market Outlet shall be available to the inspection of the DCSI or any other

statutory agencies

iv. Carry out repair and maintenance of the equipment to and ensure that such repair and

maintenance is done in the quickest time possible that would not hinder operations.

v. Ensure maintenance of proper and accurate records, data and accounts relating to the

operations of the Market Outlet

vi. Ensure that proper safety standards are maintained for safety and theft prevention and

develop a SOP for handling such incidents.

vii. Ensure that the customer has a variety of products, sizes, colors, and other features to

choose from, at appropriate price points.

viii. Ensure that products displayed in the CSI Market is displayed in a fair and unbiased

manner.

ix. Ensure that proper contracts are signed with individual suppliers selected by DCSI

x. Make timely payments to the suppliers in accordance with the agreed contracts between

the two parties.

xi. Ensure that the pricing of the commodities is kept at reasonable rate.

xii. Maintain the store in good working order. Make sure customers are not turned off by

inadequate facilities or poor maintenance.

xiii. Submit half-yearly performance report of the CSI Market to the MMC.

Inventory

i. Ensures ready stock availability of goods for the customers in sufficient quantities and

sell the goods to the customers as per their quantity specifications in a constant cycle of

selling and restocking.

ii. Aim at catering to the requirements of all kinds of customers with varied buying

capacities.

iii. Conduct appropriate demand estimation to understand the quantity of inventory required

to fulfil consumers’ needs at any given time.

iv. The inventory needs are to be forecasted, so stock replenishment is smooth.

v. Stores receive shipments from suppliers and distributors. They carefully track and

record it all, and make sure it is handled properly and is in good condition.

Improvement

i. Ensure that a continuous performance improvement system is instituted for the

betterment of the CSI Market.

ii. Purchase required equipment and machinery when need is felt either by the Operator or

the potential of good sales is expected from particular products that require such

equipment.

iii. Maximizing customer satisfaction by delivering good quality products and services.

iv. Conduct surveys to seek valuable source of information and feedback and in turn pass

on the same information to the Suppliers of the products and MMC. Crucial information

related to the changes in the buying preferences of the customers, their experience with

the usage of the products, feedback on the prices and quality of the products is to be

collected on a timely basis.

v. Propose new techniques for packaging and value addition to the products.

vi. Create and improve the demand for various products by taking care of the display and

merchandising activities.

vii. Ensure highest level of customer care from greetings, assistance to service handling.

viii. Develop a SOP for return and refunds policy

ix. Ensure that maximum possible modes of payment is made available including but not

limited to;

a. Cash Payments

b. Accounts with all Bhutanese Banks

c. POS with acceptable international banking cards

Regulatory Aspects

i. Observe, fulfil, comply with and perform all its obligations set out in the Contract

Agreement or arising hereunder.

ii. Ensure that the employees are paid on time and that the working environment complies

to the Labour Rules and Regulations including fair wages and benefits. Ensure that all

designated staffs are employed and safeguarded under the Labour Act and applicable

regulations under RGoB.

iii. Ensure that the performance security of Nu. 500,000/- is maintained and used in

accordance with the provisions of this contract.

iv. Ensure timely renewal of license by complying with all the requirements, regulatory body

etc. Licensee (Operator) shall strictly follow all applicable Acts prescribed under the

RGoB.

v. Pay all taxes and duties applicable to the RGoB.

vi. Make reasonable efforts to maintain harmony and good industrial relations among the

personnel employed by the Operator, the Suppliers of CSIs and DCSI.

vii. Take insurance covering stocks and theft among others.

viii. Ensure that the accounting details are maintained in accordance with the required

format (BAS) and make it readily available on the request of DCSI.

ix. Develop and maintain internal controls, or standard operating procedures, to prevent

problems with cash handling, credit, shoplifting, and fraud.

x. Ensure that relevant and adequate timely trainings are provided to the employees in

various aspects including inventory management, POS management, financial and

accounting.

5.2 Rights of the Operator i. Modify store design, store atmosphere (lighting, music etc…), signage in consultation

with MMC after due approval based on rationality.

ii. Make recommendations to MMC on the individual product performance and request for

removal of the poor performing products until such time improvement is made or market

demand is felt.

iii. Provide additional services such as home delivery.

iv. Propose for specific products that can add value to the CSI Market.

v. Provide credit facilities and heavy cash discounts on the purchase of different products

to the customers.

vi. Provide customized services and pay personalized attention to the customers for

achieving a higher level of satisfaction with the delivery of product or service.

vii. Hiring, firing, training, and managing of employees based on the requirement and

individual performance.

viii. Set varying terms and conditions including pricing and payment methods with different

suppliers.

ix. Create loyalty programs and coupons for specific or general purchase.

x. Introduce new techniques and strategies including introduction of new technologies.

xi. Institute various schemes for the employees to improve productivity including variable

bonus system, sales performance etc…

6. Contract Agreement The description of Responsibilities and Rights of each party and the Conditions of the Contract

are provided in the Contract Agreement.

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