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Kirana V/s Super Markets.

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The case study in BW missed out one important business model. BW did talk about this earlier but some how missed to include in the case study. The Margin Free Markets of

Kerala. As per a report in BW some months back it is the largest retail chain in India.

Colored yellow all over, from walls to racks, this is something that your eyes would not miss if you travel through the roads of Kerala. Ubiquitous by their presence, Margin Free Markets is a model that is worth emulating for the retailers.

Some facts about Margin Free Markets:

History:

Govt models like the Maveli store had taken a back seat thanks to the issues omnipresent in a govt controlled organization.

MFMs were started somewhere in late nineties by a guy from Trivandrum. He had a partner who later (read on…) First showroom was near Verma Travels near East Fort.

Went on well, kept on building up franchisees.

The Business Model:

Make the idea of super markets shed its “Up market” image. The idea of supermarket was still a fledgling when MF started. None of the biggies had set foot in Kerala. And whoever like the Varkey’s showed some presence was altogether for a different crowd. The MFM attracted the common man for its simplicity and price factor. It helped the populace shed their inhibition towards the supermarkets.

Give every single commodity at a price lower than the MRP.

The people of Kerala never dreamt of purchasing products at sub MRP prices. Build the network. Accept all discount cards available -be it issued by newspapers like Manorama

or Mathrubhumi or by Margin Free themselves. Use of these cards make it cheaper even than the MFree price.

All the goods offered at MFMs -were packed as in any typical supermarket.

The idea was that of sharing profits. The chain gets bigger.

Number of pieces of a product purchased goes up. Get discounts from MNCs and others. Reduce the number of intermediaries. Rise up to the level of a distributor. Pass this

advantage to the consumer.

People flooded MFMs . Where else could the common man get a discount of 1-1.5 Rs for a Soap. This was immaterial of the number of pieces purchased. The idea was a big hit.

Then came the era of clones. On expected lines, there was a split in the business. One of the partners, moved to Cochin and started a similar chain with a similar logo. And the funniest part is that never do they claim to be different, entities unless asked for. They feel that revealing the truth would take the sheen and hijack customers from one to another.

Later atleast 4 of such MFM chains tried to build their networks. None succeeded as the original(s). The success of model is evident in the fact that even the Kirana next

door is changing to the MF yellow and discounts on a smaller scale.

The products offered at MFMs range from FMCG to grocery, Crockery to Electrical Appliances.

Very recently, they came up with MFREEM brand of spices and condiments. Signs of prosperity…..

And the chain is getting bigger and bigger.

Any IIM there to include this model in their syllabus?

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3 comments

1 NITIN KOCHHARNo Gravatar { 09.07.05 at 1:33 pm }

Hi,

Please visit the link: http://www.fmcgmarketers.blogspot.com to get updated with news from FMCG world and be a part of this interesting and content rich blog.
Please send this mail to all your friends who are interested in FMCG.

My personal blog is: http://www.nitinkochhar.blogspot.com/

2 Kunal MahajanNo Gravatar { 04.25.06 at 9:22 am }

I’ve recently graduated from ISB & was reading your blog on MFM. I was wondering how well MFM is doing now (I’ve heard some stories about disintegration etc.).

How do you think big discounters such as Food Bazaar and others entering into the hot retail arena, will affect MFM? Will they be wiped out as large national level discounters will give consumers lower prices?

3 Nikhil NarayananNo Gravatar { 04.25.06 at 5:00 pm }

@Kunal
Here I go…
As far as I know(info can be one year old, as I left Kerala a year back for MBA in Pune):
1)Started by some Gulf returned or so and partner, first in Trivandrum.They grew, they spilit
2)Another one in Cochin was born due to aboev said split.
3)Clones were born
4)Clones were born to such an extend that everyone honoured each others’ “trusted customer” or whatever u call those kinda cards.Everybody wanted to prove they were original.
5)I am sure their Target Group is not SEC A1 or A2. They are looking for SEC B2 and down.
6) Their success is not only due to their pricing, but shacking the myth among SECB1,B2,C etc that “super markets are for the rich”.Also due to their high levels of penetration acrosss the state(seen a MFM opposite National Games Village, Koramangala…about a year back)
7)The newbie malls have not made an entry into the state.Foodworld(now Spencers Daily) has a good presence in Trivandrum(dunno abt Cochin).There is Varkeys in Cochin.All these places cater exclusively to SEC A1 and A2. Some of customers in this TG would go to an MFM, but still would enjoy the ambience and style of a Spencer’s of a VArkey’s.
8)AN SEC A1 or A2 who looks for a discont in FMCG good would go to an MFM.
9)SO there is a difference in the class that MFMs and others cater to…Mind you, the market that MFM caters to is HUGE!!!
10) A Spencer’s will never go for such levels of penetrations as it would not work out to be feasible for them. They can’t have shops in small towns of Kerala. People are still ready to become franchisees of MFM.

PS:Have not done any reading on MFMs in recent past, due to the lack of info available on the net.
Tried contacting the people behing MFM, but they were not media savvy or MBAish..whatever…

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