“The thing is, I don’t want to

be sold to when I walk into a

store. I want to be
welcomed.”
(Customer
Insight)

Term Report
Course: Retail
Management
Instructor: Syed Atif
Murtaza Qaiser
 Acknowledgement
We would like to thank Sir Atif Murtaza Qaiser our instructor and Miss Ayesha Memon our TA, whose
guidance in the course “Retail Management” enabled us to do an in-depth analysis of Retailing Strategies of
Chotu Chai Wala and made us capable of giving recommendations based on that strategies.

Sincerely,

Vishal 14951
Syed Maisam Abbas 14108
Taimoor Rasool 14813
Muhammad Taha Khan 14365
Jazib Ahmed Abbasi 14428
Farazur Rahman 14488
Table of Contents
Industry Overview......................................................................................................................................3
ABOUT CHOTU CHAI...................................................................................................................................3
Literature Review........................................................................................................................................4
Methodology..............................................................................................................................................6
Analysis.......................................................................................................................................................7
Conclusion...................................................................................................................................................8
Recommendations......................................................................................................................................9
References................................................................................................................................................11
Appendix...................................................................................................................................................12
Shell Proposal........................................................................................................................................12
Chotu Chai Wala Bukahri Branch..........................................................................................................13
...............................................................................................................................................................13
Income Statement and Balance Sheet (Shujat Branch)........................................................................14
...............................................................................................................................................................14
 Industry Overview
The Food Industry in Pakistan is the 2nd largest industry after textiles. It is growing at an
estimated rate of about 7.46% per annum according to UNIDO. The three major industry groups
are: frozen food, value addition in major food crops, and fruits, vegetables and intermediate
products.
Pakistan is one of the top tea consuming nations and the third largest tea importer globally. A
massive increase of 35.8% in per capita consumption of tea in Pakistan was recorded from 2007
to 2018.
When we specifically talk about modern dhabas, there are many new entrants like Chai Party,
Chai Manzil, Chai Shai, Sangat and etc. due to increasing demand of people. But the first movers
in the market were Chai Session and Chotu Chaiwala. Chotu Chaiwala was able to make itself
popular among the residents which helped it to expand in to new areas. The idea was liked by the
people and their engagement was increased which attracted new people to cash in this
opportunity.

ABOUT CHOTU CHAI

The founder of Chotu Chaiwala, a tea cafe established

with the concept of a ‘dhaba’ (roadside restaurant), Mohammed Qamber Hussain is a young
Pakistani Entrepreneur who resides in Karachi. He started at the age of 17 in one of the largest
cities of Pakistan, Karachi and looks after the entire business himself. The first branch of Chotu
Chaiwala inaugurated in August 2015. Chotu Chaiwala portrays an image of traditional and
modern restaurant as it serves clients with dine-in and drive-thru services.
The concept behind the name of Chotu Chaiwala was that “Chotu” is an urdu word used for a
boy who works as a waiter in dhaba and “Chaiwala” is used for a person who sells tea. It has
around 80 employees on board who caters up to 6,000 weekly customers. Within some time, the
tea shop specialized its menu with a variety of Parathas, Chai (tea), Shakes and Nans. With the
success of Chotu Chaiwala, in 2016 Mohammad Qamber Hussain introduced a new tea brand in
the market which he named after his restaurant, “Chotu Patti”.
Currently, they are operating in three cities where they have 15 branches and six “On The Go”.
Around 7000 tea cups are sold on day to day basis.

Literature Review

Retailing consist of all activities towards providing value to end-consumers through products and
services. Retail is the last stage in a distribution channel that contains the people and businesses
that are physically involved in moving and transferring the goods and services from producer to
final consumer.[ CITATION Ber \l 1033 ]

Everything you experience in any retail store is the part of retail strategy. In retail management,
an effective retail strategy should consist of its target audience and how the format will cater the
needs of consumers and how it will lead the store against the competitors to gain the sustainable
competitive advantage. It is noted that the retail strategy should be as above – calling these
elements ‘specific target market, location, and the retailer’s value proposition’ – but added retail
mix to the four Ps.[ CITATION ECo06 \l 1033 ]

The basic retailing mix framework relies on the product, place, promotion, price, presentation
and personnel. It has two very important roles: to draw an effective retail strategy and to create
customer equity with these components. The product inculcates the type and the variety of goods
that are available at a particular store; the place elaborates on the concept of the location of the
store, it`s franchises and how it optimizes its space; the promotion includes discounts and offers
provided by the firm in order to grab customer attention and to retain its current customers and
how well it basically reaches a larger audience through its PR; pricing is another important factor
which describes the value for money that the firm is charging for and how the firm competes
with other brands; presentation is the aspect on how the firm differentiates itself from its
competitors through merchandising; personnel is basically the customer service and the internal
marketing.[ CITATION Hit19 \l 1033 ]
The retail matrix offers the retailer a helpful structure for dissecting exchange zones. By
intermittent and ordinary assessment of the cells in the grid, as they apply to exchange regions
for both existing and proposed stores, the retailer can follow and conjecture changing exchange
region measurements in a more methodical design. This gives a more intelligible structure for
arranging retailing blend techniques in light of changes. Given the undeniably intricate climate
inside which the retailer should work, insightful systems.[ CITATION Raj10 \l 1033 ] Essentially the
retail mix is combined to address customer needs, formulate strategy, coordinate operations and
respond to competition. [ CITATION Ber \l 1033 ]

Retail mix influences consumer behaviors as customer lies in the middle of Retailing mix
framework. It can be understood with the 3-model component of attitude:
1. Cognitive component: In this part of attitudes forms consumer behaviors towards a
certain product through direct experience or any other related information.
2. Effective Component: This component of attitude consists of consumer feelings and
emotions about particular products.
3. Conative Component: This component defines a shopper’s possibility that he/she can
behave towards the object of such attitude. It is usually termed as consumer intention to
purchase.

A retailer has the conventional retailing mix at its disposal to address customers’ in-store
interaction needs and broadening customers 'horizons. Interactions have the ability to create
trust, lead to emotional commitment, enhance customer cooperation, value perceptions,
formation positive word -of -mouth and customer loyalty. There is a relationship between an
element or elements of a retail mix offered by a particular type of retailer and this
relationship has relationship with customer loyalty.
 Methodology
The methodology for the report was based on both secondary data and primary data. Secondary
data was used to get the overview and the statistic of the industry to get the basic idea, the source
for the secondary data was articles and blog posts. And the primary data was used to get the
specific idea about the brand to analyze its retail presence. For the primary data we visited the
outlet several time and took the interview of one of the partners. For the retail visit we visited the
outlet like a mystery shopper and behaved like a regular customer to get real insight of their
customer service. From the outlet visit and interview we observed the retail practice that how
they manage their backward and forward operations, how they procure their raw material, how
they manage their inventory, how they manage their distribution, how they stand out from there
competitor, how they serve their customers, how they control their quality standard etc. After
seeing this all practices done by chotu chaiwala we tried to resonate it with the concepts we
studied in our retail management course to better understand what makes what impact on the
overall retail appearance on the outlet. And then we tried to encapsulate our finding in the form
of report.

Analysis

Due to a growing trend in Pakistan for chai dhabas, people now adays go prefer comfort food at
such places because of the social setting. People hangout at such places for a short family outing,
to hang out with friends, to lay-off steam or for professional unformal meetings. There are a total
of 18 branches all of whose strategic location solely depends upon the target audience, their
customers, that are mainly upper-class people. So, all of their stores are at prime locations
usually at road fronts where it is clearly visible and are at a location that is a connecting point for
different areas i.e Chotu Chaiwala Johar branch, which is near the Safura Chowrangi.

The store design has a premium experience to capture the upper class. We chose the Bukhari
branch of Chotu Chaiwala which is the most important one out of all the others because it`s one
of the most successful franchise, they hire and train employees there and it is one of the oldest.
Chotu Chaiwala basically targets the upper class which incorporates the SEC A and B+. Due to
the friendly atmosphere, about 70% of the total customers include families and as per
observation, the ratio of men and women is 50:50. Customers usually go for the same products
that are not seasonal like tea and stuffed parathas because they have developed a fondness for a
light and cozy meal. The major chunk of peak hour starts after 9pm during weekdays with more
deliveries and takeaways and on weekends it starts after 6pm with more dine-ins.Customer
retention is done in two ways backwards and forward. The backward retention model
incorporates a unique recipe for their products which is measured and implemented with an
extensive working on the specific formula to develop a unique taste. The forward retention is
because of the brand name itself which eventually attract customers. The main differentiating
factor is the location itself. It is situated in areas where there is a high chance on a turnover of
customers like in front of tuition centers, near offices, at fuel stations, hospitals or even at a train
station (located in Lahore). The second factor is the uniqueness in the recipe of the products. The
third reason is the brand image that is developed through word of mouth which is basically
because of the awards that they won for their hygiene and customer service.

It mainly does brand though sponsors for painting the wall at the store or near it to make the
store more visible. They put up posters and sign boards for their on the go branches. Chotu
Chaiwala at times sponsors small events, provide vouchers through mobile applications like
BOGO and does advertising through social media platforms. It works in partnership with Hascol,
Agha Steel, Pepsi and foodpanda. But they do not carry out promotions on a large scale like TV
commercials or celebrity endorsements. This is mainly because of their belief that the brand
speaks for itself which is one of the reasons why the business has grown exponentially in the last
two years. Chotu solely relies on its goods through outsourcing. It is associated with a
comessarie, which is located at Bahadurabad, for some time now which centrally supplies the
inventory, mainly frozen products through delivery vans to all its branches. The only problem
that they face is that the delivery is delayed due to traffic so to tackle this issue they store some
of the products on the branches off hand.

It mainly deals in cash because it sells food on a daily basis so cash sales go to 85-90% and
credit sales make up about 10-15% of the total sales. The percentage of return is very low in their
store chain which rounds up to 0.1% because product quality is always up to expectations of the
customer. But at times some customers get very picky and specific about the details of their
orders then the branch manager steps in to observe the problem and caters by providing a refund
by simply replacing their meal with a new one (with the same ordered food). The store has a very
flexible design to cater to the number of customers that walk-in each day. This is due to the fact
that it is a food store so there is always a change in the number of customers, especially on
weekends. The basic design of the Bukhari branch is built on a 600sq. feet for which they have to
pay Rs.45000 for rent. Each table is separated by a distance of 5 to 6 feet with 12 tables in one
row and one waiter for each row. So, there are a total of 48 tables, 4 waiters and 1 manager
available at the moment. Taking margins into consideration, Chotu charges a royalty of 5% on
sales and 2% for advertising (4-5000 rupees). The cost of the product is about 40-45% depending
upon the type and number of products sold. To elaborate, Chotu recently introduced shakes and
are planning to introduce stuffed naans for which they earn a good deal of revenue and their most
selling items are tea, chicken cheese parathas and caramel shakes; these three items carry the
highest margin. Their warehouse cost is about 5% of the Total sales. Their fixed cost varies from
30-35% which includes labor cost, utility expenses and management fee. On average they earn
about 30-35% on each product.

Conclusion

Chotu Chaiwala has seen its growth exponentially after it saw its first branch that opened in
Karachi. During the years Chotu has increased its market share with its many branches which are
an attraction point for all the ages. Chotu has recently expanded country wide with its recent
branch being launched in Lahore and plans on to further expand in other cities. Chotu Chaiwala
lacks in the marketing side and needs to work on it. Although, Chotu has its presence on the
digital side but their marketing on digital platform is weak. Their marketing campaign in any
universities is limited to only setting up stalls during a social event by any student run society.
They can further strengthen their digital presence through digital campaigns. Chotu`s different
branches are not only differentiated through their location but also through their profit at the
month end. The profit margin between two branches of Chotu Chaiwala has huge difference
ranging from 30 to 40 thousand. This is one thing that needs to be addressed because Chotu
Chaiwala is providing its customer with the same experience be its Bukhari Branch or be its
Johar branch. The large difference in profitability should be addressed and either through
promotional offers or customer loyalty cards. One last and major recommendation for Chotu
Chaiwala is that their major inflow of customers starts after evening and the whole period of time
after morning till evening is under-utilized as the shop experiences low customer footfall. Chotu
Chaiwala needs to utilize this time through promotional offers or discounts in order to turn their
expense into revenue. Furthermore, the idea of Chotu Chaiwala of making their own tea brand
and selling packaged tea to the customers is quite different from its competitors. This idea
expands their portfolio and to cater it they need a marketing plan and a distribution market to
establish their brand name further into the minds of the customers.
 Recommendations

 They should focus on opening their outlets near airports, railways since these are the
places where there is a large crowd almost every time of the day.
 They should have a better understanding of the changes of the rates in the market so that
they could also adjust their prices accordingly in order to attract further customers. Since,
the Pakistani market is very volatile and there are ups and downs in the prices so having a
proper understanding of the changes in the rate is very important.
 Since, they have a premium benchmarked pricing, they should also introduce competitive
pricing so that they will be able to compete with other brands that are located in that
vicinity.
 They should introduce their frozen products into local markets so that product extension
is done by entering new markets and it will also help in their branding.
 They should also focus on the machinery and automation as the better the machinery, the
more the automation, and the quicker the speed of service.
 They should also use the concept of making freshly cooked items because they provide a
different enriched experience to the consumers.
 They should also have their own HR and marketing team to have a better organized
system to cater for their needs.
 They should move towards a better E-commerce platform through social media pages so
that mass marketing can be done, and they will be able to market their products to a
larger audience. They should post about their products, reviews, openings and also ask
for feedback on their social media pages in order to increase engagements from the
audience.
 They should also focus on maintaining the quality of each of their product on every
franchise since the customer that are catered by Chotu Chaiwala is very brand conscious
and loyal to the brand. So, if the customer visits a certain franchise and find that it`s
closed for some reason so then the customer should prefer going to another one of its
branch rather than going to a competitor.
 They should work on making their own mobile application.
 They should make monthly and annual targets so in order to increase their sales because
this way they would have an obstacle to achieve and would work harder.
 They should build a loyalty program to retain their customers.
 They should work on having exclusive dealership with certain buyers like with one of its
partners, Pepsi.
References
Bhasin, H. (2019). Retail Marekting Mix. From Marketing91: https://www.marketing91.com/retail-
marketing-mix/

Chalermporn. (2014). Chalermporn Siriwichai. RITSUMEIKAN ASIA PACIFIC UNIVERSITY.

Handayani, R. (n.d.). THE INFLUENCE OF RETAILING MIX PERFORMANCE ON THE CUSTOMER LOYALITY.

Heni Iswati, R. R. (n.d.). The Influence of Retailing Mix to Consumer Attitude.

Rajan Varadarjan, P. P. (2010). Interactive Technologies and Retailing Strategy: A Review, Conceptual
Framework and Future Research Directions. Jouranl of Interactive Marketing.

Rosenbloom, B. (1976). The Trade Area Mix and Retailing Mix: A Retail Strategy Matrix: A useful
analytical framework for selecting new store trade areas and for adjusting the merchandise of
existing stores to their present trade areas. SAGE Journal of Marketing.

Terblanche, N. S. (2017). Customer Involvement, Retail Mix Elements and Customer Loyalty in Two
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Appendix
Shell Proposal
Chotu Chai Wala Bukahri Branch
Income Statement and Balance Sheet (Shujat Branch)