This action might not be possible to undo. Are you sure you want to continue?
WHAT CAN INDIAN COMPANIES LEARN FROM BIG BAZAAR
Submitted By Praveen Dhawan India
Indian Institute of Foreign Trade. In India. It wanted people to do bulk shopping for their monthly ration instead of going to the shop each week. The task was to change the mindset of consumer to bring about changes in their shopping patterns.” It has brought about many changes in the buying habits of people.SYNOPSIS: Indian retail sector is witnessing one of the most hectic marketing activities of all times. Kirana stores are indispensible part of everyday life which provide major necessities ‘just around the corner’ of the street. or so it claims. So we will study the customer preferences as well as their buying patterns. Big Bazaar’s main competitors are other business houses which are planning to enter the market as well as long established ‘Kirana’ stores which feel threatened by huge retail chains. The research objective is to • Compare the position of Big Bazaar vis-a-vis kirana shops with respect to o Porter’s 5 Forces Model o 4Ps of Marketing • Comparison of their profitability with respect to revenues earned and profits made out of it • Recommendations for a new entrant in the retail space. The conclusion would include recommendations of best marketing practices which should be followed by new entrants in the Indian retail sector. that advantage goes to “Big Bazaar. Kolkata 2 . In this project. The companies are fighting for mind share and heart share which can finally be converted to market share. There is always a ‘first mover advantage’ in an upcoming sector. RESEARCH OBJECTIVE: Big Bazaar has been the pioneer of retail revolution. It has created formats which provide all items under one roof at low rates. we will study its marketing strategies and customer response. Its first fight was against local ‘Kirana’ stores. using the findings of the survey and comparisons done above.
services provided to buyers and discount techniques 2. BIG BAZAAR FOR THE GREAT INDIAN MIDDLE CLASS It is a unit of Pantaloon Retail (India) Ltd and caters to the Great Indian Middle Class.000 sqft of space. the prices of which it claims are lowest in the city but the level of services offered is also very low. It currently operates out of 64 stores and top 15 stores register a cumulative footfall of 27 lakh a month on an average.RESEARCH TECHNIQUE: Data was collected using two approaches: 1. Survey research Questionnaire was prepared for the customers at Big Bazaar which included several open-ended and close-ended questions aimed at knowing the following: • Why Big Bazaar • Loyalty level • Effect of 4Ps of marketing Short questionnaire was prepared for Kirana store owners to obtain some facts like revenue. area of shop and their response to marketing mix. Observational research Observations were made in the Big Bazaar store regarding the customer groups present there. Kolkata 3 . ambience. The following graph shows the retail life cycle and we can say that Big Bazaar is currently at the Growth Stage. Its values and missions are to be the best in Value Retailing by providing the cheapest prices and hence goes the tag-line “Is se sasta aur achcha kahin nahin” It sells variety of merchandise at affordable rates. Indian Institute of Foreign Trade. various verticals inside the store for each category of product. It was started as a hypermarket format in Mumbai with approx. retail formats adopted by the store. Usually the items are clubbed together for offers as on the lines of Wal-mart and Carrefour and it also offers weekend discounts. 50.
Youth comprises of only around 10% of the crowd.books o M-bazaar o Electronic Bazaar o Furniture Bazaar o Footwear Bazaar • Trolleys are not easily available. • Sign boards are not prominent. Dust on shelves as well as some product items. Tried to stock maximum number in limited area. • In-house packaging not efficiently done. Items are arranged in a cluttered way. • Crowded store interiors. Lack of direction creates confusion. • Food Bazaar very efficiently managed. • Family crowd is evident. It is a bit over-staffed but layout is very good. Shelf space is used very well to stock products with clear distinction. • Little attention to cleanliness. Kolkata 4 . They can be summed up as follows: • Verticals inside the store relates to each category of product o Food Bazaar o Depot. especially on other than ground floor. Indian Institute of Foreign Trade.Cash flow Flows Maturity Growth Decline Introduction Time OBSERVATION: There were various observations made from the time I entered the store.
But first we will compare their standing in the industry using Porter’s 5 Forces model. Kolkata 5 . KIRANA STORES Both the retail formats can be studied on the basis of the marketing techniques that are used to attract customers. Indian Institute of Foreign Trade.POSITIONING STRATEGY BIG BAZAAR vs.
Big Bazaar is involved in bulk purchases so bargaining power of suppliers is low. KIRANA SHOPS AND 5 FORCES: RIVAL INTENSITY HIGH THREAT OF ENTRANTS HIGH THREAT OF SUBSTITUTES HIGH POWER OF BUYERS HIGH POWER OF SUPPLIERS HIGH The intensity of each and every force of Porter’s model is ‘high. Kolkata 6 . by looking at the degree of 5 forces.’ This means that the shop owner is struggling with very less control over his own operations and his strategies are affected by external factors. They being ‘high’. but the rest of the forces are deciding factor in the company’s marketing strategy. Again the competitiveness in this market is very high and market share for each shop is low due to high number of stores. This gives more bargaining power to both buyers and suppliers. Threat of substitute is minimal and supplier bargaining power is also less. Indian Institute of Foreign Trade. means degree of competitiveness is also high. therefore threats of entrants is high too. It is a very easy market to enter.BIG BAZAAR AND 5 FORCES: RIVAL INTENSITY HIGH THREAT OF ENTRANTS HIGH THREAT OF SUBSTITUTES LOW POWER OF BUYERS HIGH POWER OF SUPPLIERS LOW We can get an idea about how competitive this retail sector is. The retail chain will not accept very low margins.
commodity or company. are very popular in Big Bazaar stores. Observations also revealed that local brands of popular commodities. These products are never advertised but offer huge margin on sales. There is not much variety in each product i. the quantity for each product is not limited to large packs only. The commodities sold by the retail chain also includes its “own products” which get a ready distribution network. The store owner does not have many options regarding the range of products that can be sold because area of the shop is also not very large. Kirana stores Products at kirana stores are limited. The own products of Big Bazaar include My World fashion magazine which is not available anywhere else. PRODUCT: Big Bazaar Big Bazaar offers the maximum variety for each category of product and this is cited by the customers as one of the main reasons why they like shopping at the hypermarket. Customers like touching the product and selecting it themselves before buying. The product is the same in every store in the city but the brand options are more in Big Bazaar. The components of marketing mix are: • Product • Price • Promotion • Place The survey which was conducted gives the effect of each and every component of the 4Ps on the consumer’s mind. like diapers. Conclusion: Big Bazaar scores high on the product part of marketing mix. the brand choice available to customers is low. wheat flour garments etc. Customer has more choices of brand in Big Bazaar rather than kirana store. These components have a huge bearing on the retail battle between Big Bazaar and Kirana stores. Kolkata 7 . Indian Institute of Foreign Trade.4Ps OF MARKETING Marketing mix is a deciding factor in formulating marketing techniques for the success of a particular brand.e. So costs are low for such products. Also. sugar. Kirana stores usually avoid keeping expensive products which cost more than Rs. In this way lower middle class customers are targeted well. 200 and they limit themselves to cheaper and daily use items. Actually they have very less shelf space.
These all factors help the retailer to keep low prices. but laid emphasis only on low prices to attract crowd. It considers price to be the biggest attraction for all customers. It has never focused on giving great services. They feel food products of Big Bazaar will have no adulteration. Survey indicated that low prices were the biggest factor in customers’ mind while coming to Big Bazaar. There are huge synergies in terms of bulk purchasing. Prices of products are low because it is able to secure stock directly from the manufacturer. Change in prices is directly passed on to the customers. Cheap and local brands are heavily stocked in Big Bazaar which make it easier to attract lower-middle class category of customers. central warehousing and transportation. Interview with some store owners revealed that general policy regarding prices in a store is to give ready discount to its regular customers but to charge the MRP from new customers. Kirana stores Price is a very biased issue in a kirana store. Consumers accept the fact that they come from faraway places because it is cheap in Big Bazaar for bulk shopping. Departmental stores generally work on tight margins of 6-7%. Some customers feel cash discount is fine but bulk offer deals are of no use because you end up getting more than you want which is a waste. It is not possible for kirana stores to give hefty discounts on all items. It clubs small quantities to make bigger packs and then lower prices which kirana stores are unable to do. The customers trust retail chains with quality of the product. Big Bazaar works on a low cost model. Conclusion: Almost everything has some kind of discount in Big Bazaar. This quality is not assured in a kirana store. Kolkata 8 . Indian Institute of Foreign Trade. Customers feel same price for all customers as a plus point of Big Bazaar as compared to differential price policy of kirana stores. It considers its discounted price as its USP. PRICE: Big Bazaar Price is the critical point in a competitive industry. There is an average discount of 7-8% on all items in respect to their MRP.
Kirana Stores Kirana stores are involved in almost negligible promotion activity. One reason can be they work on tight budgets which have no scope for advertisements. Kolkata 9 . Promotion of kirana store is a rare event. One is the holistic advertisement which promotes the brand and creates awareness among people. It is not targeted at promoting each store but only creates an image of Big Bazaar as low-cost shopping option. Leaflets are given in local newspaper. During the survey. road shows and also started reality showtyped promotional campaign “The Big Bazaar Challenge. After talking to the store manager I found out that there are 2 types of promotional strategies. it was noticed that Buy 2 Get 1 Free type of promotions are very common. Conclusion: Retail chain Big Bazaar cannot survive without promotions on national or regional level. The biggest idea behind all advertisements is to make people do bulk shopping. Indian Institute of Foreign Trade.PROMOTION: Big Bazaar Big Bazaar has huge promotion budgets. There are promotional efforts even inside the store. Customers feel loyalty card schemes make them come again and again to the store. There are loyalty schemes which reward regular clients. Promotion is also done through cobranded credit cards with ICICI bank. of which customer takes quick notice. Other type of promotion is the particular store oriented promotion which includes speaking on the loudspeaker in nearby blocks. Original prices are cut down and new prices are shown.” Promotions like “Sabse Sasta Din” are a very successful strategy to get footfall. Its Buy 2 Get 1 Free strategy influences the customer mindset a lot once they enter the store. but not during the course of existence. Customers accept the fact that advertisement campaign of Big Bazaar did influence them in their buying behavior. The store has advertised through TV. They promote certain brands by putting names on shelves etc but they do not advertise themselves as preferred store for local people. A big ad budget helps it to get large scale of operations. Leaflet promotion maybe done once while inaugurating new store. They rely mainly on advertisement from the manufacturer of goods to pull in customers.
Its strategy is to find a cheap location and it never goes for hot spots in the city. It relied on promotional activities to make up for unattractive locations. On talking to the owners. Otherwise it is common practice to find busy street corners to get maximum customers. Kirana Stores Kirana stores are always placed in crowded market area which is located in each block and sector.com which targets high-end customers ready to use credit cards. It targets semi-urban population with its placement. It has launched a merchandise retailing website www. The store owners are ready to pay more rent for better locations because their promotion activity is negligible. The channel of place is company owned stores to have complete control. Another strategy used by Big Bazaar to overcome location disadvantage is use of internet. Location is important because buying decision is on impetus during day-to-day life. so they had no choice of location. Internet as place has put them in a profitable position because there is minimal expense of maintaining a website. so location of retail chain should be near to them because they will not travel too far. So place factor has less influence on them.PLACE: Big Bazaar Place means the location of the business. Kolkata 10 . The website is put as sponsored link. The talk with the manager revealed that the Teghoria store was opened when it was scarcely populated. Some customers travel from far places to the store.futurebazaar. Big Bazaar refrains from high-end locations for its business. Big Bazaar chose Sahara Mall instead of Metropolitan or City Centre. Indian Institute of Foreign Trade. So cautious decisions are taken while selecting place. Even in Gurgaon. Therefore Big Bazaar has made headway into a potentially high-yielding sector of online trade. Semi-urban customers still prefer kirana shops. it was found that some stores were inherited by them from their father. So the customer goes on for the nearest store. Big Bazaar has always worked on low-cost locations. which are more popular than Sahara Mall. Kirana shops make sure availability of goods nearest to the residential area. The promotion of this website is done through advertisement on Google. Conclusion: Location is something which is permanent.
Indian Institute of Foreign Trade. The store included in the survey revealed that they have average sales of 8 lacs per day. And this means there is huge requirement of capital.000 square feet of space on an average. Low profit can be attributed to • High cost of research required to study each and every region of the country • The large number of staff needed to manage all the stores • Burgeoning real estate prices which leads to high rentals • Huge promotional activities undertaken to ensure enough footfall Kirana Stores Kirana stores have only one source of income i. The deciding factor here is investment capability. “place” component of marketing mix becomes an increasingly important factor in deciding future strategies. they might be making a daily profit of Rs 350. this is very low for a national retail chain but it highlights the fact that the sector has a huge potential and will generate more profits once the government policies are in favor of opening up the sector further. But now the margins have slipped to around 7%. though the shop owners refused to give details on that.PROFITABILITY Profit is the basic motive behind the running of any business. margins available on selling FMCG products. This means a net profit ratio of 3. Big Bazaar and local departmental stores work on different scales of operation. Both retail formats have their own budgets. Profitability measures the efficiency of operations. Another thing to be noticed is that credit period given by distributors has also come down significantly. This includes all the investments made by the promoters and subsequent reserves created during the life of the business. In the wake of rising real estate prices. The stores generally occupy 30. But they do not disclose their profits for particular store. Average daily sales of a Salt Lake kirana shop covering 180 square feet in busy AE block market stands at Rs 6000-7000. The net worth of the company is Rs 526. It also helps us decide the better option amongst the two. Kolkata 11 . But considering the margins and overhead expenses.88 crores. future projections and financial limitations. P&G and Marico. Profits made each month are confidential information which none of the owners wanted to give. Big Bazaar is a brand under Pantaloon Retail (India) Ltd. The store owners revealed that in earlier days. they used to enjoy margins of well over 11% on products from HUL. The profit after tax in financial year 2005-06 was 64 crores on revenues of 1871 crores. Big Bazaar This retail chain is present in all major cities of the country.42%.e.
So there should be enough walking space in between product racks. The major aim will be to give the Big Bazaar experience in a relatively small departmental store. RECOMMENDATIONS: PLACE The new store should have a central location in the market because customers will not prefer one store over the other. An individual. The finances can be arranged through family money which will be invested in the business and subsequent loans from banking institutions. The owner should not limit itself to brands of few companies only. offices etc would be an added advantage. will not be able to gather enough resources to start a whole new retail chain. Over the counter purchase is not desired anymore. hence they take their time in selecting items. The store should be spread over an area of at least 900 square feet. It should stock perishable food items. The products should be clearly categorized as high-end or low-end. when starting afresh. Kolkata 12 . The store should be such where customers can roam around and feel the products for themselves. We will study the best practices to be followed by an individual who wants enter the sector. The shelf space should be efficiently utilized to give maximum exposure of the product to the public. The range of items available should suit the local requirements. Therefore we would study the desired marketing mix of a departmental store to be opened in a market area of Salt Lake City. There should be a balance between branded goods and local products.A NEW BEGINNING The survey has revealed major distinctions between Big Bazaar and local kirana stores. The store should include beauty products in its display because women are chief buyers in departmental stores. A new entrant would like to adopt the best of both formats to sustain in this competitive environment. Proximity of location to places like coaching institutes. All the products in all sizes should be on display. They would simply go the most accessible one. PRODUCT Product variety is a big factor in determining customer response. instant eatables. FMCG goods like toiletries. Survey revealed that many customers consider shopping as time pass. Diversification of product type is recommended. The place should be well lit and air conditioned. pulses etc. The customers should be assured of quality of nonbranded items like loose packs of wheat flour. Indian Institute of Foreign Trade.
In this way. people will feel happy about going to the shop and shopping. These discounts should be slowly discarded. The owner should recognize high potential customers and give some relief off the MRP mentioned to gain loyalty. This satisfies the demands of low-end customers and local products also give better margins. In this way.PRICE Price of goods depends on the success of the store over a period of time. The store should start off with inaugural discounts to get attention. Margins are very tight. the store should distribute leaflets in local newspapers to create awareness among residents. Kolkata 13 . One way to offer better prices is by having local products like biscuits etc which are of assured quality. This will help the store in long term. Indian Institute of Foreign Trade. The store should use instore advertising to make best use of large floor space by putting up discount boards inside the store above a particular product as well as just outside the shop. The store needs to make sure that no other kirana shop is offering considerable discount compared to its own prices. PROMOTION A departmental store which operates in a particular locality does not need full fledged promotional campaigns. we can make use of the marketing mix for a new venture which belongs to the unorganized retail sector. But for a start up. This should help it create a favorable ‘word of mouth’ scenario. Another way is to talk to general public and ask for their suggestions on improving the layout. The leaflet should include special features of stores with maximum emphasis on inaugural discounts on items. Application of the best marketing practices of organized retail stores combined with benefits of accessibility of local kirana shops helps to ensure success. It is not possible for the owner to match the prices and discount schemes of retail chains.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.