belts to ewellery . Mehul xt three 1offer a its first .isee for Tightest ali. The unas.







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ely 1246 outlets, d Surat, keeping s will be lly. The in single watches ; such as


I 1 ,


Big Bazaar. This hypermarket chain was introduced in India by Pantaloon Retail (India) Limited. The year was 2001. The first store opened in Kolkata and was followed by stores in Hyderabad and Bangalore, in a short span of 22 days. These stores contributed over Rs. 43 crores to the company's turnover and over Rs.2.89 crores to the PBDIT in the first year itself. In 2006-2007, more Indians discovered the value of shopping in Big Bazaar. Big Bazaar launched 27 new stores in 22 cities, covering over 1.40 million square feet. While Big Bazaar continued to expand in the large cities, it also tapped consumption potential in smaller cities like Agra, Allahabad, Coimbatore, Surat, Panipat, Palakkad, Kanpur and Kolhapur, By May 2008, there were 89 Big Bazaars spread across various cities and towns across the country. Jo bazaar mein milia hai, who sab yahan nulta hai', is how Rakesh Biyani, Director, Pantaloon Retail (India) Limited, describes Big Bazaar. The bazaar is a term commonly used for the market or marketplace. Whenever any of us need anything, the simplest way to get it is to go to the bazaar. Big Bazaar represents a location where a customer can shop for anything that he needs, for which he would normally visit a bazaar or the market. Retail in India is still at a nascent stage. This case study has been prepared as a basis for discussion, on evolving formats suitable for India.

the next layers in to reach Pantaloon Retail (India) Limited was incorporated as Manz Wear Private Limited in the year 1987. It became a public limited company in 1991 and was renamed Pantaloon Fashions (India) Limited and then Pantaloon Retail (India) Limited in 1999. Over the years, the company has accelerated growth through its ability to manage change. It integrated backwards into garment manufacturing and expanded its retail network at the same time. It launched three successful brands - Pantaloon trouser, Bare denims and John Miller shirts-between 1987 and 1993. The company introduced the concept of The Pantaloon Shoppe, an exclusive men's wear retail store, which expanded across India from 1994-1998. In the year 1997, Pantaloon moved to large format lifestyle retailing with the launch of Pantaloons, India's Family Store. Pantaloons has grown to a 29-store network and occupies 263,000 sqft of retail space. They contributed Rs.174 crores to
the total turnover of the company.

The management was aware that in retail, size mattered. The business revolved around volumes. Lifestyle retailing did not really provide these volumes; the volumes came from the large Indian middle class market that was waiting to be tapped. Big Bazaar-the discount store-was launched in the year 2001, to meet the aspirations of the middle class. In a short span of two years, it had added a Food Bazaar and Gold Bazaar to its range of offerings.




Retailing Management

At the time of the launch of Big Bazaar, there was no real precedent in the Indian market. Giants, the RPG hypermarket, had opened in Hyderabad only two months prior to the launch of Big Bazaar. A western model had to be adapted to suit the needs of the Indian environment. Various local markets and local market leaders were studied. This was done to understand the product mix and the prices offered. One of the key discount retailers studied was Sarvanna Stores in Chennai. THE STRATEGY Saving is key to the Indian middle class consumer. The store, which would be created, had to offer .value to the consumer. Keeping this in mind, the concept of Big Bazaar was created. In India, when a customer needs something for the home, a typical thought is to seek it from the bazaar. A bazaar is a place where a complete range of products is always available to the consumer. This is true across India. As the store would offer a large mix of products at a discounted price, the name Big Bazaar was finalised. The idea was to recreate a complete bazaar, with a large product offering (at times modified to suit local needs) and to offer a good depth and width in terms of range. The mind to market for the first store was just six months. Price was the basic value proposition at Big Bazaar. The Big Bazaar outlets sold a variety of products at prices which were 5 to 60 per cent lower than the market price. The line 'Isse sasta aur achha kahin nahin/ emphasised thisl (Youwill not find anything cheaper or better anywhere else).

of tI corn) obje

CuS« obje deci the J stoo



feel sold

Selecting the Right location
The key question faced by the management was whether the low margins on the products would allow the company to sustain growth. With the aim of answering this question and in order to help the company decide on the right location, it rolled out three stores in three different locations. In Calcutta, the store was opened in a suburban market, in Hyderabad, it was in the heart of the market viz, Abid's and in Bangalore, the store was opened in an up-market residential area. The key learning which came out of this exercise was that for a store like Big Bazaar, a large catchment area was needed. The management decided to stick to the existing market places within the city. It realised that the western model of hypermarkets, where the store was located in large spaces on the outskirts of the city would not really work in India. The cost of time spent on travel and the cost of petrol in India would eat into the savings made. Property deals were negotiated keeping this factor in mind. The lease deeds negotiated were for a period of 12 - 20 years and the rentals varied 'from Rs.30 per square foot to Rs. 50 per square foot, depending on the city and location.


The Merchandise Mix The key driver of the footfalls at Big Bazaar was the large product mix offered to the customer. Big Bazaar stocked about 1,30,000 items in over 20 product categories. For the initial stores, the classification was simply done in terms of apparel and non-apparel and shop in shops. In the first year, apparel accounted for 70% of the off-take and the price was largely responsible for the success. The prices ranged from Rs.99 to Rs.799. Non apparel, which included plastic items, footwear, toys, luggage, appliances, white goods and stationery accounted for 30% of the off-take in the first year. The shop in shops, which were a part

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cat im wh

Case 10 Big Bazaar-The

Route to the Indian Mass Market


;iants, of Big 'arious ct mix

) offer t from to the

of the store, added to the product mix being offered to the customer, without requiring the company to invest in the inventory. The buying process for most of the categories at Big Bazaar was largely price driven. The objective was to deliver good products at the best possible prices. A key element of the pricing strategy is to achieve 'Market-Breaking Price'. To achieve this, the price that will offer value to the customer is first determined. An appropriate sourcing strategy is then worked upon to achieve this objective. Value Pricing and maintenance of quality are the key factors influencing the pricing decisions. I The management was aware that the food retail sector was one of the fastest growing sectors in the Indian retail market. The fact that food would never go out of fashion and the spending on food stood at 53 per cent of personal income, was a very strong reason for the company to consider entering food retailing. Keeping this in mind and to enhance the footfalls at its existing Big Bazaar outlets, the company launched Food Bazaar in the first year of operations.
Food Bazaar

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would ) help ns. In 1arket large vithin large travel tiated rd the yand

Food Bazaar stocked on an average, 10,000 stock keeping units (SKUs) and occupied on an average, 5,000 square feet of retail space. It was modeled on the Indian mandi, where customers could touch, feel and choose products, supplemented by packaged foods for western shoppers. The products sold were categorised as: • Processed Food & Non Food (Hungry Kya) • Dry Staples (Golden Harvest) • Wet Staples (Chill Station)


r. Big


the e first ccess.




sand part

The Processed Food and Non Food category contributes 60% of Food Bazaar sales. This category includes a mix of products from a large number of FMCG companies and a wide range of imported products, health foods and specialty foods. Dry Staples includes dry groceries like rice, wheat, da!, spices, ete. This category contributes 30% of the sales. Wet Staples includes fruits and vegetables. This contributes 10% of the sales.

Retailing Management

Local flavours and vane ties are made available through the shop in shop model, by arrangements with leading vendors in each city.The company has launched Food Bazaar Masalas, Food Bazaar Tea and Premium Harvest Pulses. While Big Bazaar today, includes Food Bazaar, the management has also rolled out Food Bazaar independently in 3 locations and is considering rolling out Food Bazaar as a part of Pantaloons and as a part of Central - the integrated seamless mall being developed by Pantaloon. While apparel still continues to be the largest selling category at Big Bazaar, contributing to over 40% of the sales, in a short span, the share of food sales has increased rapidly to 25. 74%. Managing the Supply Chain The management opted for the consolidator model for the new merchandise categories that it sought to introduce. This was largely done for thoseproducts that were manufactured or produced across the country like steel utensils and food grains, but were sold in the unorganised sector. Consolidators were traders/proprietors in specific products. For most of the players in the unorganised market it is difficult to deal with an organised retailer. The consolidator was already a player in that sector and provided them with the ease and comfort of a face-to-face relationship. At the same time, because of his knowledge and access to the market, he was able to put together the product line with ease and at the best possible prices. This reduced the lead-time and also enabled the company to go ahead with its expansion plans. This model provided the consolidators an opportunity to expand their business without becoming employees of the company. Due to the large scale of volume, the consolidator could operate at low margins, ranging from I to 3%. Distribution is decentralised. There is a warehouse attached to each store, so that the ownership of the merchandise is held by a particular centre. Initially, the stock turnover was three months, which is now down to two months in the new stores where you do not really have a precedent or background. Organisation Structure

The organisation structure for Big Bazaar is flat in nature. For Big Bazaar, the divisions are Apparel, Non Apparel and the New Business Division, which includes Gold, Footwear ami the shop in shops. For Food Bazaar, a separate team has been created, which again works independently. About 1,800 people work for Big Bazaar directly. Support and Ancillary services comprise of another 400 people. A new trainee is put through a basic three-day training programme before going on the shop floor. Evaluation is done every six months. Encouraging loyalty In the year 2003, the management launched the Big Bazaar ICICI Bank eo-branded credit card, aimed at promoting customer loyalty. On the purchase of Rs.l, 500 or more, the customer has the option of making a payment by three EMIS, without any charges. For every Rs.IOO spent on shopping, four reward points are awarded. The company is looking at the possibility of providing free home delivery to the cardholders.

el, by asalas, sazaar and

Case 10 Big Bazaar-The

Route to the Indian Mass Market


Information Technology




Pantaloon looks at Information Technology as the key enabler of decision-making. Day end operations are done at all the retail stores, and the internet transfers the data to the head office. The data is processed overnight and an Auto Replenishment System is in operation. Forecasting is done at the store level and week level. Going forward, the management has decided to revisit the cities in which they actually have a presence and saturate those markets before looking at virgin markets. In the year 2002-2003, the company aggressively launched private menswear, women's wear, and kidswear. The brands launched were: • Knighthood - an exclusive line of executive wear in trousers and cool casual wear • DJ & C - a line of denimwear • Shatranj - ethnic wear for men labels in five categories in

ing to %.

and shirts

that it

sector. in the eadya .rip. At rer the' ubled -ithout could .ership .onths, lent or

• Pink & Blue - casual wear for kids • Studio NYX - party and lounge wear • .CTee - cotton t-shirts with funky prints In 2003-2004, Food Bazaar reinvented itself, embarking upon providing customers an experience. The strategy was to offer fresh value added products and services across stores. As a result, some of the initiatives taken by the company were introducing a live chakki, dairy, masala grinding facilities, a bakery, and a fresh juice corner among other things. Private labels were also introduced in various product categories like tea, daIs, pulses, shampoos, ete. In 2004, 'Food Bazaar on Call' was offered, initially at one store in New Mumbai. This service allowed customers to place an order on the phone and avail the home delivery facility. Over the years, Big Bazaar has introduced a whole new range of fashion products inspired the seasons' colours and textures. In the year 2008, it signed M S Dhoni, the Youth Icon ofIndia, its brand ambassador. by as

oparel, shops. 'rise of before

Says Rajan Malhotra, CEO, Big Bazaar, 'Fashion has always been seen to be something for the elite. We disagree. Big Bazaar has managed to create the breakthrough by bringing the latest fashion to the masses at affordable price points. The new collection at Big Bazaar will appeal to customer~ from all walks of life, with its trendy designs.' 'Dhoni and Big Bazaar have a lot of synergies as the Indian ODr captain stands for the aspirations of youth in India, while Big Bazaar is looked up to, by millions ofIndians to fulfill their aspirations.' Big Bazaar, the largest retail chain of Future Group, is eyeing a turnover of Rs 8,000 crore by the year 2009. The company hopes to achieve this mark by mutliplying the number of stores and implementing cost-cutting measures. Other developments include a decision by Pantaloon Retail, the group's listed entity, to hive offfour business divisions, including Big Bazaar and Food Bazaar, into separate companies. The company is now looking at opening a total of 300 Big Bazaar stores and has introduced the neighbourhood. concept of retail, opening stores in residential areas. It will also introduce new business segments such as health and wellness in its stores. Big Bazaar would focus on the 'kanjussi culture', a term used to explain the company's focus on identifying areas to cut costs. The concept focuses on cutting intermediate layers and passing the benefit to customers. Big Bazaar is estimated to end the year 2008 with a turnover of Rs 4,000 crore and expects to double it over the next year.

it card, has the ent on ividing


Retailing Management
Exhibit 1
Financial Cost of 9 .Manpow, Advertisir InteresUT PBDIT/ln

The company was also looking to create more buying occasions, he said. For example, on Republic Day, Big Bazaar achieved a sales of Rs 240 crore compared with Rs 150 crore in the previous year. Three years ago, Big Bazaar introduced discount sales on the Republic Day, which was well received by the country's youth. For instance, this year, Big Bazaar sold 1,38,000 pairs of jeans and 38,000 cell phones during the Republic Day offer. Time and again, the company has innovated with its offering to the customer. It has introduced to India a retail format that is essentially value and price driven. It is an early success, however, given the diversity within the Indian marketplace, how do you see this retail format evolving for a pan Indian presence?

Profilabili PBDIT/Te PBDTlTol Net Profit RONW (J ROCE(A

Balance: Debt-equ Debtors t Inventory Current


Quick Ra Asset tun

Key Fina/ Total Rev Profit bsf Profit afte Cash Pro

Per share Basic Ear

Basic Ca:
Dividend Book vali

Case 10 Big Bazaar-The

Route to the Indian Mass Market


ole, on in the , which
iairs of

Exhibit 1

Group Ratios
Jun-03 Jun-04 Jun-05 Jun-06 ..• Jun-07

Financial Performance Cost of goods/Net Manpower Sa.les

68.23% 4.29% 2.65% 3.97%

66.54% 4.17% 2.84% 3.64% 2.39

66.52% 4.80% 3.09% 2.60% 3.42

66.53% 5.99% 2.72% 1.97% 4.05

68.26% . 6.19% 2.80% 2.70% 3.43

costs/Total Income and selling costITotal income. income (Debt-Service

rwever, .g for a

Advertising InterestITotal



Profitability PBDITlTotallncome PBDTlTotallncome NetPr6fitFr6tal Inc6me






8.57% 4.60% 2.56% 18.92% 20.31%

8.66% 5.03% 3.00% 24.47% 21.03%

8.89% 6.29% 3.65% 24.42% 22.41 %

7.99% 6.02% 3.43% 17.15% 18.03%

9.24% 6.54% 3.60% 14.82% 17.48%

..RONW (Average networth) ~OCE (Average Capital employed)

Balance Sheet. Debt-equity ratio Debtors turnover (days) Inventory turnover (days) Current Ratio Quick Ratio Asset turnover (Total Income/total assets)





0.79 7 99 2.19 1.08 1.96

1.53 18 93 1.51 0.48 2.07

1.29 10 86 1.65 0.52 1.96

0.89 4 94 1.73 0.55 2.03

0.50 3 98 1.44 0.58 1.62

Key Financial Parameters Total Revenue

(Rs in Crores)






445,62 38,18 11.41 18.89

659,64 57.14 19.78 31.68

1,055.85 93.91 38.55 58.90

1,871.98 149.64 64.16 99.85

3,328.76 307.62 119.99 184.78

~.r~fit before Interest Tax and Depreciation , PrbfitafterTax Cash Profit


; Per share data Basic Ea"rnhlgs (less extraordinary .Basic Cash EarniHgs(Rs.) Dividend (Rs.) Book value (Rs.) income)

. Jun-03 .


,113 1.76 0.20 7.39

1.84 2.66 0.30 9.87

3.31 4.45 0.50 20.12

5.06 6.70 0.50 39.20

8.71 11.39 0.50 74.42

Exhibit 2

Retailing 10-year Balance Sheet


Exhibit 3
(Rs. in Crore)

, Profit

& La;

.Sa.les s' 01 Other lncoi


St)1ir6 capit~J

8.09 2.21 7.52

9.26 4.00 10.48








29.35 0.00

"Shareapplicatiorr Reserves & surplus \!Varrant ApplicationMoney ,Shareho.l(jer's Fund

Total Incor Cost of goe Contract w






196.53 3.00







54.00 1.79

67.68 2.92 141.32 4.23 145.55 216.15

94.89 6.03 214.76 21.36 236.12 337.04

221.53 13.04 256.17 30.04 286.21 520.78

526.91 27.92 428.10 173.29 601.39 1,156.21

1,092.17 55.84 951.93 347.65 1,299.58 2,447.60

Packing m; Power Excise

25.99 0.36 26.35 44.17

26.93 1.84 28.77 52.52

31.61 2.73 34.34 59.93

68.22 1.42 69.64 105.71

109.53 0.30 109.83 165.62


Transporta Sales Tax

Gross block

Mise. Expe Total Cost 8.03 4.32 12.35 0.40 PBDIT Interest PBDT ., Depreciatic PBT Extra-ordin 885.96 6.74 2.19 3.35 10.87 2.20 3.27 65.17 162.97 633.85 1.50 44.74 55.53 82.78 132.46 166.21 229.98 1,749.45 Fringe Ber Profit after Current Ta: Deferred To


13.12 7.15 0.39 20.66 24.08 9.36 52.52

12.41 9.66 19.6 2403 31.05 0.89 59.93

13.75 12.04 0.98 26.77 56.01 0.76 105.71

17.64 44.44 4.40 66.48 99.73 0.53 216.16

13.58 52.91 6.95 73.44 156.54 0.40 337.04 1,156.21 2,447.60

Case 10 Big Bazaar-The
Exhibit 3
's, in Crare) Profit &Loss Account Sales & Operating Income Other Income 29.35 0.00 1,062.82 Total Income Jun-98 90.10 1.62 91.72 57.52 9.42 0.87 0.38 Jun-99 105.24 073 105.97 73.32 6.35 0.69 0.58

Route to the Indian Mass Market


1O-year financial summary - P&L

Jun-02 285.29 0.67 285.96 186.11 6.51 2.11 5.34 4.58 10.03 13.59 8.77 2.72 5.26 17.96 262.98 22.98 11.24 11.74 4.22 7.53 0.01 7.52 0.39 0.10 Jell1-03 444.83 0.79 445.62 303.5 6.77 3.10 7.94 3.40 15.71 19.13 11.83 3.43 7.75 24.88 407.44 38.18 17.67 20.51 6.35 14.16 0.78 13.38 0.85 1.13 Jun-04 658.31 1.33 659.64 438.01 6.97 5.64 12.08 3.36 27.59 27.53 18.75 5.95 14.91 41.72 602.50 57.14 23.94 *33.20 8.79 24.41 0.07 24.35 1.45 3.11 67.84 961.94 93.91 27.46 66.46 13.33 53.12 0.03 53.09 7.28 7.01 0.24 19.78 38.55 106.03 1,722.34 149.64 36.92 112.72 20.82 91.90 0.07 91.82 11.07 14.87 1.75 64.16 165.90 3,021.14 307.63 89.76 217.88 36.86 181.01 0.06 180.95 30.71 27.93 2.32 119.99 J.un-05 1,052.80 3.05 1,055.85 700.31 15.27 12.44 21.95 0.28 47.97 50.65 32.56 12.66 113.46 112.07 50.96 19.08 207.02 206.09 93.14 35.57 Jun:06 . 1,868.97 3.00 1,871.97 1,243.43 20.66 19.22 37.41 Junc07 3,236.74 92.03 3,328.77 2,209.48 14.62 27.80 61.51

Jun~OO Jun-01 137.28 0.66 137.94 97.16! 5.17 0.76 1.03 180.58 0.44


181.02 117.98 8.28 1.24 2.02 0.43

,Cost of goods cons & sold
Contract work expenses ;Packinl;i:matedals . Power Excise

1,092.17 55.84 951.93 347.65 1,299.58 2,447.60

0.65 1.91 -Advertisement expenses Transportation expenses •Sales Tax 2.83 0.91

1.18 2.57 3.15 0.73 1.47

3.08 4.18 2.98 1.08 1.85 9.22 126.53 11.41 5.07 6.33 1.07 5.27 (0.00) 5.27 0.35

6.18 6.81 6.05 1.73 3.55 12.00 166.27 14.74 6.22 8.52 1.63 6.89 0.04 6.85 0.45

767.07 92.47 574.60 131.13 805.73 252.01

Mise. Expenditure Total Cost· PBDIT Interest ,PBDT Depreciation

8.91 83.40 8.32 5.29 3.03 0.85 2.18

7.16 97.21 8.76 5.51 3.26 0.83 2.43 (0.02)

Extra-ordinary Items 885.96 65.17 162.97 633.85 1.50 1,749.45 Fringe Benefit Tax Profit after EOI

2.18 (0.04)

2.45 0.10

2.22 2.35 4.92 6.40 7.03 11.41

223.72'" 120.15 . 15.71 ~ 359.58 1,389.86 2,447.60

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