Report as per EOS course’s curriculum (IIM

Calcutta)

India’s Multi-Brand
Organized Retail
Industry –
Big Bazaar
[PGPEX Fourth Batch 2010-11]

Anand Moroney (PGPEX 5/4)

Arun K Mathur (PGPEX 9/4)
Atul Bali (PGPEX 13/4)
Suma Sheshadri ( PGPEX 41/4)
7/9/10
 India’s Multi-Brand Retail Industry – Big Bazaar

Contents
1. Executive Summary ......................................................................................................................... 3

2. Overview of the retail industry in India ............................................................................................ 3

2.1. Organized Retail ...................................................................................................................... 4

2.2. Retailing Formats ..................................................................................................................... 5

2.3. Multi-Brand Retail ................................................................................................................... 6

2.4. Profile of the major Multi-brand Retail players in India ............................................................ 6

2.5. FDI in Multi-Brand Retail Sector ............................................................................................. 7

2.6. Porter’s Five Forces Analysis ....................................................................................................... 8

3.1 Overview of company: Entry and Growth: ............................................................................. 10

3.2 How Did Big Bazaar tackle Porter’s forces: ............................................................................ 11

3.3 Tackling Competition & Developing Competitive Advantage:................................................ 12

3.4 SWOT Analysis of Big-Bazaar:.............................................................................................. 17

4 The Challenges faced by Organized Retail Industry: ...................................................................... 19

4.1 Infrastructure related issues: ................................................................................................... 19

4.2 Policy related issues: .............................................................................................................. 21

4.3 Conclusion & the Road Ahead: Recommendations for Big-Bazaar: ........................................ 22

Figures
Figure 1: Comparative Penetration of Organized Retail (in %) ....................................................... 4

Figure 2: Organized Retail Penetration across categories (%) ........................................................ 4

Figure 3: Retail formats available in India .......................................................................................... 5

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 India’s Multi-Brand Retail Industry – Big Bazaar

1. Executive Summary

The Indian Retail Industry is the largest among all the industries in India, accounting for over 10

per cent of the India’s GDP and around 8 per cent of the employment. With a three-year

compounded annual growth rate of 46.64 per cent, retail is the fastest growing sector in the

Indian economy. Traditional markets are making way for new formats such as departmental

stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun

appearing in metros and second-rung cities alike, introducing the Indian consumer to an

unparalleled shopping experience.

Until recently, the retail industry in India was mostly dominated by the mono-brand model. But

with the entry of large format retail – like Big Bazaar, Spencer’s, Reliance—many retailers

began adopting the multi-brand retail model as a way of adding more value to their business.

This paper focuses on the growth of retail industry in India focusing on current opportunities,

future trends, strategy and growth for the Organized retail in India, and within that Multi Brand

retail. Study has been done with reference to the biggest organized retailer in India – Big

Bazaar.

2. Overview of the retail industry in India

The Indian retail industry is divided into organized and unorganized sectors. Organized retailing

refers to trading activities undertaken by licensed retailers, that is, those who are registered for

sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains,

and also the privately owned large retail businesses. Unorganized retailing, on the other hand,

3
 India’s Multi-Brand Retail Industry – Big Bazaar

refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner

manned general stores, convenience stores, hand cart and pavement vendors, etc.

The Indian retail sector is highly fragmented with around 90 per cent of its business being run by

the unorganized retailers like the traditional family run stores and corner stores. This figure was

just about 4% in 2006 (Figure-1). The organized retail however is at a very nascent stage though

attempts are being made to increase its proportion over 9-10 per cent with the year 2011 bringing

in a huge opportunity for prospective new players.

120
Figure 1: Comparative Penetration
100
of Organized Retail (in %)
80

Traditional
60
Organized Source: Ernst &Young, the Great
40

20
Indian Retail Story, 2006
0
US Taiwan Malaysia Thailand Indonasia China India

2.1. Organized Retail

The Indian retail market is estimated at US$ 350 billion. But organized retail is estimated at only

US$ 27 billion. However, the opportunity is huge, organized retail is expected to grow at 6 per

cent by 2015 and touch a retail business of $ 40.

25
Figure 2: Organized Retail
20
Penetration in categories (%)
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 India’s Multi-Brand Retail Industry – Big Bazaar

Source: E&Y, the Great Indian Retail Story, 2006

As noticed in the figure above, the Organized Retail Penetration (ORP) is the highest in footwear

with 22 per cent followed by clothing. Though food and grocery account for largest share of

retail spend by the consumer at about 76 per cent, only 1 per cent of this market is in the

organized sector. However, it has been estimated that this segment would multiply five times

taking the share of the organized market to 30 percent in the coming years.

2.2. Retailing Formats

As shown in the figure below, the organized retail sector in India operates in three formats:

Mono/exclusive branded retail shops (ex. special Nike outlets), Multi-brand retail shops (Big-

Bazaar) and Convergence Retail outlets. The figure also explains the difference in the way these

Retail store formats operate. We focus on Multi-brand retail in the following sections.

Figure 3: Retail formats available in India

Source: IT Retailing: Are You In The Loop? July 16, 2006

5
 India’s Multi-Brand Retail Industry – Big Bazaar

2.3. Multi-Brand Retail

Multi-Brand retailing is a retail model where the retailers focus on carrying products with

various brands. Retail branding does not necessarily focus only on the creation of private label.

In the case of multi-brand retailers, the task becomes more difficult as the retailer needs to create

a store identity which is different from that of brands that he sells within the store, but at the

same time, there has to be a level of consistency among the products available.

2.4. Profile of the major Multi-brand Retail players in India

Pantaloon Retail: Pantaloon Retail (India) Limited, is India’s leading retail company with

presence across multiple lines of businesses. The company owns and manages multiple retail

formats that cater to a wide cross-section of the Indian society and is able to capture almost the

entire consumption basket of the Indian consumer. The company operates over 140 stores with

registered a turnover of Rs 20.19 billion for FY 2005-06. Pantaloon Retail forayed into modern

retail in 1997 with the launching of fashion retail chain, Pantaloons in Kolkata. In 2001, it

launched Big Bazaar, a hypermarket chain that combines the look and feel of Indian bazaars,

with aspects of modern retail, like choice, convenience and hygiene.

Lifestyle International: Lifestyle International Holdings Ltd’s principal activity is the

operation of lifestyle department store and retail outlets. It focuses on high-end department store

format. As of December 31, 2005, Lifestyle International operated its retailing business through

two brand names, SOGO and Jiuguang.

Spencer’s Retail: Spencer’s retail is the largest supermarket chain in India. Spencer’s retail

offers the complete gamut of products & durables ranging from bread to bed covers; from

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 India’s Multi-Brand Retail Industry – Big Bazaar

toothpaste to television. Spencer’s today is operating across 80 stores spread across 20 cities in

the country with a retail trading area of more than half a million square feet and rapidly growing.

Shopper’s Stop: Shopper’s Stop was started in 1991 by the K. Raheja Corp group of

companies. From its inception, Shoppers’ Stop has progressed from being a single brand shop to

becoming a Fashion & Lifestyle store for the family.

Trent (Tata): Trent (Tata) was established in 1998; Trent operates some of the nation’s largest

and fastest growing retail store chains. A beginning was made in 1998 with Westside, a lifestyle

retail chain, which was followed up in 2004 with Star India Bazaar, a hypermarket with a large

assortment of products at the lowest prices. In 2005, it acquired Landmark, India’s largest book

and music retailer.

2.5. FDI in Multi-Brand Retail Sector

India has kept the retail sector largely closed to outsiders to safeguard the livelihood of nearly 15

million small storeowners and only allows 51 per cent foreign investment in single brand retail

with prior Government permission. Thus, single-brand retailers such as Louis Vuitton, Fendi,

LLadro, Nike and Toyota can operate now on their own. Metro is already operating through the

cash-and-carry wholesale mode. FDI is also allowed in the wholesale business.

Business Models for entry in Indian markets

At present entry into India’s retail sector can be done through three different routes. First is

Franchise agreements, which is the most widely used. Examples of firms adopting it are

Domino’s and Pizza Hut. Second is Cash and Carry in wholesale trading in which 100% FDI is

allowed. This serves small retailers and is not meant to cater household consumers. Finally, we

7
 India’s Multi-Brand Retail Industry – Big Bazaar

have Strategic Licensing in which a foreign company enters into a licensing agreement with a

domestic retailer.

2.6. Porter’s Five Forces Analysis

New Entrants Threat: Moderate:
• High Fixed Costs: Supply Chain, Real estate
etc.
• Dependence on relationships and resources
• Competition: High:
• Competition for offering lowest price
• Competition for growth to gain clout
and command prices to the suppliers

Buyer Power: Moderate:

Supplier Power: • Low Bargaining power on prices
Moderate • High power of choice of Retailer
• Loyalty points, membership cards, discounts
• Suppliers have little are used to lure the customers
say on the margins
and thus wield low to
moderate bargaining
power Threat of Substitutes: High:
• Organised retail shops • Supermarkets offer a wide range of products, so
usually are the substitutability of products is low
biggest customers for • Substitutes exist in form of kirana shops and
these suppliers vegetable vendors

Threat of new entrants: While the barriers to start up a store are not impossible to overcome,

the ability to establish favorable supply contracts, leases and be competitive is becoming

virtually impossible. Now there are finally signs that the Indian government is dropping its

traditionally protectionist stance and opening up its retail market to greater overseas investment.

It has eased restrictions on foreign investment, allowing overseas retailers to own 51% of outlets

as long as they sell only single-brand goods. Chains like McDonalds, Marks & Spencer, Body

Shop and Ikea can, if they want to, open and control their own operations in India. On the whole

threat of new entrants in the retail industry is moderate.

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 India’s Multi-Brand Retail Industry – Big Bazaar

Power of Suppliers: Historically, retailers have tried to exploit relationships with suppliers and

decrease their bargaining power. In the Indian retail industry as well, suppliers tend to have very

power reduced because of increasing dependency on big ticket stores such as Spencer’s,

BigBazar and Reliance. However, since organised retail still covers a smaller share of the pie,

suppliers can wield some power to increase their margins.

Power of Buyers: Individually, customers have very little bargaining power with retail stores. It

is very difficult to bargain with the clerk at, say Spencer’s, for a better price on grapes. But as a

whole, if customers demand high-quality products at bargain prices, it helps keep retailers

honest. The other side of the argument could be that the increasing availability of such retail

stores has offered the freedom to pick and choose the best retail shop thus reducing the

dependency on one retailer.

Availability of Substitutes: The tendency in retail is not to specialize in one good or service, but

to deal in a wide range of products and services. This means that what one store offers you will

likely find at another store. Retailers offering products that are unique have a distinct or absolute

advantage over their competitors. For example:-MORE(A Birla Brand) provided variety of

products which are more or less of similar nature and thus aids in making available different

goods. However if we compare the organised retail with the unorganised kirana stores, the kirana

stores can be said to be a substitute for the supermarkets.

Competitive Rivalry: Retailers always face stiff competition. The slow market growth for the

retail market means that firms must fight each other for market share. More recently, they have

tried to reduce the cutthroat pricing competition by offering loyalty points, membership cards

and other special services to try and gain the customer's loyalty.

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 India’s Multi-Brand Retail Industry – Big Bazaar

The ferocity of the competition also lies in the desire of the retailers to gain a bigger share of the

market. A larger share ensures economies of scale in an industry where the fixed costs are high.

At the same time, large size enables the retailers to demand lowest prices from the suppliers thus

increasing their competitive advantage by increasing the wedge between cost and sales price.

Big-Bazaar:

We now focus our study on Big-Bazaar, the firm used in our analysis:

3.1 Overview of company: Entry and Growth:

Big-Bazaar was launched in 2001 by Kishor Biyani, owner of Future Group, and has since then

become synonymous with household shopping in Indian metro and large cities. It is a Multi-

Brand retail chain which falls under the category of Hypermarket. It sells a large mix of

merchandise which is useful in day to day household affairs or which is needed as a part of

normal lifestyle and has become the favorite destination of Indian middle class for their shopping

requirements.

Big-Bazaar carries a host of products ranging from Apparels, Food products, Farm products, Soft

and Diet drinks, Utensils and Crockery, Personal care products and Home utility care products. It

also carries Electronic products, Fashion & Jewellery, Furniture, Child care & toys and a host of

other products which are useful in running household affairs. A typical Big-Bazaar store carries

around 170000 Stock Keeping Unit (SKUs) in these different categories.

With Organized retail occupying less that 1% of total retail in 1997, there was certainly a huge

unexplored opportunity waiting to be encashed. Kishore Biyani, the promoter of Pantaloon Retail

identified this opportunity and launched Big-Bazaar. Pantaloon was launched in 1997, and so

Biyani already had spent over 4 years in establishing this successful brand. With his past
10
 India’s Multi-Brand Retail Industry – Big Bazaar

experience in handling known brands such as Bare Jeans, John Miller, and Pantaloon Shoppe (an

exclusive menswear store), he quickly identified an opportunity in creating a Hypermarket,

which would offer Value products to customers. Indian customers being highly price sensitive in

value products, the chief strategy adopted to make Big-Bazaar attractive was low pricing. Thus,

Big-Bazaar identified the punchline of “Is se sasta aur accha kahi nahin”, which by itself

communicates the Low-Pricing strategy of the firm. It also hinged on the fact that it was the only

such store of its size providing plethora of products under one roof.

The strategy quickly attracted Indian consumers. When Big-Bazaar was launched, its main

competitors were the shops which used to supply daily consumables and household-products to

consumers within a small local territory. Adopting a value based and low pricing strategy, Big-

Bazaar speedily spread its operations from 2 stores in 2001 to over 150 stores in 2010. The

company is planning to expand its operations by taking the number of its stores to 300 and

increasing its turnover to over Rs. 10000 Crores in the next 2 years.

3.2 How Did Big Bazaar tackle Porter’s forces?

Buyer Power: Big Bazaar sells its products at low price to reduce buyer’s power. So far this has

worked wonders for Big Bazaar and even their punch line is ‘Isse sasta aur accha kahin nahi’.

Big Bazaar provides a range of products which gives its customers an unparallel variety. Big

Bazaar provides not only products but also value added services to its customers. Big Bazar’s

pricing philosophies include the Everyday Low Price, Genuine products with warranty, Free

Shipping and Easy Returns.

Threat of substitute: Big Bazaar basically sells daily usage consumable items which can’t be

replaced. People have to buy food, snacks, soap, cosmetics, and cloths. Considering Kirana

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 India’s Multi-Brand Retail Industry – Big Bazaar

stores as substitutes, big bazaar cannot penetrate into residential areas and set up shop there due

to size requirements. This is where the kirana shops have an edge as they thus become more

accessible.

Barrier of Entry: Big Bazaar implemented these strategies to make barrier of entry high:

• Big Bazaar created a big brand for itself. It did not try to start with humble beginnings the
way MORE(Aditya Birla venture) or other players went.

• Big Bazaar established inimitable processes and supply chain technology.

• Big Bazaar operated on large scale which would take years for a new company to imitate
due to high fixed costs and path dependency.

Supplier’s power: On the one hand they can wield pressure on the smaller kirana stores while

on the other the bigger players pressurize them to reduce prices. Organized retail today is a small

portion of the entire retail industry in India. As the industry grows, suppliers will face

diminishing bargaining power due to heavy dependence on one retailer.

Big bazaar has already made sure that its supplier’s offer them the best price

• Big Bazaar is increasingly selling a major share of it supplier’s items; hence suppliers are
bound to depend heavily on Big Bazaar.

• Some of the suppliers don’t have their own established brand and depend on Big Bazaar.
We separately study issue of competition, and how Big-Bazaar created competitive advantage:

3.3 Tackling Competition & Developing Competitive Advantage:

Big-Bazaar was the first to enter a supermarket type business in India, thus giving organized retail

industry a different direction. Thus the time of its entry, it did not have any strong organized

competition. The main challenge it faced was from the unorganized retail Kirana (Mom-n-Pop)
12
 India’s Multi-Brand Retail Industry – Big Bazaar

stores, which were embedded in shopping habits of people. However, by offering value propositions

of low cost, more variety and better shopping experience, it has changed shopping habits of people

in metros and cities of its presence. Therefore, because of its success, it started facing the heat of

organized competition. It faced two types of organized competition. Generic competition was from

stores such as Reliance Retail, Vishal-Megamart, Spencers, More and Star Bazaar. It also faced

category specific competition from stores such as Westside (garments), Health and Glow, Globus

and Piramyd. We take a look here on the strategy which Big-Bazaar followed in offering a value

proposition to consumers and how Big-Bazaar strategically differentiated itself from the onset of

competition.

India, as a developing country is not a high on per-capita income. The middle class in India, earns

less than a third of million rupees per annum. The earning capacity and inflation rate go hand in

hand, not really offering any big growth in consumption capacity. Thus, consumers really look

forward to savings in their daily consumables. Big Bazaar could see this typical nature of Indian

consumers. Therefore, it adopted a Low-Cost strategy and offered the proposition of high savings to

Indian consumers. The suitability of this strategy in this industry and in India is reinforced by the

value offering from Big-Bazaar of household use articles which are used in regular household

consumption and were offered to a class of people eagerly looking for savings. There were some

activities and resources which Big-Bazaar used to create competitive advantage. First was Big-

Bazaar’s ability to offer several brands under one roof. Thus, although it offered several verities of

many brands, but mutual reinforcement of its activities of bulk purchase and price negotiation with

suppliers helped it in pursuing the strategy of offering low cost commodities to consumers.

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 India’s Multi-Brand Retail Industry – Big Bazaar

Also, the standard mechanics of distribution channels were circumvented by Big-Bazaar. Big-

Bazaar developed its own warehouses and aligned its distribution networks directly with

manufacturers. This helped in reinforcement, as well as effort optimization. Reinforcement was

done as Big-Bazaar was able to avoid intermediation of distributor margins, which it could offer to

consumers in form of low prices. Along with this, Big-Bazaar could optimize its efforts to network

across its own retail outlets and channelize the procurement directly to either retail stores or to

warehouses which were located either adjacent to or in direct vicinity of its retail stores.

Along with the above activities, which led to achievement of the low-cost strategy adopted by Big

Bazaar, it also offered a world-class shopping environment to its consumers. This differed from the

small and clumsy Kirana stores which did not provide touch and feel access to goods sold to

consumers. Thus, factors such as self-service lead to direct contact of consumers with goods, which

acted as purchase stimulants. These factors led to a better shopping experience, which added value

to the low-cost strategy offered by Big-Bazaar. The Low-cost strategy also got reflected in Big-

Bazaar’s name. Bazaar literally means market. Indian consumers have been traditionally shopping

in markets. Markets offer a collection of different small-small retailers offering specialty items to

consumers. The name Big-Bazaar immediately connotes a Big market which offers all shopping

requirements to consumers under one big roof. Thus, consumers quickly got diverted from

traditional household shopping habits and places to Big-Bazaar. Big-Bazaar was thus successfully

able to create a competitive advantage against the unorganized competition.

Organized competition, however came later from two different types of competitors. One type was

which tried to offer an equally wide mix of commodities and offered a proposition of low-cost.

Stores which tried to cater with this similar strategy are Vishal Mega Mart, Spencers, Reliance

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 India’s Multi-Brand Retail Industry – Big Bazaar

Retail, Nilgiris and More. Other types of competitors specialize in offering some products. These

competitors supply specialized products, and offer them in several propositions. They not only offer

low-cost products as commodities but also offer slightly premium products in same category which

carry better quality. Examples of such competitors would be Westside, Health & Glow, Globus and

Food World etc. Thus, Westside, which typically offers fabrics, would not just commoditize clothes

to match the pricing of Big-Bazaar, but it will also keep range of premium products to attract

consumers who want to purchase better quality products. We assess the competitor strategies and

analyze measures taken by Big-Bazaar to further create and maintain its competitive advantage.

Big Bazaar tackled Organized competition by repeatedly establishing its Cost leadership strategy in

the market. This was done by choosing the set of activities which facilitate the same, and by

actively utilizing its resources towards that end. Using its resource of an established brand, Big

Bazaar launched a series of campaigns which highlight and penetrate its consumer friendly strategy

of being a broad based low cost differentiator. To name a few activities, it has started EDLP (Every

Day Low Pricing), in which everyday, some products are offered at below the regular prices. It has

started point of purchase price discount and bundle-purchase discount schemes. It also started price

discount offers and adopted slogans, such as Isse sasta aur achha kahin nahi (cheaper and better

products cannot be found anywhere else). It has also started offering interval based promotions by

developing an Hafte ka Sabse Sasta din (Week’s cheapest day) offer. It has also started special event

based promotions such as Sabse Saste Teen Din (Cheapest three days), an offer which came on 26th

Jan 2009 in an extended weekend. Apart from the above activities which reinforce the low cost

strategy and its leadership position in the industry, Big Bazaar has also started Home delivery

services for a purchase more than specified amounts, and within a certain radius of the store. This

has added value to its existing low cost strategy. The traditional kirana (Mom & Pop) local stores
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 India’s Multi-Brand Retail Industry – Big Bazaar

used to offer this facility to its regular buyers, and by offering similar strategy, Big Bazaar is

developing personalized services which can help in increased customer attraction and purchases,

and sustainability of its competitive advantage.

Using its resources of huge stock, Big Bazaar also launched ‘The Great Exchange Offer' to

corporate offices and various housing societies which find themselves loaded with junk items

ranging from computers, stationery and printouts and waiting to be disposed of. ‘The Great

Exchange Offer' is a month-long event where consumers give their old junk - including newspapers,

clothes, footwear, plastics, electronics or furniture to Big Bazaar and get coupons in exchange

which can be used to make purchases at the store (upto 25% of the value of the purchase). Big

Bazaar also started a “Big Bazaar Wholesale Club” which gave to an opportunity to save in bulk as

the customers buy in bulk. In line with the Big Bazaar tradition of providing best deals at best

prices, the Big Bazaar Wholesale Club provided the customers bulk deals at wholesale prices.

Big Bazaar is a part of Future Group, a group which holds multiple interests in organized retail

industry in India. Being a part of a bigger retail house has also helped Big Bazaar. It has actively

tried to utilize the set of resources which are available to the entire conglomerate. For example, the

three popular chains which Future Group holds are Big Bazaar, Pantaloon Retail Pvt. Ltd. and

Central. Big Bazaar is for mass market, while Pantaloon and Central cater specifically to the

garments segment for lifestyle and premium consumers. Thus competition within group products is

very limited. However, the scope of resource sharing is always there. This has resulted in cost

advantages due to simultaneous activities being conducted across enterprise for inbound logistics

such as procurement, human resources sharing, inventory warehousing and technology support. The

cost advantages have further been used to reinforce the strategic position of Big Bazaar of offering

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 India’s Multi-Brand Retail Industry – Big Bazaar

stable low priced household products. Big Bazaar has thus been able to make positive use of its

skill-set and resources towards common goals of Future Group profit maximization without

compromising on market value of any of its individual retail brands. Thus, by effective use of its

resources of brand, its parent-group subsidiaries, its first mover advantage, Big Bazaar was able to

create and maintain its competitive advantage.

3.4 SWOT Analysis of Big-Bazaar:

STRENGTHS: Low Price/Different Discount Scheme: The Big Bazaar Outlets sell a variety of

products at prices which are lower than the market price. Almost everything has some kind of

discount in Big Bazaar. Consumers accept the fact that they come from faraway places because it is

cheap in Big Bazaar for bulk shopping. Big Bazaar is able to secure stock directly from the

manufacturer and offer discounts up to 60% for the 1,70,000 SKUs 365 days a year.

Huge Display Area: A typical Big-Bazaar store covers an area between 15000 and 50000 Sq Feet.

With an average 30,000sq/ft: Big Bazaar displays all their grocery and all other product that

customer can touch and feel the quality. It operates on the concept of shopping through self-

selection by the customers. There are sections such as Gold-Bazaar, Mobile-Bazaar, Shringar,

Utensils and Plastics etc within one store, each storing multiple brand SKUs in that category. This

concept has also attracted consumers and made products more accessible.

Product Diversity: 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 Big Bazaar. The

product is the same in every store in the city but the brand options are more in Big Bazaar.

Promotion: Huge promotional activities are undertaken to ensure enough footfall. Big-bazaar

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 India’s Multi-Brand Retail Industry – Big Bazaar

engages in regular discounts, as well as special discount schemes, such as “Sabse Saste Teen Din”

around Republic Day. Such schemes attract non-regular buyers who in turn become regular.

Infrastructure & Ambience: Big-Bazaar makes sure that its stores have huge area to not only stock

large number of SKUs, but also for things such as place for navigation to consumers, for additional

space for promotional displays and for billing. Ambience of the Big Bazaar is not like the

hypermarket in West, which follows liner layout. It is not only providing good parking , AC

ambience to create a “ no hassle “shopping experience but also designed in a way that it provides a

traditional bazaar like environment, where the most Indian feel comfortable.

WEAKNESSES:

Demand Management: Big Bazaar is in a growing industry. It has also tried to make its operations

efficient to cater to consumer demands. However, because consumer demands are always growing,

and the store size is a constraint, Big-Bazaar is finding it increasingly difficult to house largeer

number of demanded products.

High dependence on distribution channel of firms for FMCG products (Fast Moving Consumer

Goods): Big-Bazaar has to directly depend on the distribution channels of several companies for

many products. Thus, for brands in FMCG, there is a heavy dependence on lot many suppliers for

each different brand. This makes the supply chain vulnerable to even small deviations, which in turn

might lead to gaps in inventory management and even customer dissatisfaction.

Perception of Overcrowding among consumers: Because of larger and larger number of people

getting attracted towards Big-Bazaar, we see enormous crowd gathering in every store. This is true

specially on weekends. Thus, consumers are getting a perception of Long-Queues at billing-

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 India’s Multi-Brand Retail Industry – Big Bazaar

counters, and sometimes even at purchase counters for some goods. This perception, if it becomes

strong can drive consumers away from Big-Bazaar.

OPPORTUNITIES:

Organized Retail: As noted above, Organized retail is growing its share in total retail industry in

India. This shift of preference of consumers to shopping through organized retail indicates a huge

expansion opportunity for Big-Bazaar.

THREATS:

Foreign & Domestic Competition: Demands of allowing 51% FDI in Multi-Brand Retail, if

approved can pose a significant threat to big bazaar. This will allow foreign players in the same

segment in which Big-Bazaar operates. This may force Big-Bazaar to change the way it carries out

its operations. Lot of Domestic players, such as Megamart, V-mart pose a direct challenge to Big-

Bazaar. It may have to deal with these players with a completely different strategy.

Higher Real Estate Prices: This factor can directly increase the lease or rental costs of Big-Bazaar,

which may lead to higher effective prices. Thus, solely because of this factor, Big-Bazaar might

have to deviate from its core strategy of offering value based price to the customers. This factor

operates specially in metros, which provide a high chink of revenues of Big-Bazaar presently.

4 The Challenges faced by Organized Retail Industry:

4.1 Infrastructure related issues:

Some of the Infrastructure related issues impacting the retail industry are same as those

impacting the industry in general in India while some are very specific to retail as such.

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 India’s Multi-Brand Retail Industry – Big Bazaar

a) Underdeveloped Supply Chain: This is the key bottle neck in the growth of retail in India.

We have inefficient and unreliable transport system in terms roads, rails and ports. Supply chain

management systems have very low penetration particularly in rural India. Also missing is

investment in cold storage warehousing. It is estimated that lack of national cols chain network

results in loss of Rs 50000 Crs. of farm produce every year.

b) Utilities: Inadequate supply of electricity clean water and natural gas in urban areas is a

bottle neck for large organized retail in India. Retailers have to substantial amounts for these

facilities with no reliability resulting in huge amount of cost for customers. Power shortage all

over the India is responsible for lack of cold storage and automation.

c) Information Technology Infrastructure: Although there has been considerable

improvement in tele-density in India, yet the growth of IT related infrastructure – mainly mobile

communication and internet has been restricted to urban areas only. This has severely

handicapped the setting up of organized retail on rural belt.

d) Supply Base Hurdle: A fragmented supply base prevents economies of scale. Vendors are

small players taking advantage of SSI subsidies and are highly unreliable in terms of timely

deliveries. Dealing with large number of them increase transaction costs for the retailer. Supply

side uncertainty cause higher inventory demanding more space and cost. All this adds to the cost

of operations for the retailers. Impact is all the more on Multi Brand Retail.

e) Inadequate Human Resources: While retail industry is now turning out to be one of the

largest employers in India, but lack of trained manpower is bottle neck specially in middle

management levels. There is no university-industry partnership for imparting skills in disciplines

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like retail management, retail merchandising, retail sales and marketing, fashion/apparel

merchandising etc. Strict labor laws are not conducive to retail business driving retailers to part

time employment and as a consequence little training and development of employees is paid

attention to. Further attrition rate in industry is high resulting in unstable growth.

Similarly policy decisions taken or not so taken by Central and various State governments in

India have impacted the retail industry. Some of them are as discussed below:

4.2 Policy related issues:

a) Taxation: There are number of taxes applicable on goods as goods are manufactured and

distributed around the country. Some of them are excise duty, value added tax, service tax, sales

tax-central and state, entry tax, turnover tax, octroi etc. This not only increases the costs but also

makes system inefficient on account double taxation and creation of hurdle in movement of

goods within the country. Goods and Service Tax is now being discussed to address above

issues.

b) Real Estate: The delay in real estate reforms have been impacting the retail industry

immensely as real estate plays are a very large role in setting up the chain of stores. The lack of

availability of space and high cost of same has been the key issue. Indian laws like Rent Control

act, unclear laws causing confusion on use of land for commercial purpose, high stamp duty rates

of 5-14%, inadequate infrastructure planning have directly impacted the retail growth.

c) Insufficient Government Incentives: The biggest point of contention here is that

Government has not granted industry status to retail in India. Thus many incentives and benefits

which are available to industry are lacking. This has resulted in lot of investors shying away

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 India’s Multi-Brand Retail Industry – Big Bazaar

from this area. The banks and other financial institutions do not focus on retail financing

resulting in higher cost of capital for retailers.

d) Policy Hurdle: There is no nodal agency to create and manage supportive framework for

retail sector. Government laws require at least 30-40 licenses before a retail store can be open

creating a big hurdle and encourage bad practices. APMC laws create an extra layer between

farmers and retailers causing barriers for benefits to reach farm producers. FDI in retail is

restricted to 51% and FDI in multibrand retail in not allowed by government. This adversely

impacts investment in the retail sector. There is no attraction for World class companies to invest

and bring their best practices which would bring efficiencies and thus benefit both producer as

well as consumer.

4.3 Conclusion & the Road Ahead: Recommendations for Big-Bazaar:

Looking into the attractiveness of the retail industry in India, the competition is bound to

increase in future for BIG BAZAR. Thus company cannot afford to be complacent and has to

continue to evaluate its strategy in view of new threats and opportunities thrown by the market.

BIGBAZAR faces threat from large Indian corporate in retail like Reliance, TATA, RPG group

etc who have deep pockets and pan India presence. A large threat in future is going to come from

International chain of stores like WALMART, CARREFOUR, TARGET, COSTCO etc who are

eagerly waiting for Indian Government to liberalize FDI in multi-brand retail. A discussion paper

on FDI in multi-brand retail has already been floated by GOI and it is expected as a one step

closer to liberalizing multi-brand retail in India. Therefore it is very important for BIGBAZAR to

gear itself to face the challenges ahead.

Some of the areas where BIG BAZAR needs to focus are as follows:
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 India’s Multi-Brand Retail Industry – Big Bazaar

1) Increase the number of retail outlets: This should be the key strategy initiative for BIG

BAZAR. They have so far concentrated in TIER 1 & TIER II cites with more stores in TIER

I. They can expand their presence in TIER II and make entry in TIER III on selective basis.

The success in retail lies in maintaining profitability by following low cost strategy. A

prerequisite for the same is achieving volumes by taking advantage of economies of scale.

By increasing their size they will be in a better position to manage power of suppliers who

are big FMCG companies like HLL, P&G, ITC, NIKE, etc. With large size they will be

able to bargain better. Large size also would require investment in fixed assets both in terms

of stores and larger supply chain. New entrants would not be able to match their size and

this would create huge entry barriers for them.

2) More Brands/ More SKU: Another key competitive strategy for success is to increase

number of SKUs held by a retail store. By providing items for all family members

BIGBAZAR can increase the footfalls and position itself differently from its competitors.

The company should not only focus on more number of SKUs, but also on more brands for

particular SKU so that they are able to provide enough choices for customers. This will help

to reduce intensity of competition as they will become preferred retail store for customers.

3) Diversifying -Backward Integration: Diversifying into related fields would also help them

strengthen their position in the industry. They can look into areas like warehousing and cold

storage chain. Success in retail is largely dependent on success in managing the supply

chain. Warehousing and cold storage is an important integral of smooth movement of supply

chin and require huge investments. By controlling warehousing and cold storage capacity

they can control a valuable resource and create entry barriers for the new entrants and also

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reduce intensity of competition as their rivals will have to depend on others for these

activities.

4) Synergize with other Businesses: BIGBAZAR belong to Future Group of Industries which

have many allied business similar to retail. They are namely Pantaloon India- a retail in

garments, STAPLES- (a joint venture in field on office equipment retail) etc. As a corporate

strategy BIGBAZAR can exchange skills and share activities with them. This will not only

help them to reduce costs but also increase and bring value to their operations.

5) Human Resource: One of the challenge retail Industry is facing is lack of skilled manpower

required for maintain growth. Thus skilled manpower is a valuable resource for retail

industry. It is a scarce and critical resource (service industry is dependent on its manpower

to a great extent). Thus BIGBAZAR needs to control this resource to its advantage. It should

invest heavily in training and imparting skills to its people. They should forge partnerships

with leading management institutes in India and World for retail management and training

its manpower. This will create a unique advantage over its competitors and nullify their

power.

References

1) A CII- A T KEARNEY report on Retail in India.

2) The Annual Report of Pantaloon India, 2008-09.

3) Corporate Catalyst India – A report on Retail Industry

4) Foreign Direct Investment in India`s Retail Sector- An All India Retail Research Report

5) Ernst &Young, the Great Indian Retail Story, 2006

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