Synopsis

Indias Multi-Brand Organized

Retail Industry-Bazaar
Submitted to Indraprastha Collage of Management And Technology

By Gaurav Choudhary REGISTRATION NO. MGMT/09/633 Guided By Rishi Nepalia ************ For the partial fulfillment of Post Graduate Diploma in Entrepreneurship and Business Management

PROJECT REPORT SYNOPSIS Name Registration Number Address of Corresspondnce : : : Gaurav Choudhary MGMT/09/633 Naino ki Dhani Jodhpur

Name of Project Guide Designation and Address

: :

Mr. Rishi Nepalia Associate Professor ICMT Defence Lab Road Jodhpur

Title of the project

Indias Multi-Brand Organized Retail Industry BigBazaar

Executive Summary
The Indian Retail Industry is the largest among all the industries in India, accounting for over 10 per cent of the Indias 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, Spencers, 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, 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.

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.

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.

Pantaloon Retail:
Pantaloon Retail (India) Limited, is Indias leading retail company with presence cross 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 Ltds 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 hrough two brand names, SOGO and Jiuguang.

Spencers Retail:
Spencers retail is the largest supermarket chain in India.pencers retail offers the complete gamut of products & durables ranging from bread to bed covers; fromtoothpaste to television. Spencers 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.

Shoppers Stop:
Shoppers 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 nations largest and fastest growing retail store chains. A beginning was made in 1998 with estside, 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, Indias largest book and music retailer.

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 Indias 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 Dominos 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, wehave Strategic Licensing in which a foreign company enters into a licensing agreement with a domestic retailer.

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

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 pportunity 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 pastexperience in handling known brands such as

Bare Jeans, John Miller, and Pantaloon Shoppe (an exclusive menswear store), he quickly identified an pportunity 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 BigBazaar 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.

How Did Big Bazaar tackle Porters forces?

Buyer Power: Big Bazaar sells its products at low price to reduce buyers 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 Bazars 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 cant be replaced. People have to buy food, snacks, soap, cosmetics, and cloths. Considering Kirana 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. Suppliers 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 suppliers offer them the best price Big Bazaar is increasingly selling a major share of it suppliers

items; hence suppliers are bound to depend heavily on Big Bazaar.

Some of the suppliers dont have their own established brand

and depend on Big Bazaar. We separately study issue of competition, and how Big-Bazaar created competitive advantage:

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-nPop) 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 BigBazaar 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-Bazaars 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. 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 lowcost 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 Lowcost strategy also got reflected in Big-Bazaars 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 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 (Weeks 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 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 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.

NEED OF THE STUDY In this competitive world, there exists huge competition between organizations of retail sector. The company which adopts best sales promotion activities, will have better profits. So, it is necessary to know companys sales promotion activities which results in sales growth and turn profits to the organization. OBJECTIVES OF THE STUDY

1. To Evaluate the Different Sales Promotion Activities of Bigbazar

2. To Analyze the factors impacting in Designing the sales promotion

Activities on at Bigbazar.

3. To study the impact of Sales promotions on Consumer Buying

Decision at Bigbazar. 4. To suggest the appropriate sales promotion strategies to the Bigbazar to attract new customers & retaining the old customers.

SCOPE OF THE STUDY Big bazaar is having its sales promotional activities in such a manner. It plays a great role in growth as well as incomes of the company. METHODOLOGY AND DATA COLLECTION METHODS Research design Sources of data:Primary data: It is the information collected directly and with any references. In the study it was mainly interviews with concerned officers and staffs either individual or collectively. Some of the information had verified or supplemented with personal observation, the data collected through conducting the personal interview with the customers. . Secondary data: The secondary data was collected from already published sources such as pamphlets, annual reports, reports and internal records the data includes. Reference from text books and relating to articles published in business details like economic times, business time e.t.c Sample design: sample selection is of random type. Sample size: sample size is 100 customers of Big Bazaar