belts to

ewellery
. Mehul
xt three

1offer a
CAS E 10
its first
.isee for BIG BAZAAR-THE ROUTE TO THE INDIAN MASS MARKET
Tightest

ali. The
Big Bazaar. This hypermarket chain was introduced in India by Pantaloon Retail (India) Limited.
unas. In
The year was 2001. The first store opened in Kolkata and was followed by stores in Hyderabad and
J
Bangalore, in a short span of 22 days. These stores contributed over Rs. 43 crores to the company's
us, The
ely 1246
outlets,
I 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
d Surat, j also tapped consumption potential in smaller cities like Agra, Allahabad, Coimbatore, Surat,
keeping Panipat, Palakkad, Kanpur and Kolhapur, By May 2008, there were 89 Big Bazaars spread across
(
s will be
lly. The II 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
in single I
marketplace. Whenever any of us need anything, the simplest way to get it is to go to the bazaar. Big
watches 1, Bazaar represents a location where a customer can shop for anything that he needs, for which he
; such as would normally visit a bazaar or the market.
sence III 1
I
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.

COMPANY BACKGROUND
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
the next
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
layers in and expanded its retail network at the same time. It launched three successful brands - Pantaloon
to reach
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. "I

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.

o
 pa

594 Retailing Management

MARKET ENVIRONMENT
of tI
At the time of the launch of Big Bazaar, there was no real precedent in the Indian market. Giants,
corn)
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
obje
local markets and local market leaders were studied. This was done to understand the product mix
strat
and the prices offered. One of the key discount retailers studied was Sarvanna Stores in Chennai.
CuS«
obje
THE STRATEGY
deci
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. the J
In India, when a customer needs something for the home, a typical thought is to seek it from stoo
the bazaar. A bazaar is a place where a complete range of products is always available to the ente
consumer. This is true across India. As the store would offer a large mix of products at a discounted outl
price, the name Big Bazaar was finalised. The idea was to recreate a complete bazaar, with a large
Foo
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. FOOl

Price was the basic value proposition at Big Bazaar. The Big Bazaar outlets sold a variety of 5,O(
products at prices which were 5 to 60 per cent lower than the market price. The line 'Isse sasta aur feel
achha kahin nahin/ emphasised thisl (Youwill not find anything cheaper or better anywhere else). 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.
I
The Merchandise Mix
f:
I
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. cat
Non apparel, which included plastic items, footwear, toys, luggage, appliances, white goods and im
stationery accounted for 30% of the off-take in the first year. The shop in shops, which were a part wh
vel
 Case 10 Big Bazaar-The Route to the Indian Mass Market 595

of the store, added to the product mix being offered to the customer, without requiring the
;iants, company to invest in the inventory.
of Big
The buying process for most of the categories at Big Bazaar was largely price driven. The
'arious
objective was to deliver good products at the best possible prices. A key element of the pricing
ct mix
strategy is to achieve 'Market-Breaking Price'. To achieve this, the price that will offer value to the
.nnai.
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.
) offer 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
t from stood at 53 per cent of personal income, was a very strong reason for the company to consider
to the entering food retailing. Keeping this in mind and to enhance the footfalls at its existing Big Bazaar
.unted outlets, the company launched Food Bazaar in the first year of operations.
llarge
Food Bazaar
dth in
Food Bazaar stocked on an average, 10,000 stock keeping units (SKUs) and occupied on an average,
etyof 5,000 square feet of retail space. It was modeled on the Indian mandi, where customers could touch,
ta aur feel and choose products, supplemented by packaged foods for western shoppers. The products
lse). sold were categorised as:
• Processed Food & Non Food (Hungry Kya)
• Dry Staples (Golden Harvest)
would • Wet Staples (Chill Station)
) help
ns. In
1arket

large
vithin
large
travel
tiated
rd the
yand I
i

r. Big
j
1
I
I, the
e first
ccess. 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
sand imported products, health foods and specialty foods. Dry Staples includes dry groceries like rice,
lpart 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.
 I Case 10 Big Bazaar-The Route to the Indian Mass Market 597

el, by Information Technology

asalas, j 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.
sazaar
1S and

ing to
I The data is processed overnight and an Auto Replenishment
done at the store level and week level.
Going forward, the management
System is in operation. Forecasting is

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 labels in five categories in
menswear, women's wear, and kidswear. The brands launched were:
• Knighthood - an exclusive line of executive wear in trousers and shirts
that it • DJ & C - a line of denimwear and cool casual wear
duced • Shatranj - ethnic wear for men
sector. • Pink & Blue - casual wear for kids
in the
• Studio NYX - party and lounge wear
eadya
.rip. At • .CTee - cotton t-shirts with funky prints
rer the' In 2003-2004, Food Bazaar reinvented itself, embarking upon providing customers an
ubled 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
-ithout
introduced in various product categories like tea, daIs, pulses, shampoos, ete.
could
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.
.ership
.onths, Over the years, Big Bazaar has introduced a whole new range of fashion products inspired by
lent or the seasons' colours and textures. In the year 2008, it signed M S Dhoni, the Youth Icon ofIndia, as
its brand ambassador.
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
oparel,
customer~ from all walks of life, with its trendy designs.'
shops.
'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
'rise of
aspirations.' Big Bazaar, the largest retail chain of Future Group, is eyeing a turnover of Rs 8,000
before
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,
it card, into separate companies. The company is now looking at opening a total of 300 Big Bazaar stores
has the and has introduced the neighbourhood. concept of retail, opening stores in residential areas. It will
ent on also introduce new business segments such as health and wellness in its stores.
ividing
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.
598 Retailing Management

The company was also looking to create more buying occasions, he said. For example, on Exhibit 1
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 Financial

was well received by the country's youth. For instance, this year, Big Bazaar sold 1,38,000 pairs of Cost of 9
jeans and 38,000 cell phones during the Republic Day offer. .Manpow,
Time and again, the company has innovated with its offering to the customer. It has introduced Advertisir
to India a retail format that is essentially value and price driven. It is an early success, however, InteresUT
given the diversity within the Indian marketplace, how do you see this retail format evolving for a PBDIT/ln
pan Indian presence?

Profilabili

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

Balance:

Debt-equ
Debtors t
Inventory
Current r
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 599

ole, on Exhibit 1 Group Ratios

in the
Financial Performance Jun-03 Jun-04 Jun-05 Jun-06 ..• Jun-07
, which
iairs of Cost of goods/Net Sa.les 68.23% 66.54% 66.52% 66.53% 68.26% .
Manpower costs/Total Income 4.29% 4.17% 4.80% 5.99% 6.19%
oduced Advertising and selling costITotal income. 2.65% 2.84% 3.09% 2.72% 2.80%
rwever, InterestITotal income 3.97% 3.64% 2.60% 1.97% 2.70%
.g for a PBDITllnterest (Debt-Service Ratio) 2.16 2.39 3.42 4.05 3.43

Profitability Jun-03 Jun-04 Jun-05 Jun.-06 Jun~07

PBDITlTotallncome 8.57% 8.66% 8.89% 7.99% 9.24%

PBDTlTotallncome 4.60% 5.03% 6.29% 6.02% 6.54%
NetPr6fitFr6tal Inc6me 2.56% 3.00% 3.65% 3.43% 3.60%
..RONW (Average networth) 18.92% 24.47% 24.42% 17.15% 14.82%
~OCE (Average Capital employed) 20.31% 21.03% 22.41 % 18.03% 17.48%

Balance Sheet. Jun-03 Jun-04 Jun-05 Jun-06 ,J!f!1-n,

Debt-equity ratio 1.53 1.29 0.89 0.50 0.79
Debtors turnover (days) 18 10 4 3 7
Inventory turnover (days) 93 86 94 98 99
Current Ratio 1.51 1.65 1.73 1.44 2.19
Quick Ratio 0.48 0.52 0.55 0.58 1.08
Asset turnover (Total Income/total assets) 2.07 1.96 2.03 1.62 1.96

Key Financial Parameters (Rs in Crores) Jun-03 Jun-04 Jun-05 Jun-06 Jun-07

Total Revenue 445,62 659,64 1,055.85 1,871.98 3,328.76

~.r~fit before Interest Tax and Depreciation 38,18 57.14 93.91 149.64 307.62
, PrbfitafterTax 11.41 19.78 38.55 64.16 119.99
,
Cash Profit .. 18.89 31.68 58.90 99.85 184.78

; Per share data . Jun-03 . Jun~O{

Basic Ea"rnhlgs (less extraordinary income) ,113 1.84 3.31 5.06 8.71
.Basic Cash EarniHgs(Rs.) 1.76 2.66 4.45 6.70 11.39
Dividend (Rs.) 0.20 0.30 0.50 0.50 0.50
Book value (Rs.) 7.39 9.87 20.12 39.20 74.42
600

Exhibit 2 10-year Balance Sheet

Retailing Management
I Exhibit 3
(Rs. in Crore)
, Profit & La;

.Sa.les s' 01

Other lncoi
EqU.i\Y St)1ir6 capit~J 8.09 9.26 12.52 13.32 17.32 18.18 19.14 22.00 26.88 29.35
Total Incor
"Shareapplicatiorr 2.21 4.00 0.00
10.48 Cost of goe
Reserves & surplus 7.52 13.07 22.75 36.68 49.50 75.75 196.53 500.03 1,062.82
\!Varrant ApplicationMoney 3.00 Contract w

,Shareho.l(jer's Fund 17.82 23.75 25.59 36.07 54.00 67.68 94.89 221.53 526.91 1,092.17 Packing m;
1.79 2.92 6.03 13.04 27.92 55.84 Power
25.99 26.93 31.61 68.22 109.53 141.32 214.76 256.17 428.10 951.93 Excise
0.36 1.84 2.73 1.42 0.30 4.23 21.36 30.04 173.29 347.65
26.35 28.77 34.34 69.64 109.83 145.55 236.12 286.21 601.39 1,299.58
44.17 52.52 59.93 105.71 165.62 216.15 337.04 520.78 1,156.21 2,447.60
"Advertlserr
Transporta
y",:".<'

Sales Tax
J
Gross block Mise. Expe
Total Cost
8.03
PBDIT
4.32
Interest
12.35
PBDT .,
0.40
Depreciatic

PBT
Extra-ordin
885.96 Profit after
6.74 10.87 65.17
Current Ta:
2.19 2.20 162.97
Deferred To
3.35 3.27 633.85
Fringe Ber
1.50
44.74 55.53 82.78 132.46 166.21 229.98 1,749.45 PAT

13.12 12.41 13.75 17.64 13.58

7.15 9.66 12.04 44.44 52.91
0.39 19.6 0.98 4.40 6.95
20.66 2403 26.77 66.48 73.44
24.08 31.05 56.01 99.73 156.54
9.36 0.89 0.76 0.53 0.40
52.52 59.93 105.71 216.16 337.04 1,156.21 2,447.60
 Case 10 Big Bazaar-The Route to the Indian Mass Market 601

Exhibit 3 1O-year financial summary - P&L account

's, in Crare)
Profit &Loss Account Jun-98 Jun-99 Jun~OO Jun-01 Jun-02 Jell1-03 Jun-04 J.un-05 Jun:06 . Junc07

Sales & Operating Income 90.10 105.24 137.28 180.58 285.29 444.83 658.31 1,052.80 1,868.97 3,236.74
Other Income 1.62 073 0.66 0.44 0.67 0.79 1.33 3.05 3.00 92.03
29.35
Total Income 91.72 105.97 137.94 I 181.02 285.96 445.62 659.64 1,055.85 1,871.97 3,328.77
0.00
1,062.82 ,Cost of goods cons & sold 57.52 73.32 97.16! 117.98 186.11 303.5 438.01 700.31 1,243.43 2,209.48

Contract work expenses 9.42 6.35 5.17 8.28 6.51 6.77 6.97 15.27 20.66 14.62

1,092.17 ;Packinl;i:matedals 0.87 0.69 0.76 1.24 2.11 3.10 5.64 12.44 19.22 27.80
55.84 . Power 0.38 0.58 1.03 2.02 5.34 7.94 12.08 21.95 37.41 61.51
951.93 Excise 0.43 4.58 3.40 3.36 0.28
347.65
0.65 1.18 3.08 6.18 10.03 15.71 27.59 47.97 113.46 207.02
1,299.58
1.91 2.57 4.18 6.81 13.59 19.13 27.53 50.65 112.07 206.09
2,447.60
-Advertisement expenses 2.83 3.15 2.98 6.05 8.77 11.83 18.75 32.56 50.96 93.14
Transportation expenses 0.91 0.73 1.08 1.73 2.72 3.43 5.95 12.66 19.08 35.57
•Sales Tax 1.47 1.85 3.55 5.26 7.75 14.91
767.07 Mise. Expenditure 8.91 7.16 9.22 12.00 17.96 24.88 41.72 67.84 106.03 165.90
92.47 Total Cost· 83.40 97.21 126.53 166.27 262.98 407.44 602.50 961.94 1,722.34 3,021.14
574.60
PBDIT 8.32 8.76 11.41 14.74 22.98 38.18 57.14 93.91 149.64 307.63
131.13
Interest 5.29 5.51 5.07 6.22 11.24 17.67 23.94 27.46 36.92 89.76
805.73
,PBDT 3.03 3.26 6.33 8.52 11.74 20.51 *33.20 66.46 112.72 217.88
252.01
Depreciation 0.85 0.83 1.07 1.63 4.22 6.35 8.79 13.33 20.82 36.86
PBT 2.18 2.43 5.27 6.89 7.53 14.16 24.41 53.12 91.90 181.01

Extra-ordinary Items (0.02) (0.00) 0.04 0.01 0.78 0.07 0.03 0.07 0.06
885.96 Profit after EOI 2.18 2.45 5.27 6.85 7.52 13.38 24.35 53.09 91.82 180.95
65.17 (0.04) 0.45 0.85 1.45
0.10 0.35 0.39 7.28 11.07 30.71
162.97
0.10 1.13 3.11 7.01 14.87 27.93
633.85
1.50
Fringe Benefit Tax o 0.24 1.75 2.32

1,749.45 2.22 2.35 4.92 6.40 7.03 11.41 19.78 38.55 64.16 119.99

223.72'"
120.15 .
15.71 ~
359.58
1,389.86

2,447.60