Big Bazaar to move into grocery stores segment

Big Bazaar to move into grocery stores segment
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First Published: Fri, Aug 01 2008. 12 38 AM IST

Pantaloon prototype: If its Big Bazaar Best Deals store in Kandivali, Mumbai—that stocks items of daily use —is successful, the company plans to open such stores nationwide. (Photo: Ashesh Shah/Mint)
Pantaloon prototype: If its Big Bazaar Best Deals store in Kandivali, Mumbai—that stocks items of daily use —is successful, the company plans to open such stores nationwide. (Photo: Ashesh Shah/Mint)
Updated: Fri, Aug 01 2008. 12 38 AM IST
New Delhi: India’s biggest publicly traded retailer, Pantaloon Retail (India) Ltd, plans to open up to 1,000 grocery stores under its Big Bazaar brand in the next three years.
It also plans to launch catalogue stores and supermarkets in an initiative to cash in on its popular flagship brand.
Pantaloon prototype: If its Big Bazaar Best Deals store in Kandivali, Mumbai—that stocks items of daily use —is successful, the company plans to open such stores nationwide. (Photo: Ashesh Shah/Mint)
Pantaloon is testing a prototype of a convenience store called Big Bazaar Best Deals in Mumbai’s Kandivali suburb. If the pilot programme succeeds, it plans to open such stores nationwide, managing director Big Bazaar said. “That is a concept we are working on.”
Another Pantaloon official, who declined to be named, said the company opened the store last month and will test it for three months. “If the prototype is successful, we will go ahead and open such stores in other catchments.”
The company is still not sure whether it will name the grocery shops Big Bazaar Best Deals when it goes for an actual roll-out, this person said. He added that the retailer plans to open 150-200 such stores, each covering an area of 2,000 sq. ft, in the next 18 months.
“It is better late than never that people have realized that this (smaller format) is the best suited form of retail in India,” says R. Subramanian, managing director of Subhiksha Trading Services Ltd, which operates India’s largest chain of convenience stores. It, too, is aggressively ramping up the number of shops.
A host of Indian retailers, including Reliance Retail Ltd, Bharti Retail Ltd, Aditya Birla Retail Ltd and HyperCity Retail (India) Pvt. Ltd, are fighting a fierce battle in the grocery store space, with plans to open thousands of such shops. The retailers are focusing on smaller stores in a bid to gain scale, and overcome high rentals by getting reasonably priced real estate in residential locations.
Subramanian is unfazed by the increasing competition in its bread-and-butter smaller format stores. “Imitation is the best form of flattery, as everybody wants to be like us.”
Pantaloon made a late entry into the smaller format last year with a neighbourhood discount chain called KB’s Fair Price store. Currently it has more than 100 such shops and plans to open another 1,400 in the next three years.
It also plans to roll out supermarket outlets called Big Bazaar Express in two-three months that would each have a floor area of 15,000-20,000 sq. ft, according to the official who did not wish to be named. This compares with the 50,000 sq. ft Big Bazaar hypermarkets and 200,000 sq. ft Big Bazaar Supercentre.
Pantaloon plans to open about 100 Big Bazaar Express supermarkets in the next two years and the roll-out will start either in the National Capital Region—which comprises New Delhi and its satellite cities—or Chennai. The official declined to share investment figures for expanding Big Bazaar into smaller formats.
Pantaloon is also planning catalogue stores, to be called Big Bazaar Unlimited, in association with its electronic commerce unit, FutureBazaar India Ltd, and take this format to small towns. These small shops would display catalogues from which customers can order merchandise to be delivered at home.
It is also going ahead with its aggressive strategy for the hypermarket format. Currently, it operates 91 Big Bazaar hypermarkets and plans to double that number in the next one year.
“Big Bazaar is a much bigger brand than what we physically are on the floor,” said the official. “We are looking at different formats to see how we can make the brand stronger.”
Big Bazaar is the biggest revenue and profit generator for Pantaloon. The company announced revenues of Rs3,236 crore for the fiscal year ended June 2007 with a net profit of Rs120 crore. Pantaloon begins its fiscal year in July.
Edelweiss Securities Ltd expects Pantaloon’s revenue to jump to Rs5,755 crore in the fiscal year to June this year. The Mumbai-based brokerage firm expects Pantaloon to achieve a significant jump in its profit as well.
The company is expected to announce its annual results in September.
Pantaloon expects Big Bazaar and its existing Food Bazaar supermarkets chain to clock $1 billion (Rs4,250 crore) of revenue for the fiscal year that just ended. It projects the revenue to go up to $1.5 billion next year and to almost $4 billion in four years if the division maintains its current growth pace, Biyani had said earlier this year.
The company is also planning to spin off Big Bazaar and take it public.
“It’s a good strategy. If you were to spin off that brand which is across multiple formats, it would be valued higher. Therefore, you can unlock greater value throughout the group,” said Jayant Kochar, managing director of retail consultancy firm Go Fish Retail Solutions.
Priya Ayyar, an analyst who tracks Pantaloon at Edelweiss, said Big Bazaar has already reached a “critical mass” and the listing is about time. Branching into smaller format is the right thing to do, she added. Smaller formats are “the best place to cater to your everyday needs, while Big Bazaar hypermarket is for your weekly purchases”, Ayyar said. “Also, its quicker to roll out as you don’t have to wait for a mall to be built.”
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First Published: Fri, Aug 01 2008. 12 38 AM IST
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