Friday, January 27, 2006

Big Bazaar vs. US Retailers

Yesterday was a Maha Savings Day at Big Bazaar. Big Bazaar announced a week back that 26th January would be the day when its going to give ultimate discount on its entire range. One could buy a 21 inch television at just about 5890 bucks. VIP suitcases were available at just about 200 rupees and a whole lot of merchandise notably garments like the Ruf and Tuf jeans. A pair of Ruf and Tuf jeans were available at 499/- only which is close to 50 % less than the market. With this kind of offer Big Bazaar opened its stores on 26th of January, a national holiday, at a never before time. At 8:00 AM.

Some of the offers were as follows:
The offers were spread across categories from electronics to utensils to apparel to furniture to food. Pressure cookers will be on offer for Rs 299 while a pair of 2 Ruf-n-Tuf jeans for just Rs 499, Motorola C115 mobiles for Rs 1399, sofas for Rs 15,999 or a 21'' flat TV for Rs 5890 and many more such offers. Customers will get sugar for a year free on shopping above Rs 4000 and on shopping above Rs 8000, sugar and Charminar basmati rice will be supplied free for a year.

So to test the waters, I went to Big Bazaar in the evening at about 6:15 PM. As soon as we reached the lane close to the Mall, the traffic jam had started and I was getting the signals of it. We somehow got a parking space at a distance of about 200 m from the Mall and after parking the vehicle moved towards the Mall only to see the biggest surprise of my life.

This is what I observed. The Mall was locked out as if it was a strike of the worker's union. All the lights were shut down and the entire MPM Mall which used to shine like anything in the night turned into a dark place with only Police and security guards visible. The entire Mall was closed for any public entry by tying a rope from end to end which covered the entire structure. No citizen was allowed inside and Police was literally doing a lathie charge on the crowd which tried to make an entry into the Mall. No one was allowed to stop anywhere near on the road also and it was out an out a situation wherein once again our infrastructure was not able to serve the people. We came out of the place pretty early and went to CENTRAL. CENTRAL was ok since the crowd there is of some standard.

But then the title of the post does not reflect the story till now. A few days back I was working on a quiz where in I came across a site which was telling the story of big retailers in US. Globally the economy is doing really good and we are seeing consumer spending reaching new heights. new projects are getting kicked off and new opportunities are coming into focus in almost every direction. But in this point in time can we hear of some closures happening. Yes we do and here is the example. Instead of talking about their growth plans for 2006, many big-name retailers instead are announcing store closings.
Here are some examples
  • Among those retailers closing locations are jeweler Zale Corp. which is set to turn off the lights at more than 30 of its high-end Bailey Banks & Biddle stores.
  • Office supplies seller OfficeMax announced it will close 110 of its 950 U.S. outlets this year as part of its ongoing restructuring efforts.
  • Department store chain Mervyn's plans to close a third of its stores in 2006.
  • Toy seller Toys R Us is closing 75 of its namesake stores, most of them by springtime, and converting 12 others to Babies R Us locations.
  • Music retailer Musicland Holding Corp., which filed for Chapter 11 bankruptcy this month, is considering a "significant number of closings of unprofitable stores" under the Sam Goody and Suncoast names.

Only the big giants like Walmart and HomeDepot are looking into expanding their chain. Why is it that there is a rash of closings and cutbacks. Howard Davidowitz A retail analyst and, chairman of Davidowitz & Associates, argued that the U.S. retail market was "too overstored" and therefore a victim of its own overcapacity. There's nineteen-and-a-half square foot of retail space for every shopper in USA which is a lot by any standard. The question raised in concern to the above is :

"Is it natural for companies to keep expanding when the market is already overcrowded with stores, especially when there are numerous projections calling for a slowdown in consumer spending?"

The problem for the brick and mortar store is increased due to the steady increase in the Online Retailing which is the second biggest group in retailing after Walmart. The movement is happening more towards consolidation of small stores as people move towards value stores like Walmart and Target. Its getting more into the hands of larger stores as the stronger is becoming more stronger. But the online retailing should be looked more synergestically with the brick and mortar stores in terms of adding value to the customer.

To be continued.

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