The Rise & Fall of Big Bazaar – Detailed Case Study

Big Bazaar’s case study is a classic example of retail success and failure.

Once a pioneer in Indian organized retail, it gained widespread popularity for its value-driven approach, primarily targeting the middle-class market.

However, its meteoric rise was eventually overshadowed by challenges stemming from overexpansion, intense competition, and financial mismanagement.

In this article, we shall discuss Big Bazar’s rise and fall while highlighting key lessons retail businesses can learn to scale their operations sustainably and at a faster rate.

The Business Model of Big Bazaar

Big Bazaar, founded by Kishore Biyani in 2001, quickly became one of India’s largest retail chains.

The business model of Big Bazaar was centered on offering a wide range of products at affordable prices, targeting the middle and lower-middle-class segments of Indian society.

This value-driven approach made it the go-to destination for consumers looking for competitive pricing on essentials and non-essential items alike.

Key Elements of Big Bazaar’s Business Model:

1. Geographical Reach: Big Bazaar focused on expanding its footprint rapidly across urban and semi-urban locations to make its store accessible to a broad section of the population. At its peak, Big Bazaar had over 295 stores spread across more than 100 cities in India.

This aggressive retail expansion without analyzing a location’s growth potential was one of the major reasons for Big Bazaar’s fall. We’ll talk more about this later on.

2. Hypermarket Format: Big Bazaar adopted a hypermarket model, which allowed customers to purchase everything from groceries to apparel, electronics, and home goods in one location.

3. Discounting Strategy: The chain stressed aggressive discounting to attract price-sensitive customers. With frequent promotions, sales events, and discount offers like “Sabse Sasta Din“.

4. Private Label Products: Big Bazaar also launched its own private-label products under brands such as “Tata Star”.

5. Customer Loyalty Programs: Big Bazaar introduced loyalty programs like the “Big Bazaar Profit Club” to incentivize repeat purchases.

The Rise of Big Bazaar

Big Bazaar’s journey from its inception in 2001 to becoming a household name in India is a testament to its innovative approach to business model.

Big Bazaar’s rise to prominence was driven by these three factors:

1. Aggressive Expansion

Big Bazaar’s growth strategy centered on establishing a widespread physical presence, targeting both metro cities and Tier II cities.

As we mentioned, in just over a decade, the chain went from 1 store in 2001 to over 290 stores by 2014, making it a household name across urban and semi-urban India.

The aggressive expansion was fueled by Big Bazaar’s ability to leverage economies of scale.

This rapid store rollout not only solidified its position in the retail space but also helped it reach millions of customers, improving its brand recall.

2. Revenue Growth

The aggressive expansion translated into impressive revenue growth. By 2014, Big Bazaar’s annual revenue crossed ₹9,000 crore.

This substantial growth was fueled by its ability to cater to various customer needs through competitive pricing. Big Bazaar’s revenue milestones showcased the potential of its business model, setting benchmarks for organized retail in India.

3. Operational Scale

The Big Bazar’s extensive operations allowed it to source products in bulk, removing the need for middlemen, reducing procurement costs, and enabling it to offer competitive prices.

How Did Big Bazaar Fail?

Despite its rapid rise and initial success, Big Bazaar eventually began to struggle.

By 2017, the company was grappling with significant financial challenges, exacerbated by the 2020 pandemic, which further reduced sales and cash flow, leading to store closures.

In August 2020, Future Group proposed selling its retail, wholesale, and logistics arms, including Big Bazaar, to Reliance Industries for ₹24,713 crore.

In February 2022, Reliance took control of over 200 Future Group stores, including Big Bazaar, marking a significant shift in India’s retail space.

This historical fall of Big Bazaar can be majorly attributed to these key reasons:

1. Expansion into Unprofitable Locations

Big Bazaar’s aggressive expansion strategy in the early 2000s, while initially successful, eventually led to challenges.

With over 295+ stores spread across the country, maintaining profitability in every single location became difficult.

On the other hand, not analyzing a location’s crucial datasets like growth potential and rental costs beforehand, led to the closing down of 20 Big Bazaar stores due to high rental costs and low customer demand.

This Big Bazaar case study goes to show that location selection is one of the primary pillars of a retail’s success and even a giant retail chain like Big Bazaar cannot escape store closure at some time.

At GeoIQ, we solve the location puzzle by providing crucial datasets across India, including footfall trends, customer demographics, competitor insights, growth potential, customer demand, catchment potential, rental data, etc. These insights enable retail businesses to make decisive decisions about store locations before opening.

2. Competition

The rise of competitors like D-Mart, along with the rapid expansion of online marketplaces, eroded Big Bazaar’s market share. D-Mart’s similar focus on cost-efficient operations, value pricing, and a strong local presence allowed it to attract a significant customer base.

While Big Bazaar opted for rapid expansion, DMart took a slow and steady approach which contributed to DMart’s success story.

3. Internal Management and Debt Issues

The company’s parent, Future Retail, faced financial difficulties, leading to the accumulation of debt. Future Retail’s debt had surged to over ₹17,000 crore, severely impacting Big Bazaar’s ability to continue operations smoothly.

Key Lessons for Retail Businesses from Big Bazaar’s Case Study

1. Profitability > Growth/Expansion:

While expansion is critical, businesses need to be mindful of profitability. Overexpansion without proper financial planning or understanding of local market dynamics can lead to losses.

So, retailers must focus on scaling sustainably and ensuring profitability at each location.

At GeoIQ we help small to big retail chains, scale sustainably at a faster rate with our location AI platform.

2. Financial Planning:

Financial stability should be the backbone of any expansion strategy.

Overextending resources without ensuring profitability at each step can strain cash flow and lead to unsustainable growth.

Retailers must balance growth aspirations with practical and sustainable financial management to avoid operational inefficiencies and long-term losses.

3. Competition Analysis:

Understanding competitors’ strategies is essential for staying ahead in the market. Ignoring competing brands in the same retail category can result in losing customers to better-positioned rivals offering superior value.

Retailers must continually analyze market players to refine their offerings and maintain a competitive edge.

Conclusion

Big Bazaar’s rise and fall offer a comprehensive case study on the complexities of the retail sector and how complex it is to sustain even for a giant group, Future Retail.

Big Bazaar’s case study highlights the importance of scaling retail businesses, taking sustainability, and forecasting financial needs into account.