Big Bazaar, the popular hypermarket chain in India, closed down in early 2022 after over two decades of operations. There were several factors that contributed to the decline and eventual shutdown of Big Bazaar:
When Big Bazaar started in 2001, organized retail was still in a nascent stage in India with very few players. However, over the years, many national and international chains like Reliance Retail, D-Mart, Walmart entered the market. This significantly increased competition for Big Bazaar. The newer entrants had better supply chain management, offered lower prices and often had larger store sizes. Big Bazaar struggled to effectively counter this competition.
High rental costs
A major expense for retail chains is rental cost of real estate. As Big Bazaar expanded rapidly in the 2000s by opening new outlets, its rental costs shot up. Many of its store leases were focused on high visibility and expensive locations. With revenue growth slowing down, the high rental costs became unviable. Big Bazaar tried renegotiating rents but met with limited success. Several loss-making stores had to be shut down.
Problems with franchise model
Big Bazaar had adopted a franchise model where many of its stores were owned and operated by franchisees. This helped scale up rapidly. However, it also led to challenges in maintaining brand consistency and control. Many franchisees struggled with thin margins and could not invest adequately in upgrading stores or adopting new strategies from the parent company. Disagreements between franchisees and company management started impacting operations.
Inventory management challenges
Retail chains need very good inventory management to avoid stock-outs or wastage. As Big Bazaar expanded its product range and number of outlets, effectively forecasting demand and maintaining availability across its nationwide supply chain became difficult. This led to situations of stock-outs of popular products on one hand and write-offs due to overstocking and spoilage on the other. These operational inefficiencies hit margins.
India’s e-commerce sector saw massive growth from 2010 onwards. Players like Amazon, Flipkart and others drove this boom through deep discounts and convenience of home delivery. Big Bazaar was slow to adapt to this shift to online retail. By the time it launched initiatives like online-to-offline sales, it had already lost market share.
Failure to localize
Multi-national chains like Walmart succeeded in India by localizing their assortment according to regional tastes and preferences. Big Bazaar on the other hand adopted a more standardized pan-India product offering. This reduced its appeal among many small town consumers who found regional chains to be better catering to their local needs.
Challenges during COVID-19
The COVID-19 pandemic and resultant lockdowns in 2020-21 were the final blow that broke the company’s back. With stores closed for months, Big Bazaar’s revenue nosedived while fixed costs remained. The employee expense, inventory and operational costs accumulated during this period strained finances to a breaking point.
In summary, while Big Bazaar pioneered the concept of organized hypermarket retail in India, it failed to counter the competitive threats and business model innovations in later years.
The company filed for bankruptcy in early 2022, bringing the curtains down on a retail brand that revolutionized shopping for middle-class Indian consumers in its heydays. Its failure holds key lessons for retailers on the need for localization, managing growth sustainably and adapting boldly to market disruptions.