I accidently hit upon this article and it was simply superb. Read it.
In this article you will find that an average salesperson who sells peelers makes huge amount of money that he lives in one of the posh apartments in Park Avenue. I always wanted to build a house in Park Avenue in Monopoly game since it gave me the highest rent. I can imagine if one lives in a 3 bedroom apartment in Park Avenue how much money he should be making.
What makes him so special? He just sells peelers just like others. But he has a classic lifestyle. He lives in one of the costliest places and dines in the best of the restaurants five days a week which an average guy would not have heard of. He wears the costliest dresses. Isn’t that rocking? Wouldn’t you do such a thing?
We all think only the so called professionals make money but the truth is that businessman whatever business he does whether small or big makes money than any other profession on earth. Now the question is how come he makes so much money? The answer is he sells loads and not one or two.
Big Bazaar – Ever wondered how come they sell so cheap? Even I was thinking about the same for quite some time now. Before “Big Bazaar” came into picture, I had been to Chennai and my friend took me to “Saravana Stores” and I was so shocked to see that the shop was crowded with crazy people and the prices of goods can be compared to that of road side hawk seller’s. How can someone sell so cheap? How can the y make profit? Will the goods be of high quality or not? These were the questions that came into my mind. I wanted answers to my questions and was in the process of getting the same.
If I sell any product with so less margin then the only way to make money is sell more.
What I figured out?
Let us assume that we shop in a branded showroom for clothes say “Peter England” and in “Big Bazaar”. Peter England has its own brand value and also has its own loyal customers similarly BB. Now to have a shop in MG road (heart of city) in Bangalore for PE one has to shell out money like crazy. Assume that the manufacturing cost of a shirt is Rs. 150. The same shirt at PE showroom will cost not less than Rs. 600 and at BB it will be around Rs. 300. (I have actually bought a PE shirt at both places) Why is it so? The shirt will be sold to both PE and BB by the manufacturer at almost the same price say Rs. 250. Then why is there so much difference? The answer is, the consumers are not paying for the shirt alone but also for the rent of the building, the running cost of the showroom, for paying the salesperson and all that the owner of showroom pays for the smooth running of his showroom. He does not like to pay for anything from his own pocket and he prefers the brand’s loyal customers to pay and they do. Generally there is a notion that if someone buys in BB they are of low quality. I think if you are buying anything branded then it will be of same quality throughout. So that is brand for you. If you buy something branded don’t think about the location where you are buying, everyone wants to survive and they will. It is up to you to shop at the right locations and at the right time to make the better use of money and it is better if you realize these small things.
Big Bazaar got its inspiration from “Saravana Stores”(I read it in a book called “IT HAPPENED IN INDIA” by Kishore Biyani). Saravana Stores would have got inspiration from a hawk seller. I really don’t know about that. But the mantra to make more money is very simple. Sell more at lower margin than sell little at higher margin. Both gives profit but what you are looking at is more important.
For the entrepreneurs out there; if you want to make it big then sell things at a lesser margin if you don’t have a loyal customer base. It is a good start for you guys.
Great post. You have hit the nail on the head. Selling more at a lower margin is better everyday than selling less at a higher margin. That is how Wal-Mart stores made it big. While this is true for retailers, if you are in the business of manufacturing the goods AND selling it, then another factor comes into play and that is to maintain a very high quality. I have experienced this first hand, wherein the products I manufacture are of the highest quality and yet I sell them at excellent prices, so that I make up in volume what I give up by way of lower margins. The key then becomes maintaining your overheads to very low levels which has been my secret to profits. Your referenced article was terrific also. Thank you.
But the problem is that one has to have a truck loads of money to get into cut throat business like the way the Reliance guys do. They have the deepest pockets and they play with their money and none can dare to stop them or compete with them. They are the players and rulers in their game whatever it is.
I am glad that you are making good profits with your business. You are maintaining your overheads to low levels that is really very interesting. Not many think of these things while starting a company. I wish you all the success with your business.