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Last week I went to newly opened big bazaar store close to our home and was pleasantly surprised with a neat and clean store. Big bazaar stores in general are not very tidy and clean, most of it could be attributed to large number of customers they serve, but we are not here to debate the point. What happened after that was interesting. While I was moving around the store, I was approached by the store manager for the feedback on the store and I was more than happy to share my feedback as I was seeing a largely clean and evenly spaced big bazaar store after a long time. He also mentioned that they have launched a new scheme in which you can pay INR 10,000 to get the card and use it shop for goods worth INR 12,000.  The scheme looked too good to be true and I made a mental calculation that I can use this scheme to do my monthly grocery shopping one shot here and save loads of money. And as happens to all of us, when we see a too good to be true offer, I made up my mind to get the profit club card that day itself to get bulk of benefits on same day shopping list. And then while picking up items from aisles, I noticed a big banner of profit club which detailed out terms and conditions albeit in a much smaller font as compared to offer and then I realized the old adage – “Devil is in details” and here are details. WP_000166 Joining fee : INR 100 (I am assuming this is one time payment) Upfront payment : INR 10000 Max Monthly shopping allowed per month on this card : INR 1000 => Implies that one would need to shop every month for atleast 1000 for next one year to get full advantage of this scheme. Let us now bring in the concept of Time Value of Money (TVM) concept and see the scheme is really worth it. First let us understand the concept of time value of money – TVM simply means that 10000 today is not same as 10000 a year from now. Say, if you had 10000 in your hands now and if you placed in a FD for a year and bank gave you 10% rate of interest per annum, then you will have 11000 with you from now. What this simple exam does is to illustrate that 10000 in hand today is worth 11000 if invested, ofcourse we took simple numbers to illustrate the point, but I guess everybody would have got the message. Now, if we apply the same TVM concept to Big Bazaar, the purported saving comes down. For our illustration, let us assume that there is a monthly interest rate of 1%(we don’t want to take interest rate of credit card companies for calculation, they usually charge you 3%+ per month, a grand steal I would say) the current value of 12000 worth of goods come to 11255. If you will like to explore this on your own, do experiment with NPV formula in excel spreadsheet. Okay, so we have got down the benefits to 11255. Is there any thing else to add, ofcourse the parking charges and traveling. Let us consider parking charges only for now. They charge INR 10 for two wheeler and INR 30 for four wheelers. These charges vary with the city and the location, for our calculations let us take INR 20 as a parking charge every month, this will whittle down the total benefits to ~11000 on a expense of 10000. So, roughly a 10% benefit. You should also consider that there are forcing you to shop every month to get the benefit of INR 1000 spread over a year. Whether this is worth it is a call is your call.. Now let us shift gears and try to see what does it have it in for Big Bazaar. Here are the two things I can think of – First is Working Capital Management (WCM). For layman,  Working Capital is the money companies need to run their day to day operations. Much of it is in form of credit the companies receive from its suppliers and some of it is in form of bank loans. The companies which run their businesses really well are those who work on negative working capital, funding their day to day running from suppliers, buyers etc. Big Bazaar seem to be going that way by taking advances from its buyers to fund its business. Second big reason is that they are binding the card holders to shop with them for next one year, a kind of forced customer loyalty which may pay rich dividends. My thoughts on the profit card scheme – It is not a groundbreaking profit scheme for consumer but seeks to bind consumers into shopping with big bazaar for next one year. Not sure if it will really take off – need to wait and watch.

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