One of the first things that a visitor to Dhaka notices is an abundance of shopping malls in almost every corner of the city. Lining all the avenues and main streets are these huge, shiny, multi-storied buildings full of clothes, trinkets, jewellery, household goods, cosmetics, DVDs and CDs, everything one can name under the sun. Most people find it convenient to go to a place where they can find everything under one roof, in a nice air-conditioned, fairly clean, environment. But one problem about these glamorous malls is that they are off-limits for many lower income groups as the prices of most items are quite high. Overhead costs plus the fact that many of the products are foreign keep the prices of the products at a high level. There seems to be a need for stores that cater to all consumer needs but offer products that are within the reach of most people, a store like America's Wal-Mart.
For reference, Wal-Mart is a chain of stores in the United States that sells literally everything from pineapples to sweatpants to DVD players. The main attraction of Wal-Mart is not the breadth of its goods, however; it is the prices. Wal-Mart is notorious for having what seem to be impossibly low prices. Somehow, they manage to sell products at as much as half the price the same product would be at a comparable store. For example, if a hypothetical rice cooker were to cost 2000 taka at one store, it could cost 1000 taka at Wal-Mart.
So how is such price reduction even possible? The goods sold at Wal-Mart are not necessarily low quality since it actually stocks some name brand items, such as iPods and Nikon cameras. Therefore, undoubtedly, Wal-Mart's trick must be in their marketing and design. For certain products, Wal-Mart contacts the manufacturer, often forcing them to sell the product to Wal-Mart at a lower price than usual, which in turn allows the store to charge a customer less. An example of this is seen in the Tupperware brand, which was forced by Wal-Mart to outsource (manufacture their product abroad instead of in the U.S.) in order to cut labour costs and thus cut the cost of the product for Wal-Mart, which was able to sell Tupperware at a cheaper price than at other stores since they did not spend as much when buying the product from the manufacturer.
So the customer is lured into their local Wal-Mart store (in American suburbia, there is at least one Wal-Mart within a 30-kilometre radius) with catchy slogans like, “Always low prices, always,” then depicting the manufacturer's product at the low price. The manufacturer usually agrees to the low price because with Wal-Mart's $13 billion annual profit, it is obviously a successful store, and any wise manufacturer would want to team with that success.
Of course, Wal-Mart cannot make such a significant profit from cutting prices left and right. The bulk of its profit in reality does not come from the lower income customer lured in by the jaw-dropping price tag; it comes from the middle income “average Joe.” How it works is that while middle income Joe is also attracted by the outrageously low prices shown in a Wal-Mart advertisement, when he goes to the store to buy what he needs say, an mp3 player he will notice the advertised, cheap mp3 player. However, on the shelf above that item, he will perhaps see an iPod, sold at full market price. Middle income Joe will supposedly then purchase the flashier, name brand iPod, thinking that he has bought it at a bargain since it is only a bit more expensive than the Wal-Mart mp3 player, but he will essentially pay the same amount that he would have at an electronics specialty store. Thus, Wal-Mart pockets the difference between their brand and the name brand.
Now, knowing the practices of Wal-Mart, it certainly seems as though Bangladesh could use such a store. Not only could those of lesser income benefit from the reduced price goods available to them, but local manufacturers could also benefit by having another store to market their goods. The wealthier classes of Bangladesh are such a small percentage since those beneath the poverty line account for 44% of the population, that it seems logical that retailers should target the less fortunate with cheaper products to bring in an overall greater revenue.
However, cutting costs is more difficult than it seems. Aarong, a Wal-Mart-type of enterprise, selling everything from milk to sandals to pottery but not electronics, would find it especially difficult to coerce their manufacturers into supplying goods at lower prices since, according to their website, 85% of their artisans are women, who probably need every taka they make to help their families. Additionally, Agora, a primarily grocery store which also sells other products, such as cosmetics, sells everything at “a fixed price recommended by the suppliers,” according to their website. They too would have difficulty using Wal-Mart's tactics to target the lower-income groups, who primarily buy their food (if any) from street vendors.
Now, Dhaka shopping malls, such as Pink City, Rifles Square, and Bashundara City, usually have several similar types of stores right next to each other, which means each store needs to keep their prices competitive to stay afloat. On the top floor of Rifles Square, for example, there are at least five DVD stores down the hall from one another, meaning that each store needs to walk the line of having their prices lower than the other stores to attract more customers but at the same time keeping their prices high enough to make a significant profit. This, in turn, makes it impossible for them to reduce their prices too much. Additionally, some malls exclusively sell products from India and abroad instead of local products, so they must keep prices high or they would not be able to afford the overhead costs.
Really, it seems as though the retail-situation in Bangladesh is a sort of Catch-22 at the moment as there is no way to effectively cut costs to promote inclusion of the lower income group into the Dhaka large-scale markets. However, perhaps with time, stores will find the financial backing they need to satisfy the needs of the manufacturers and the customer. After all, Wal-Mart did not become the multi-billion dollar company it is today overnight.
(R) thedailystar.net 2008