INTRODUCTION Casas Bahia is a in Brazilian retail chain which specializes in furniture and home appliances. It was founded in 1958 in `São Caetano do Sul São Paulo’ by Polish immigrant Samuel Klein. Samuel Klein started his career as a peddler selling products to immigrants from the Brazilian Northeast. By 2010, it had more than 500 stores in eleven states.
FOCUS Brazil’s population was divided into affluent class and lower income group. Out of which 84% was considered to constitute the lower income group. The high end product companies did not target lower groups. Casa Bahia decided to serve lower income group by providing them option of credit purchase on lower rates. Primarily maidservants,cleaners,cooks,independent street hawkers and construction workers were its customers.
BUSINESS MODEL Credit financing was the core business model. 90% of the total revenue came from credit sales. To finance purchases customers required to submit to an SPC credit check. The client receive a credit limit depending upon his/her total income. All the information collected was centralized and made available at all the stores . Casas bahia maintained records on the personality traits of its customers for future references.
Contd. The information was utilized by company to evaluate the creditworthiness of its clients to see their potential to buy new items. Rate of intereset varied for different credit period. Casas Bahia could by from suppliers at lower cost from competiors and was able to sell at little lower prices. Cross selling constituted another reason for the impressive sales figures of Casas Bahia. TRUST IN THE POOR WAS THE CRUX OF CASAS BAHIA PHILOSOPHY
Contd. Aggressive marketing was considered another reason for the success and popularity of Casas Bahia. Company invested around 3% of its revenue on advertisement. Sales were promoted using famous singers ,actors and television personalities. Success of casas Bahia business also depended on the strategic location of its stores.
CRITICISM FACED BY CASAS BAHIA Casas Bahia came under criticism that it is exploited the poor in the name of selling them branded products in easy instalments. Casas Bahia targeted the poor working class people by taking advantage of their vulnerabilities and yearning for expensive consumer goods. Analysts also commented that casas Bahia cheated the poor by saying that it charged lower rate of interest whereas the prices of goods are inflated.
Q1.Study and explain the unique features of Casas Bahia’s business model? What are the reasons for Casas Bahia’s success? Explain The company developed a sustainable business model focused on low-income groups. It comprised of the following features:
Trust in customers-crux of their philosophy
Credit financing- client’s creditworthiness
records for future reference
Innovative installments system CARNE -
Art of Vender - selling, achieved economies of scale
Aggressive marketing –involving singers, actors & famous personalities
Ideal location –reduced costs & high profits
Operational management- cost cutting & economical
Q2.Critically examine and comment on Casas Bahia’s marketing strategies that targeted BoP market ? BoP market was untapped at the time when this company entered. BoP constituted a large chunk of the economy leading to following strategy adoption: