Pricey discount: When Tk99 stores no longer sell at Tk99
The once thriving Tk1 to 99 shops are either closing shop or moving away from the business model in order to survive
Khalid Hossain is a familiar name in Rajbari town. He sells gift items like showpieces, toys and dolls at a cheap rate. His store is named 'Tk1 to Tk99+' – a specialised store that you will find in different places in Bangladesh where each product costs below Tk100.
As all his products were priced below Tk100, Khaled had a warm relationship with his customers, because they could operate on a budget. 'Were' and 'had', meanwhile, are the operative words here.
Things have changed in the last two years.
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"In the past, suppose, I had 10,000 products in my store, and almost all of them would cost below Tk100. But now, I have only 25 to 30 products in my store that cost less than Tk100," Khaled told The Business Standard.
In the Tk99 stores, the business model is based on buying and selling vast amounts of goods at heavily discounted prices, which provides a small profit margin, covered up by the large volume of sales. Sometimes, the stores can price items higher than regular retailers, provided they stay under Tk99. The consumers are willing to accept the higher mark up, based on the heavy discounts offered on other items in the store.
"In the past, I wouldn't have to say a word to the customer to sell a product because the customers knew the price, and they were happy with the price range. But now, with most prices far exceeding the Tk99 range, customers keep bargaining for hours and yet I don't sell nearly half of what I used to sell," he added.
The Tk99 stores in Dhaka also shared similar grievances.
Jahangir Alam, proprietor of 'Tk100+ Gift Zone,' a store in the Khilgaon area that has changed its previous name 'Tk1 to Tk99,' said selling products below Tk100 is no longer possible. This predicament led him to change the store's name and turn his shop into a regular gift shop.
In the capital's Khilgaon area alone, you will find around half a dozen such Tk99 stores that are going through a similar transformation.
Among two such stores in Taltola Market, one still operates under the old 'Tk1 to Tk99' name.
Its proprietor Mamun Ahmed said, "I launched this store only three months ago. If I follow suit [of transformation] right now, I will not get hold of customers. But as you have seen the state of the market, eventually, I will also have to transform my store for survival."
While visiting Mamun's store, we met a customer named Nasima Begum who bought many items, judging by the number of bags she was carrying while leaving the outlet.
"I love to buy products from Tk99 stores because they are affordable. I found various necessary items for my kitchen and toys for my kids. But most stores I used to visit have changed. They are now like a regular store where I have to bargain," Nasima told TBS.
The North American model
The Tk99 stores in Bangladesh were inspired by the likes of Dollar Tree stores in the United States and Canada where you can buy any product within $1.
The Dollar Tree stores in the United States have a long history. Back in the 18th century, Michigan state was famous for its nickel stores where everything would cost below five cents.
On 22 February, 1879, entrepreneur Frank Winfield Woolworth first launched a nickel store in New York with the name 'Great Five Cent Store.' Many such variety stores grew across the US with names such as five and 10 cent store, or just five and 10, five and dime, or dime store, etc.
With inflation and suburbanisation in the 1960s and 1970s, the variety stores lost business to larger malls and other retail formats.
But in the 1990s, the $1 stores became popular in the US.
They were popular not only because of their value, but also for their availability in various corners, including in small towns, downtowns, across the cities and suburbs.
Going by names such as Dollar General, Dollar Tree, the 99 Cents Only Stores, etc, the $1 store variety market in the US grew to $77 billion in 2018. Dollar General racked up $25.6 billion in revenue in 2018 and eclipsed Macy's in retail sales for the first time, according to Fortune.
However, since the beginning of the Covid-19 pandemic, the $1 stores in the US are also in crisis as they find it hard to depend on $1 products alone. Inflation, increase in wages and other issues plague the $77 billion market.
Meanwhile its distant cousins, the Bangladeshi Tk99 stores, face an existential crisis. The concerned businessmen told TBS that this model could go extinct in Bangladesh.
Chinese products shortage
Mamun Ahmed said Tk99 stores are his family business. Besides the store in Khilgaon Taltola Market, they have other outlets in various districts in the Sylhet division that are run by his brothers.
"I can still operate the store with Tk99 products because one of my brothers is an importer who still brings low-priced products from China," said Mamun.
"Chinese products are the lifeline of this business. But our importers are not interested in bringing in the Chinese products because of the rising import duties in Bangladesh," said Mamun.
Khalid Hossain said he used to buy products from four importers who sold Chinese products.
"Out of four, three stopped importing because of excess import duty. Besides, the costs of going to China, staying in hotels for quarantine have drastically impacted the product prices.
Moreover, the poor business environment brought about by the Coronavirus added to the pre-existing issues, thus creating a situation of unprecedented misery for us. How can I sell products below Tk100 after all these charges are added?" said Khalid Hossain.
Low-end local products lure customers away
If you visit New Market, you will find a few stores that charge Tk100 for all the products. They sell locally made plastic toys, plastic flowers, and various other plastic products.
But the traditional Tk99 stores have way more products than just plastic toys. Here, the customers, irrespective of their station in life, come to buy inexpensive but quality gift items.
"The value for money is ensured in the Chinese products. Let me explain, if you buy a local showpiece at Tk60, and sell it at Tk99, you have around a Tk30 profit margin. But if you want to sell a Chinese showpiece, you will have half the profit margin of the local product.
But still, the local product will make you a loser. Why? Because their quality is very poor. If you bought 20 local showpieces, half will remain unsold, whereas you will sell Chinese products 10 times more at the same time. Their finishing is good and they are more durable than the local products," said Khaled.
Raising the establishment cost is a struggle
Mamun Ahmed said that if Tk99 products are to sell at the previous prices, these stores will not even be able to gain back their establishment cost.
"We have wages to pay, store rent to pay, and a myriad of other expenses. The product prices have also increased, and our profits have vanished," he said.
"There is a certain standard in the products that we sell in Tk99 stores. The showpieces that we once sold for Tk99 now cost more than Tk100 to buy. How can I sell that at Tk99? Moreover, the products that we still can sell at Tk99, the customers do not like them for their poor quality.
"So, no matter what we do, we just cannot sustain the Tk99 business model anymore," added Mamun.
