I

1ii
. ,i)\r r;i" Future GrouP

BIRTH O
 month and a halfago - on March 30 to be precise -.
Kishore Biyani gathered 1 ,000 of his senior employ-
ees at The Mariott in Hyderabad. He asked all ofthem
to write down on a banana leafwhat they saw as the
future of the Future Group. In an emotionally
charged - - ceremony, he
and somewhat theatrical
then sprinlled jal, brought all the way from
Ganga
Varanasi, on all ofthem. ?he gesture, he explained, was to mark the death ofthe
old Future Group- and the birth of a new one.
Biyani then took stage to make a presentation 'Re-bom', drawing an analogy
ofthe symbolic 'Ganga Snan' to rebirth. To starting a new life after forgiving and
forgetting- "The event was ulbelievably emotional. But ifwe have to sell our own
brands and build our own FMcc (fast-moving corxumer goods) cornpany, wc have
to think big," says Biyani, Group cEo of the { 1 8,0o0<rore Future Group.
The rebom Future group is banking on two big breaks from t}Ie past to power
ahead of all rivals. One, it will depend heavily on white-label PMCG, produced
under Future Consumer Enterprises, to ofler the cheapest and best groceries in
his shops. While he will continue stocking FMCG products made by others like
fTc and Hindustan Unilever (HUL), his own labels will allow him to ofler the
highest value proposiuon whiie simultaneously protecting his margins. FMcc,
Biyani thinls, will become a huge revenue and profrt generator, and the most
crucial part ofhis strategj..
The second, and perhaps nearly as important part, of his strategy involves
altowing his customers to shop from any.riuhere and take deliveries anywhere as
well. In a month from now, shoppers at Big Bazaar's select stores in Mumbai
will qxperience the re-bom retail chain. They could order online (website or app)
and ship it home; they could order at store ard ship the product home; they
could order online and pick up goods at a store nearby; they could order at one
store and pick up at another store. Big Bazaar will ofrer these and many other

Kishore Biyani's retail business

I
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but it has grown much m0re ffi
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lune 7 2015 BUSINESS TODAY sr

 Future GrouP

oermulati,rns and combinations

in its new avatar' The
formats of
i"r. t"tli t . tt"at.uy replicaled in the other
Easy Day'
ifr" group fik KB t rairprice,.Nilgiris and
popularly dubbed
il rhe retail world: this s'hategy is it 'multi-
call
* o."i-.ft"""a' ,nough Biyani prefen to aslut big
ii-^"i . ir"u"rrt.
has.emerged

ioo"-ioi u.r"ugu"r.a
ir.,i,J o"ti""*'ft,
corporai6 retail chains against the
"mni<hannel

"r "-tail,
which has alrcady captured up *-em@@@@
.""t - of the retail market in many
io i S p"t una tising -
half-hearted at- .t' o Ej: -o
,,u.ts of tft" wotta. fraving made several Ncr= o
iirpts ui Uut, rebaztar 'com' BigBanancom andBig Eo G' Aa =
e
"ruit
n'""1- oi.""t, i" uaaition
ulrnort ull of th"-, Siyani
to
is
beta versions)'
banking on this
and
new
failed at
strategy
.o E
d,
CL
€E
e-
'E
E
ao
<t)
(o
io louttt"t
"-tuif"tt
- his latest tormentors-in-chief -
as
Birla
o CL
iiii'.iunr t"tuirot such as Reliance Retail' Aditva >-
and SPencer's Retail'
^'" "iit*,"
Retail o
ii" pi"".* oflndia's big retail' has been under
l.rJ

in the race
attack tom all quarters. First' in the mid-2oOOs'
of new enkants sucn as
to match ttte financial firepower
bor-
zl
ol nJfi-"a aaity" sir,fu *d nh"tti-W"ltoutt' Biyaniahead of
.irJ "t , iiz'ooo crore at one point to keep

ii" ou"[. H" nua,o pay the price for his adventurism
il;; n.JJ 6 ;i oit tris rasuion uusinesTantaloon 7/''|
ii"'*i *i i"tt";i ;ces Fdt're 6pita[!o l,uv
business // :
I
And wtrile hb slil-confnued growmg
olt part of his debt.
lnJJut, **" or rtis deep pocketed rivals - especially
Also' the Aditya
i"ii-"" i"o - it"u" grown even faster'
busioess' esp€cially
ilnf-" Ci""o o -"-lidlaung its retait
big chunk of wtrich'
fr"i;"-1t-fr*gjt f*hion business' a
he had !o setl it o['
i"rl.iir-t, lr,"iu"'r,
by Bivani before
iJitnoi rt, n ur.o ucquired Jubilant's four hwerrna.rkels
,.TH[RE\llAS in Bangalore for an undisclosed amount'
-'-fuf.L*ftlf.,
A COMPILLING CASI after 2O-!!, the meteoric rise of e-tailers I
among others' on tne i
. r. rl
i
such asFlipkart. Snadeal' Amazoo'
tvlEROIR OIVEN THT back of convenience and discounls is
posing * :n?*97
FOR THI pnysrcat'
threat to the growth prospects of big' organised
d, e-tailers had collectivelv comered
's'i-iiri""i"
i"i.il"* z-or+[
crore) of the $4o-billion organised
6sJoz
ma-rket (excluding kirdna sloresj'
SYNERGIIS OI{UI!B'' '""'i-iiiit
retail
bJck-and-mortar retailers' includin
g
"i."t,
thc likes ofBig Bazaar and Central'
fell up to l2 per cent
RAJAN MITTAt' Vice Chairman' 2014
a"ti"* ift" i.i i""f teason in October-November'
Bharti EnterPrises ;it" i-t"fft f-f."d f.i*ht'eningly desolate during this festival

,""ron4aia SoU.ui" Dutta, cEo' Fabindia' in

an earlier
Future Group's own
il[Jew.itn a,rsinsss Today' whjle
lledgling e-tajl
*".tt ft^ U.en dwindling' India's
$?0l}ilAn?0{' $?m0ft?0tz "t"ii
il;;;t1;t-.,"d tosrow from strensth to strensrh

Total Revenue 2,353 !'582 iI^'{iz.zzo crore ($3.5 bi ion) in 2014 to 13q'167
5, according to Gadner' whal is

Total Expenies 3,063

Zl20 .-r. iiO Uiilr""f r" z0l
need to make money
iuJr.vl.tg.etuil.ts it thatwhile they
irotitltterfax -315 -538
to .a."ii itt Uutinao c-tailers can continue losing money
are backed by venture
ln { crore: 'The ompany danged
its limncialyeal l0
io gain rnarket strare because they
analls
AgrifMarch: Source: Ministry ol Corpo'afe

52 BUSINESS TODAY June 7 2015

 li)lq

L (l,l
trF cr=
gE
z, ao
Er
LJ at', e cct

THE NUMBERS GAME

Financials of Future Group companies
capitausts with deep pockets.
Property consulttnt Knight Frank India and the
Retailers Association of India say that by 201 9, e-tail may
be as large as organised retail. While e-tail's share is pro-
ll tmf . unll-0fcm.

iected to ris€ from two per cent to l l per cent of tbe Total Revenue 14,205 20,316
Indian retail mark;FtF-fatter's share couf(kfrop from
1 7 per cent to I 3 per csnL
lqlglf1pemgq ]ajx 20,2?3

That sentiment reflects in their valuations, too. While Deppsietiqn 4s? . 632
India's biggest e-tailer Flipkart was valued at $11 billion
({70,000 crore) in its last round offunding, India's big- Profit After Tax 80 276
gest retailer Future Group's three listed companies are
Consolidated data in { crore:
collectively valued at18,000 crore only. SecondJargest 'The compaoy chanqed ils lrBncirtr
e-tailer Snapdeal, whicli is Sarelflive years old and has
the backing of marquee investors such as Ratan Tata and
Azim Prem.ii, is already valued at $1.85 billion (about
{11,700 crore) and is now looking at raising funds at a
NT 20t/B

valuation of$7 billion (about{44,000 crore). Total Revenue 3,076 0.2

$p91s_e5 3,035.
As Biyani battles e-tailers on one hand, the rise of
T_olql 0,5
Dqprqgiql|on 385
Reliance Retail poses yet another headache. Iaunched live
-
iears after Big Bazaar, Reliance Retail has ftown organi-
catly to {17.640 crore in 2014/15. alnost on a par with Interest 163
Biyani's Futue Group. Profit After Tax ?3 -0.3
So Biyani is egging on his group to grow to a retail
Standalone data in { crore
business worth 160,00O crore (currently about 115.000
-crore) by 2020, an FMcc business worth libiOO c.ore
(currendy 11 , 500 crore) and a growth rate of 2 6 per cent
year-on-year. Hc wants !o increase the number ofstores to
4.0OO from thepresent l' J& anda t6[al retail space i
30 mry[ m[/!
million sq.ft. He n4ll need a one lal<h strong workforci (at
present 40,000) to manage the business. He has even hlrdd
Total Income 937 960
5Igraduates from the Indian Instihrtes ofMdnagement TstelExpen:e: 908 978
and 300 designers for his fashion business Deplegiqt[qn 39 a7
Biyani says that when he opened his first store in
lnterest
Kolkata in 2001,India was learning to consume and a
lotTe-scharAed since then. He says three big changes Profit After Tax -15 -77

Consolidated data in { crorc Source: Ace trluity

t
 imDact consumption in India - the rise of millenialo
(those who are bom after 1982 and would account
THE BIG BRAWL
for more than half the population by 2025l'-in- Bivani is still ahead in the physical .
cr!asinq dependenae on technoliigy for consump- refail space but he now has to con-
retail
tion anl the fact that India would be a $l{rillion
economyly 202O and 5.8 per cent of global con- tenO witn far more formidable rivals
,u-e. speoding would happen in India as opposed
re-
11 l' ' to 2.6 per cent today. "For that we need to be
i born, have no baggage from the past' be it success
J'' or lailure, we need-ttr harre neff ideaslo
sdrti the
or to-oaow and create a new rele- The retailer closing in on Biyani's heels is
"oJo*o -
lndia Incls top heavyweight Mukesh
vance in the hearts and minds ofcustomers'"
he says. Ambani of Reliance Indusiries.
Reliance Retail, controlled by Ambani,
The Great FMCG Push has the scale - 2.62 stores in 200
In Biyani's target of { 7 5 '00O crore of rev-
enue for the Future Group. which also cities - and the cash from Parent
includes other businesses such as insur- RIL to sock it to the Future-Bharti
ance. PMCG is €xpected to contribute combine. Reliance's strong areas:
{10.000 cmre. He is probably the first re- grocery fashion, digital. Do we hear
tailer in India who is looking at cr€ating brands
planning to alarm bells ringing?
not iust for bjs own stores, but is also
retil them outside of his stores. "The ambition of NO OF STORES MTLUoN SO fI TORMAIS
being a large FMCG company is dgh! especialy sinc€ Value, hypermarkets,
he owns the most complicated segment of an FMcc t2.5
supolv chain, which is retail outlets'" says B'S'
2,621 digital, fashion, etc.

N"n sn. foona"r, Trust For Retailers and Retail

Assliauon India. "However, executing his zucG
of
business outside bis slores could pose an
entirelv dillerent challenge. "
Biyani's biggest USP' though, would be ADTTYA IIBLAIUUIL
the food parks (essentially large food
Though the group started slowly, Kumar Mangalam
processing factories) that he is
Birla is now consolidating and expanding his retail
building himself. Rivals such as
Reliance Raail and Spencer's business. The group recently picked up Jubiliant's
too have maior FMCG retail business for an undisclosed amount' Birla's
dreams but theY have in- food and grocery retail, which operates under the
steadoutsouced Processing
brandname "More" owns 483 supermarket stores
and manufacturing of foods
to smaller lirms. BiYani' and l6 hypermarkets
however, believes that for N0 0t sloRts MrLuoN s0. rT
'ORMATS supermarket,
Fashion,
2,311 7.1 hypermarket
Superstore formats
lncludes lrore, Madura Garmenls, Pantaloons, and Jotal
SIZING UP THE
COMPETITION
Performance
of some of mqE MJB

Biyani's Revenue"
160
main rivals PBIDT 652 r45 PBIDT 186

Profit After Tax n2 -135 Profit AfterTax

ln{crore
37
Sourcq I'ICA
39

ln { crore; 'Net tumover sourcs Minhtry ol Corporate Alfaits .

54 BUSITT-ESS TODAY l|ll'le 7 2O1S

 GODI{EJ NATUh E'S 8A5,.{ET
Nature's Basket may be small, but it's got a leg-up
on the others - it
is t:e first retailer to have kicked
off its omni-channel ;trategy.lt retails premium food
products, mostly international labels, plus f rozen
foods. cold cuts. cheese and wines. lts site Na-
turesbasket.com caters to Delhi and Mumbai, but it
reaches 8,000 cities ihrough Amazon and Snapdeal.

N0.0fsToREs MttuoN s0. rT fORMAIS

Premium food &

3e 0.09 9r0cery

FMcc brands will be produced at the

D-MART
D-lviart who? You'd be forgiven for asking that question,
especially if you?e not in Maharashtra or Guiarat. But
15-year-old D-Mart is actually amongst the most profitable
retailers in lndia, largely because it owns most properties
in which it operates. A topline of {4,699 crore isn't to
be scoffed at either.
"tstimates based on D-l'lad! average dore size of 30,00035,C100 sq
product diferentiation and consurner stickiness' investing
in food parks is a must. Not to mention a few perc€ntage
points higher margins than his rivals. Initially' mosl ofbis
{1 ,000-crore food park outside Bangalore.
He is also planning io set up two more, one
in cenhal India and the other in the east.
Unlike othet rttailers, who have created
private branils only for cornmodity-bas€d
products such as rte, Ilour and sugar, Ior
some time, the Fuh:re Group has been fo-
cusing on branil-building: From the Tasty
Tleat range ofbiscuits, noodles and sauces
to Sach personal care products, almost 25
to 30 per cent ofElig Bazaar's revenue comes
from its pri\''ate lab€ls. Rival Reliance eams
2 5 per cent and Spenc€r's I 2 per cent from
own m{CG brands Haminder Sa}ni, I'D of
retai.l consultancy Wazir Advisors. believes
this mal<es a lot of sense. "He has realised
that brancls will give him bett€r maryins (as
high as even 40 p6 cent viea-vis the 10 to
14 per cent he makes by selling other
brands)." "FMcc brands wi.ll be a huge dif-
ferentiator." says Debashish Mukherjee,
who leads the consumer industries and re-
tt tail practice ofA-T. Keamey in India.
But Biyani's FMCG vision is not restricted
to earning 25 to 30 per c€nt margin, but to be in the
league of tttlt* Nestle and Bdtatrnia, aiming for margins
as high as 40 per cent on pre.mium ollerings.

20qx m?JB 20gr dP/B

Revenue i,399. .4,974 Befn_us. . .11-5._0-. 1,341-

-70
.

PBIDT 235 l3Z PBTDT -78

Profit After Tax NA NA Profit After Tax -166 -209

Source Company and MCA ln icro(e Souce Company rnd MCA
In I crore;

'figures aggregrti ol Adiiya BirliRelail, Madura Fashlon I

Lifestyle and Pantaloons Fashion I Retail;Madura PAT no arr'ailable

.,.t- ,,t. .: rr.r-ir..,..r.-:

 Future Group

In line rvith his mission of catering to the

millennial consumers, he is rolling out a
THE CYBER WARRIORS host of new-age products such as frozen
Bivani's other battlefront - an army of retail-flavoured snacks and vegetables under the brand

code-jocks armed with insane fundinS / names o[ Tasty Treat and Veg Affaire'
r€spectively: 2 5 tJpes ofenriched flour
under the brand name Desi Atta;
FLIPKARI tt anvone's got Future Retail running Sandy's Kitchen, a brand of sauces
in loops, it's India's largest e-commerce company' and dips; and a range of Personal
Valued at Sl1 billion after raising 5700 million in care brands under the name of
December, Flipkart shot to the top by offering Think Skin. While Future Group
aLeady dishibutes and markets the
heaw discounts The Myntra buy has given it im-
Sunkist brand ofruice h tndia, the plan
mense muscle in fashion. The offline-online face-off
is also to get into ic€-creafis. It also has a
is closer than you think range of dairy and bakery products under
Nilgiris. The company has set up an oats
GMV. I tl0.0F tlt],lS $00{I!
s{ BtH0lt | 20 tllLl0ll factory in Sri Lanka and would be soon
launching its own brand of oats. "We are
not lookjng at mass, it will be masstige and
premium, We are not launching ordinary
t0 flt1
SNAPQEAL ttt vouns. energetic, and readv noodles where people are already there. We
Five-vearold oniine marketplace
SnapOeal is an will not do simple biscuits, we will do cook-
wheie more than 100,000 sellers hawk their wares ies anil something else. We need to have
rcme competitive advantage."
and a new 0roduct is added every 10 seconds.
Biyani says his hod and RMCG business
The company is valued at 51.85 billi0n, courtesy a
will be similar to that of Irc Foods' "We are
' S627-million investment from Softbank, and is now trying to do virtualy the same as [tc. they
looking at raising funds at a valuation of 57 billion Core are into flour, biscuits, iuices and snacks'
stren0th areas: electronicl fashion. We are into dairy and bakery, which they
are notinto."
I mils$oclco

$3
Gt[r
Bllu||ll I l,t0.0f

toiltuoll If Biyani is looking at ItMcG brands to

spur his next phas€ of growth. Sahni of
Wazir Advisors is surprised why he hasn't
been as active with Big Bazaar Direct
AMAZ0N Rmazon is... well, Amazon' Market cap: , (his assisted commerce Platform
itli uP with
SZO0liilion V'lorlC's second largest online retailer 'I where be has signed
kirana stores to sell Big Bazaar'
after China's Alibaba. And now founder Jeff Bezos
'IlS rsr and. E Zone merchan-
has oulled out his bazookas for the Indian market,
fl aise), which he announced
unveilin0 a S2-billion investment plan Core sirength Y with a lot of PomP and show
areas: electronics, fashion. Now, where have we \ f early last Year. "Creating an
heard that before? oflline store network is a great
idea. This would be a great Plat-
GMr" I NO0f ml6 SI0ClGl)

$Bllll0tl i 19tlLtl0ll
THE 0THERS Bi'lani's worries don't end with the
tfrree irio qttns. Lurkinq behind them are shrapnel speed'
ing towaids all his major segments. ['tailers eBay and
Shopclues, furniture hawkers Urban Ladder and Peppeffry,
qrocery peddlers BigBasket and L0calBanya, fashi0n czars
lr/vntra(owned by Flipkart) and Jabonq.. did we hear
form to sell his own brands and keeP
zucc comp€tition at bay."
In fact, Big Bazaar Direct was Biyani's
maiden initiative post the sale ofPantaloon
in 2012. Biyani claims that it reports a busi-
ness of ? 5-30 lakh a day, with a network
of 600-700 ftanchisees in Raiasthan and
parts ofMaharashtra. However, Big Bazaar
Dir€ct, he says, is still a work in progress.
"Our dream is to have franchisee-assistld
co[unerce Lr every pin code area in India'
We sell 150,000 sKUs (stock ke€ping units)'

56 BUSINESS TODAY lun.7 2Ol5

onc€ rv€ are able to create a master data on that and layor
it up, lhen we want to have agenls in every pin code arca.
What is tabng time is to list 150,000 products and creatc
that ecosystem ofmaster data management. Onie we are
ready, the whole thing becomes much easier."
In 2014, Biyani even tied up with Amazon to sell his
privately-owned apparel brands through Amazon India.
He plans to extend it to other categories. "The partnership
with Amazon, which obsess€s about being the earth's
most customer-centric company, will enable us to lever-
age their strengths, investments, and innovations in
technology to reach out to a wider set of consumers
across India," Biyani said in a statement.
Arvind Singhal, Chairman, Technopak Advisors, says
pulling oll a consumer brancls bwiness will be a huge chal-
lenge, "However, in the rccent past a lot of new brands like
Paper Boat (juices), Fogg (deos) and Cremica Foods have
done a decent iob of fighting competition from seasoned
players. Biyani will have a fair chance ifhe gets his brand-
ing, packaging and pricing fategies right," says Singhal.
Biyani admits that his tMcG focus will be an acid test.
"The consumer has to accept our product. The execution
has to be top-class. Product quality has to be impeccable.
We have to get everything riSbt like the Friday release of a
movie. In the consumer goods business, nothing will work
if you are at fault."
He also admits that he doesn't have the er?erience of

"B|YANr HAS REAilSED T||AT REIAIL HAS LITTLLB0UIULAIIX!

lT lS BRANDS T|.|AT |IJILL GlVt [I'l!ET]II MAB0!N"
HARMINDER SAHNI. MD, Wazir Advisors

conzumer goods companies in the country in terms of prod-
uct <hvelopmen! but he hopes todug this $p by parhering
with experts in various fields "We don't loo$'everything.
So we will have to get into Jvs" We have taken technological
lcrowhow from Swiss company Bubler' the largest technol-
ogr provider in food processing"
The Promise of Omni-channel
Oflate, whenever Biyani attends a corporate gathering or
even travels in an airplane, tie most obvious question he
is asked by the penon sitting nqt io him is about the future
of e-commerce in India. "My standard reply is that they
occupy mind space, but it is multi-channel which will do
more than pure online."
Ornni-channel - big retail's own answer to e-tail - has
been conceived around the idea ofleveraging the strengths
ofbrick-and-monar retailers and their assets on the ground
as well as the weakness€s ofe-tailers, who not so long ago
appeared completely invincible.
The most obvious advantage forBiyani is distribution.
He already has 1 8 8 Big Bazaar stor€s, 1 9 Food Bazaan,
I 1 Foodhalls and I 2 5 KB's Fairprbe shops in addition to
150 Nitgiris stores, 188 Easy Day supermarkets anil 15
Easy Day hypermarkets, where he can retail all his FMCG
products. But for a retailer to puu ofla consumer brands
business will never be a cakewallc Biyani says that he is
spending {100 crore initially and building the omni-
channel minds€t in his organisation. Once it's done, he
hop€s at least 10 per cent of his retail revenue will come
from omni-channel. "Ifyou order from Mumbai and you
live in Bandra, our nearest store will deliver to you, You
can order through an app, mobile phone, web, whichever
way you want. W€ will stafi with one-hour delivery and
then come to 30-minute delivery."
Ifhe is able to oller between 30,000 and 40'000 iterns
at his biggest stores to the consumer today, omni-channel

Iune 7 2015 BUSINESSTODAY s7

 Future Group

CASHING OUT
Biyani has exited a few businesses over the past few years

NOVEMBER 2OI3
Divested 380/o stake
in apparel brand
MAY 2OI2 JUNE zol2 Biba and 350/o stake DECEMBER 2OI3

Sold Pantaloon to Sold Future Capital in AND Clothing, Divested 450lo stake
Aditya Birla Retail to Warbug Pincus together for in Capital Foods for
for{1,600 crore for T450 crore {450 crore {180 crore

will allow him to inventory of 1.5 lakh items

ofrer bjs entLe right from zupply chain managernent, zupplier:, stores and
at all his 1,300 slores to the consumer at any point in time' merchandising as well as logistics and technology.
Home Depot, for instance, ollers more than lve lakh prod- But when it works, it's nothing short of magic.
ucts on its omni{hannel plaform as against iust 3 5,000 Walmafi generates $8-$9 billion of its $486 billion reve
units at a store. nue from omnkhannel. For Tesco, nearly 8-1 0 per cent
Tbe biggest difrerence that his omni-channel model ofbusiness comes ftom omnl.channel. In Australia, omni-
would have ftom a pureplay e-commerce company is that charurel retallers such as Woolworths, Coles, David Jones
his stores would act as his warehouse, unlike e-cornmerce and Myer account for half of the e-tail market and are
companies that have to invest in warehouses to cater io growing nearly as fast as any e-tail firm.
multiple locations. "We have 2 7 locations in Mumbai and One of the biggest draws of omni+hannel is instant
they can become 27 warehouses," he explains. But hall gradfication tbrough store pick-ups Nearly 50 per cent of
hour delivery may only work when the customer and the Best Buy's online buyers prefer to pick up from stores they
store stocking the goduct are at the same location- Where choose. From the money it saves in Sipping, B€st Buy even
they are in diller€nt cities, it may not be possible and may tbrows in a surprise when such customers arrive for the
take as long to reach a crrstomer as an e-tailer does. ptck-up, giving them tee battaies, possibly a memory card
As far as reach goes, etail has deeper reach: Flipkart, or a pack of soaps, etc.
Snapdeal and Amazon deliver to thousands of PIN It's something thafs forced rival Amazon,com to
codes in India, lncluding smaller towns. And match tactic for tactic. First, it launched same
Future's orDni-channel will have to at day delivery pilots ln mu.ltiple cities. Then,
least match that to be competitive. under the Amazon Iocker programme,
But simple as it may sound, customers calt s]tip thet onlne or-
omnfchann€l retail is not just ders to be picked up from a 7-11 or
another moniker. It's a way of a Staples store ne a rby.
life- a completely dillerent ar- Interestingly, the I 5 7-year-old
chitecture ofretail. Several glo- Macy's has now redelined itselfas
bal and domestic retailen have '...one of the nation's premier
multiple channels but typically omni-channel retailers".
they all function in silos, The But why is it so hard to mas-
moment such silos are con- ter? Because it requires great€r
nected, they become omni- [ predictability through use of Big
channel. It's easler said I Data and analydcs. But most impor-
i'lilli,lrjl'i.,1;iil'*" ffi*t tantly, the algorithm must be robust
enough to make sure the companY
g(urrttt makes a profit in the end because omni-
::'"ff#,Fffi-";
permutations and combina-
channel zupplies will play havoc with the
landed cost ofthe product at the custom-
tions. It r€quircs signifi cant ln- er's doorstep, or when it's handed over to
terdeparhnental cooperation, him. Macy's, for instance, kicked ollomni-

58 BUSINESS ToDAY lun T 2015

.|....:,..:.'...-'.:.:..|-:i;.'.;l+i.."..|l.:;J:!1:!'!-4|':.i:='.'.=-g;;'.:.,:.'.';';..-
channel inplemertation as far back as 2009 But by the geography. If a consumer living in Shillong will want to
end of 2013, it had ouly managcd to put about 500 of its buy a food product which is not available in the store close
850 stores fulfilling online ordcrs. to herhome, reaching it to her may becone achallenge "
"Tust because multi-channel hasn't startcd in India, B ut does that mean that e-gr ocers such as l-ocal Banya

peopie think the pure-play online retailers are the only or Big Basket will have an advantage over Big Bazaarl
ones lvho alc going to do this business. They don't have C€rtainly not, says Singhal. "The biggest cos't of most e-
grocers is supply chain and
any products, they don't
logistics and Future has a
have brands, they don't
clea-r edge thanks to Future
have their supply chain, so
Supply Chain." Big Bazaar,
how will they work? It's a
says Singhal, also has the
very expensive model. I
have my own brands, Prod-
advantage of having its
own brands, and the e-gro
ucts, supplY chain, data
base. lVhat else do I want?" cers in order to succeed
have to invest in backward
He believes that he is
integration such as working
best poised to serve his cus-
tomels both though his with farmers and creating
physical stores as well as their own prii'ate labels.
online. Govind Shrikhande,
lrD, Shoppers StoP, agrees
Past Life
It's not iust Big Bazaar that
with Biyani that Physical
is re-born. Biyani saYs he
retailers have an edge over
pure-play online retailers. himself is a person dillerent
"A pure online PlaYer can from his past life. "EarlierI
was focrrxd on growth and
never be an omni-channel
retailer as they don't have a
doing new things all the
physical presence. A cus- time. Now I am doing 10
days of rigorous review of
tomer can go inio a PhYsical
store, shop the PhYsical businesses in a month.
store merchandise, and Allocation of capital and
resources has become the
they can also use a kiosk or
new priority. We will not
an iPad within the store to
sign for any new store if we
order online in the store, get
don't see profitability at
it delivered iu the same

"THE AMBIII0N 0F BEIN0 A Unm ruce coupnny

BUT I)(TCUTINO |-|IS Flv|CO BUSINISS OUTSIDI HIS STORIS COULD
POST AN INTIRELY DIFFERINT CHALLENGE''
B.S. NAGESH, Founder, Trust for Retailers and Retail Association of India

store ns.t day or get it delivcred to their home or any
otherplace."
According to Singhal ofTechnopak, with global retail-
ers such as Macy's and Sainsbury making a succes of
omni-channel, there is no reason why Biyani's omni-
channel plunge wilt not work. Nevertheless, he has his
doubts whether it will do well in the supermarket business'
which comprises a bulk ofBiyani's business. "With India
being a country ofdiverse tastes and preferences, most Big
Ba?aa! stores cater to the local needs ofa people ofa certain
each store. It was not the same case earlier. Now, tbe
return on capital employed is important. So my role has
changed big time."
Another change is that Biyani recruits more women m
the organimtion for gender diversity. He already has his
two daughters - Ashni (head ofFuture ldeas, the innova-
tion and incubation cell) and Avni (head ofFood Hall) -
ready for taking over bigger roles in the goup-
Biyani considers these his leamings from past mistakes
When he began in 2000, his mantra was to have a share

I ne7 201i tsUSrNDSS TODAY 59

 Biyani says lre has well past the debt pain and doesn't
of lndian consum€r's wallet in every possible way' So right
need incremental capital to grow "Pure retail companies
from r€xjtaurants, beauty salons and gyms to consumer
have ll2,0OO crorc ofdebt with 11,000 cror€ EBITDA We
finance, Biyani made sure he had a presence ever5'where'
witlr havc moved past that era. We have not expanded less than
He also tried his luck in film production However'
got rid ofall ihese businesses and a million square feet any year till date. So, where has there
debls piling up. be slor,r'ly
While been a problem? Even during the frnancial crisis we were
focused on tfuee verticals - food, lashion and home'
growing by not l€ss than one million sq.ft. per year.''
the food business is a work in progr€ss and the next few
He claims that it was during the ffnancial crisis that he
months will see a slew of new brands being launched'
creatcd FBB and rcdesigned - code named I(B 2 0 - his
fasbion under FBB is available at 240selling points' and
as
this year' In five entire business. "We thought that to survive in the busi-
many as l1 crore gaments would be sold
garmenls' nes, we have io convert ourselves into a value departmen-
vears'dme Biyani expecls to sell 50 crore
and under conhol of tbings tal store. Selling grocery alone wi.ll not take us to wh€re we
Biyani look much calmer
in 2010-2011, angry and agi- want io be. We took a big bet, and the bet was fashion' We
todav. from what he was
whenever he changeil the look and feel ofeach and every store, and that
tati. He often responded in monosyllables
quizzed about his {12,000-crore debt' Four years has paid oll"
was
dowrrthe line, he has sold Pantaloon to Aditya Birla Retail
and has exited from Future Capital. With the exit from li-
Courting Bharti Retail
Future Group's acquisition of Bhadi Retail in an all-stock
nancial services business, the <4,000-crore loan book'
deal values the latter at {500 crore in equity after adjusting
whch is counted as debt, has been taken away from the get
group's debt. The debt now stands at 14,5 0O crore' for accumulated losses of {1 ,800 crore. Ihe Mittals will
a nine per cent stake each in the BsE-
listed Future Retail and Future
.. Enterprises. In addition, Bharti
BIYANI IilILL HAVE IIAITIIIXTIXJI Enterpriscs will also receive 12 5O crore
worth of milestone-linked convertible
debentures, which can be converteil
into equity in fuhrre' eventually taking
RIGHI'' the Mittals' stake in both the entities to
PRICING $RATEOI[S about 1 5 p€r cenl They will get a board
seat in Fuh[€ Retail as well
ARVIllD SINGHAI', MD, TechnoPak
Futurc's merger with Bharti Retail'
says Biyarf, is in sync with his anbition
to expand his business. It has made him
stronger in noilhem markets where
Bharti was largely present' With this
deal along with the acquisition of the
south-focused retail cbain, Nilgiris,
which they acquired last year, Future
has a presence in 244 cities.
Prior to the signing of the Bharti
deal, the buzz was Mittals were looking
at exiting the business after Bharti
ended is reladonshiP with Wdmad in
2013. However, Rajan Bhadi Mittal'
Vice Chairman, Bharti hterpris€s' says
he has always been bullish about or-
sanised retail in India. "For Bharti' it
ivas an opportunitY to be Part of a
larger, nadonal scalc retail business and
build a world-class retail chain out oI
: hdia. There was a compelling case for
i the mereer siven the scale. cost and
i sourcing synergia ttat were on ofler' ln
* addition, geographically and in terrns of
i formats.bothbusinessescomplemented

60 BUSIh-ESS TODAY |une 7 2015

 l

''I

"BrYANl HAS [\|EVER DEFAULTTD AND ALI$LBAII(S rl1lu Sll1,IAIBl/

HIM. HE GOT RID OF HIS DIBT IN A VALUI ACCRETIVE WAY''
BALA DESHPANDE, Senior Managing Director, New Enterprise Associates

each other well," he saYs.

Bharti has multiple busineses like Del
Monte, their agi business, telecom and data
business, which are quite s)'nergistic' says
Biyani. "There are multiple opportunities
that exist. Whether we have thought about
something, I would saY no."
Mukesh Ambani's Reliance Retail has
already lound the synergy with Reliance Jio'
the yet-to-be launched bmadband business,
in 6nance, human resources, customer care.
and sales and distribution. In Biyani's case'
the departrnental stTler$/ will not be practi-
cal since Bharti and Futue Group are inde- 3
pendent 0rrns.
Bharti Airtel has 226 million subscriben t
in India (as of March 20I5) that Biyani
looks to tap, in addition to capita.l for expan-
$on. "It will be diflicult to find syneBies be-
tween tle two independent entities. Biyani
would be looking for the capital for expansion brick and mortar retailer wanting to go online would face
from the co-promoters, Mittals," says an executive with is price arbitrage, says Nandini Chopr4 l'4D ofconsultancy

Reliance Retail.
Analysts think that Biyani's recent deals are a master-
shoke. 'Future Group is clearly emerging as one of the
leading retailels in India on the back ofits acquisitions,"
says Raiat Wahi, Partner and Head (Retail), IGMG India.
Bala Deshpande of New Enterprise Associat€s expecb
more zuch consolidations happening in organised retail.
"India Inc is going to see consolidation for convergence
and capital efiiciency. Bharti and F'uture complernent well
in terrns of footprint and consumer elliciency. As the GDP
grows and companies' healthy balance sheets become
healthier, one will see more acquisitions happening."
While the advantages ofthe Bharti deal are yet to un-
fold, Biyani claims Nilgids is one of his finest buj's till date'
for which he paid {30O crore. For a north-based company
to make inroads into the south is not an easy task. "We
now have a lo5-year-old brand with slrong custom€r base
in dairy and bakery. People are ready to pay 10 per cent
premium for Nilgiris products," says Biyani. "We believ€
the power o[ compounding comes into play now. In five
years' time we can grow exponentially," he adds.
The Discounts Menace
A bulk of the e-tailing today happens on the back of dis-
counts, and Biyani is clear that he doesn't want to get into
the discounting trap. In fact, the biggest disadvantage a
Alvarez and Marsel. "Ifthere is a dress that is hanging for
{l,0OO, a physical retailer can't deePdiscount the same
product on his website because ifhe iloes so, he at once blls
bis brick-and-mortar business. The online retailer is using
private equity money to pay such huge discounts to fund
it. The big funds are paying to fir.nd my clothes. A brick-
and-mortar retailer doesn't have tlat luxury. "
In order to tackle the deep discounts ollered by most
online players, he has also creatcd a'price match' mobile
application, which will be launched in the next 30 days'
"If anybody sells cheaper than us, the additional price
charged for the product will be qedited back to customeis
account. The consumer witl get an slds saying the amount
has been creditcd."
But won't that hurt margins further? "It's all calcu-
lated. The price perception will change. I am guaranteeing
that your priccs ivill be lower. Now it's compctitjon who
should be worried, " explains Biyani.
Biyani is optimistic about the success of his omn!
channel plunge, and is even more excited about his FMcc
busines. "We have sho$n the guts to g€t into dairy' bak-
ery and juices. Indians believe that only HUI-S, P&cs and
ITcs can do it. PeoPle arc Dot taking us seriously and that's
good for us, as we have a point to prove "t
@ ajita sh a s h id h a |: @ n ev i nil

lune 7 2015 BUSINESSTODAY 61

 lnterview

will adil witlr

O'NOBODY Apart J'ront tlrc stores Aou
Bihsrti deal, what arc the other synergies?
aIrc

Bharti has many birsinesses that are synergistic with ours, Del
Monte being one. They also have agd, telecom and data busi-
nesses. There are mr:.ltiple opportunities. whetler we
Ifyou ask
have thought about something, I would say no, though we

BUYS have already started working with Del Mqnte.

EUERYIII I}|$ ;ffi;ffi;;#-*.**

can be opportunities to work with telecom players' We al-
ready have a service called T24 that ofers lree talk time to

0llil1lE"
ishore Biyani, CEO
loyal customers. It has 46 lakh subscribers.

What is your stratagy for the ne*tJive g,earc?

Future Group, tells We have multiple plaforms. We have a supply networ* acros
NevinJohn and Aiita lndia. We have a manufacturing base. We have 2l million customers, and
Shashiilhar that pmducts and brands in fasbion, food and home segments. So, we have a base
multi- channel r etniling on which tecbnology can be added, multi+hannel can be added, reach can be
is the future. Exurpts added and acquisidons can be added. In tve years we can grow exponentially'
from the interview:
What growth targets have lto setfor yourself?

We have high intemal targets. If we grow at 26 per cent (a year) from where
we are, I think we will touch {75,000 crore by 202 I ' In terrns of square feeL
we woulil be close to 30 million. Now, we are at 18.5 million.

With lhis acquisitio4 gou att now again tllebiggat retqiter"'

We never claimed to b€ the biggest r€tailer. It is a race with consumers' It

has nothing to do with other businesses' Everybody has his own business
model, everybody works in difrerent geographies. So, there is no race as zuch'

B t arer.'tthe Altnamics toilag much ililferenti Now, gou also

have online retailers tn ilealwith,

Th€ competitive intensity is far lower now. I don't lslow if my consumers are
buying online and not coming to me. W€ have not felt it yet' If somebody is
buying online, it must be a one-ofrpurchase' Nobody buys everything online'
Probably 60 to 70 per cent online business is from three-four cifres' We operate
in 2tt4 cities. I don't know ifthere is a comparison at all.

You ilon't se e-tailcrs as competition?

Technology-enable<l corrunerce is going to be there, but we have the brands'

we have the products, we have the supply chain, we have the stores, and we
will add t€chnology to them. We will be more suitable to do that business than
anybody else in a much more profitable way.
Even worldwide, multi<hannel retailing is big, not pure online' Just b€-
cause multi-channel hasn't started people think they are the only ones who
are going to do this business. They don't have the products' they don't have

ll watch interview with Kishore Bivaniat

!J businesstoday.in/fut u reg roup'biya nI
 the brands, thcy don't have thc sr.rpply chains. So, how
will they rvork? It's a very expcnsive model, I havc my
brands, products, supply chain, data l)ase.
.own
1I hut ab o ut tcthnolo g 11 ?
That is available ollthe shell lt's more about preparing
your organisation to deal with it.
H-tnilet's havc ahiglrcr vuluution tllr;n phys-
iutl relailers.Is it rtot u tUsnilvtntage?
It's good to have high va.luations. They should enioy il It
doesn't matter. It is the iob of the investor to give valua-
tions. Our job is to do things we arc good at.
IIow has Big Bazaar Diret pcrtbrmeil?
Itdoes a business of125-30 lakh a day. We only have
600-700 ftanchis€€s. We arc in Rajasthan and parts of
Maharashtra, Our dream is to have franchise-assisted
commerce in every pin code area.
lYhat aru Aour FMCG plans?
We will launch an oats brand. We want to be big in llour.
We are launching close to 2 5 new varieties, which will go
up to 1OO. We are about to launch froen food. We are
gefting into personal hygiene. we are launching a brand
for muces and dipc We are looking at personal care, home
care, food, staples and multiple categories. We have a
wafer biscuit factory. We ar€ getting into ice creams, rrc
arc aheady into dairy, bakery and juices. Ifyou map what
nc has, we are trying to do virtually the same. the food
business should be t10,0OO crore this year.
What is your visiotr?
My vision is to serge as many customers as possible. We
want to build our own branals in food, fashion and home.
Won't it be a challmgc to get inao b'MCG seg-
ments where there is slitf conryetition?
We are not gettjng into areas where there is clutter. There
are not many people in oats. In flour, there are many
playen, but none has 100 varieties. Our ketchup unit will
malie 25 types ofsauces, We have an arm which looks
atconsumption trends. We plan to build an entire prod-
uct line on the basis ofthat. We are not launchins ordi-
nary noodles or simple biscuits.
Ho,w are yott goirrg to nranagc capitnl?
We have already gone tbrough that pain. Now, we don't
nccd incrcmental capital to grow. I don't rurderstand
wherc the challcnge ofdebt is. There was no challenge
of debt anytime, There Lavc been words n4rich have
been creAted - debt-laden, debt'ddden, cash-strapped
- they are all just words, Purc rctail companies have
{12,000 crore debt with <1,000 clore EBI'IDA. We have
moved past that.
We have not expanded les than a rnillion square feet
any year till date, not even during the furancial crisis. We
thought that to survive we have to convert ou.rselves into
a value depafimental store. Selling only grocery will not
take us where we want to go. We took a big bet, and that
bet was fashion.
What about real esktte cosls?
Once the omni-channel modcl starts, we will be able to
deliver more. Once that happens, the benefts will be huge.
If we are able to do 2 5 pcr cent dcliveries from our stores,
the benefits will be huge.
So, it wiII be lull utilisation of resl csttttc,.,
Ithink the world has moved lowads il Alnost $8-9 billion
of Walrnart's business comes from ornni+hannel. A.lmod
8-10 p€r c€nt ofT€sco's business comes tom ornni<hannel
the only capability pure online has is technology. Ifyou
don't have your own poduct, |ps vvill you compete? We
have a large physica.l busin€ss O'lr buying strength is phe
nomenal, our sourcing strength b high, there is a cost of
business that has happened. Tbis is adding a layer to ir
What is the creiliting back iliscount plarr?
We have a Future Group wallet fu loyal customers. We
are seating a price match application in the next 30 days
Ifanybody sells cheaper than us, the price dillerence will
b€ credited to the customer's accormt, The customer will
not have to tack prices. A third party will do that.
WilI that hurt trtargirrs?
It's been calculated. The pricc perception will change. I
am guaranteeing that oru prices will be lorver. Now, the
other person should be wonied.
E-conunerce plalrers alwalts sell prodtrcts ot
a dist:ount. How will Aou m&trh lrriccs?
We are trying to catch up h the grocery business, wher€
prices are comparable. Ifsomeone sells brarded products
- Colgate, Lays - at a lower price, we r,r'ill match it. I can't
compare non-branded shirts or similar iten$. a
@ ajita sh ashid h a| ; @ n ev inj I
lune 7 2015 BUSINnSS TODAY 63