Future Group Chairman Kishore Biyani is known to be in talks with e-commerce giant Amazon for a strategic investment in his company. The retailer a few months ago had announced his ambitious Retail 3.0 strategy where he rolled out a plan to offer technology-enabled retail services through his neighbourhood retail format EasyDay. At the time of launch Biyani had talked about aligning with a partner to set up a marketplace model through which he could not just sell grocery but other merchandise such as apparels as well. "Besides grocery, we can put up a marketplace where everything is available. That will be in the second phase. We can build our own market place or align with somebody," Biyani had said during a conversation with Business Today's Ajita Shadhidhar. Here are the excerpts:
Blending physical retail with technology is something that you have been trying to master for a while now. What learnings from your past experience have you incorporated into your Retail 3.0 strategy?
What we are trying to do now is a culmination of knowledge and experience that we have gained over a period of time. This strategy has been thought through in a very detailed manner by travelling around the world, by understanding technologies, understanding people, experimenting on a few things and doing some scenario planning. There are lot of cultural and societal insights too, this probably is the most comprehensive exercise we have ever done in a period of two years.
Which are the models that you have evaluated?
I have visited Costco, have looked at JD.com, Alibaba, Amazon's acquisition of Whole Foods. We looked at the cultural landscape of India, the human lens of how we invoke all the senses along with the cost of doing business of various models in the world. This model has come from multiple experiences. We have anthropologists, sociologists in the organization too.
But weren't you talking about setting up an omni-channel retail model in 2015 also?
We were talking about one crore customers each spending Rs 1 lakh, and that's the model on which we started building this new model. How do we get data from consumers, how do we deliver? The digital world is something we have taken an opinion and positioned on now. That's a big shift we have done. We did the biggest training session in the history of Future Group. We did one on social media and one on artificial intelligence and deep planning. We then did scenario planning around the digital world and brought in humanitics approach to the digital world. Technology is all about increasing the capacity of human beings and organiaations. It can do three things - reduce space, reduce time and create social interactions. All this then was built into our model.
Today, from online to offline business, what we do is crazy. The amount of online presence we have to get customers offline nobody has ever done anywhere in the world. We do so many programmes online to get customers offline. We do a programme called 'Decide Your Price', in Brand Factory we sold tickets online to get people queuing, we do pre-registrations for all our big programmes online. What matters is how you use the digital medium to do business.
Can we talk about the membership model?
Future Group has been working on multiple membership models. One was Profit Club which was the original model which we created and the frequency of customers coming to our stores touched 18 times a year. That got us thinking that loyalties could be built. You can do anything for a customer who comes in 18 times a year, and that's how we started building a membership model. Then we created a model called the Savings Club for Easy Day. We thought small stores should only be membership stores. So, we take Rs 1000 and give them a 10% discount.
Haven't you always been a fan of large format retail?
I was always a fan of the small store format. I am a fan of retail, doesn't matter whether its big format or small format.
Before setting up Easy Day you had KB's Fairprice. Any learnings, any mistakes?
Lot of learnings, lot of mistakes. It was designed in a different time in a different way. It was only a grocery store, with limited SKUS, very stingy, small 600-800 sq.ft stores. We realized that unless we do a 2,000 sq.ft. store, it isn't viable. We now know the model, the size, the number of SKUs we want to keep, proximity of the customers etc. We have worked a lot around understanding the small store model and what will work in India. We also experimented with some convenient stores, in convenient stores the SKUs are different. People who walk on the streets buy colas and sandwiches. We did everything and finally zeroed down on this model.
How are you going to ensure that the customers will not go anywhere else?
Membership. You get everything at a call or a Whatsapp or text. It can't get easier than that. You get credit on whatever you want, it's a full technology driven solution which we are wanting to give. Lastly, it will be a very personalized thing, we will be personalizing everything for the member, which probably only a local kirana can understand and personalize. We have 340,000 members already, we are hoping to touch 700,000 members by end of this fiscal.
What would be the role of Facebook and Google in your business? Do you have an exclusivity contract with them?
We don't have exclusivity contract for sure, but we have started working with Google on search. We are going to do hyper-local search marketing among persons who are living around a particular area and see how we can talk to them. Google is helping us work on our geographical strategy. FB is all about communities, profiling customers, looking at their social media pattern and building their persona.
Won't you also be looking at selling your other merchandise apart from grocery?
Besides grocery, we can put up a marketplace where everything is available. That will be in the second phase. We can build our own market place or align with somebody.
Since you will be discounting most of the products will there be any change in the way you source?
We will be able to predict how much we can sell. That will bring down supply chain costs, we can plan in advance. There will be a big difference when we use data.
A lot of the modern retail companies are talking about aligning with local kiranas. Do you see the next wave of growth coming from kirana stores?
One of the largest category of consumption is grocery. So, there will be more players in that. More the merrier, as that will be a $1 trillion business in some years. But there is a limitation for a smaller retailers, they can't stock more than a certain amount of SKUs, and consumers need more now.
Do you see a trend of convergence retail emerging?
In an e-commerce business, it only invokes one of our senses and not all our five senses and human beings will never be satisfied by just fulfilling one sense. You need to work on all your senses and only a physical environment can do that. Digital environment brings in efficiencies and lot of other benefits which couldn't have happened through physical. I think the combination of these two becomes a deadly combination.
I have been consistent in my view that the e-commerce only model on this cost proposition is vulnerable. The cost of doing business will matter in the long-term and the cost of doing business in a pure ecommerce model is a challenge today in this country.
DMart is the most highly valued retailer in India. Any lessons to be learnt?
Retailers are merchants, they buy and they sell, and they have to do it efficiently. DMart is a very efficient operator at great cost. Simplicity is what one can learn from DMart. We are exactly opposite of DMart.