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'Nobody buys everything online'

Kishore Biyani, CEO, Future Group, tells BUSINESS TODAY that multi-channel retailing is the future. Excerpts from the interview:
twitter-logoNevin Johnand twitter-logoAjita Shashidhar | Print Edition: June 7, 2015
Future Group CEO Kishore Biyani
Future Group CEO Kishore Biyani

Kishore Biyani, CEO, Future Group , tells BUSINESS TODAY that multi-channel retailing is the future. Excerpts from the interview:

BT: Apart from the stores you will add with the Bharti deal, what are the other synergies?

Biyani: Bharti has many businesses that are synergistic with ours, Del Monte being one. They also have agri, telecom and data businesses. There are multiple opportunities. If you ask whether we have thought about something, I would say no, though we have already started working with Del Monte.

BT: How will the telecom business be useful?

Biyani: If MVNOs (mobile virtual network operators, which do not have to own the network to offer services) are allowed, there can be opportunities to work with telecom players. We already have a service called T24 that offers free talk time to loyal customers. It has 46 lakh subscribers.

BT: What is your strategy for the next five years?

Biyani: We have multiple platforms. We have a supply network across India. We have a manufacturing base. We have 21 million customers, and products and brands in fashion, food and home segments. So, we have a base on which technology can be added, multi-channel can be added, reach can be added and acquisitions can be added. In five years we can grow exponentially.

BT: What growth targets have you set for yourself?

Biyani: We have high internal targets. If we grow at 26 per cent (a year) from where we are, I think we will touch Rs 75,000 crore by 2021. In terms of square feet, we would be close to 30 million. Now, we are at 18.5 million.

BT: With this acquisition, you are now again the biggest retailer?

Biyani: We never claimed to be the biggest retailer. It is a race with consumers. It has nothing to do with other businesses. Everybody has his own business model, everybody works in different geographies. So, there is no race as such.

BT: But aren't the dynamics today much different? Now, you also have online retailers to deal with.

Biyani: The competitive intensity is far lower now. I don't know if my consumers are buying online and not coming to me. We have not felt it yet. If somebody is buying online, it must be a one-off purchase. Nobody buys everything online. Probably 60 to 70 per cent online business is from three-four cities. We operate in 244 cities. I don't know if there is a comparison at all.

BT: You don't see e-tailers as competition?

Biyani: Technology-enabled commerce 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 technology to them. We will be more suitable to do that business than anybody else in a much more profitable way.

Even worldwide, multi-channel retailing is big, not pure online. Just because 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 the brands, they don't have the supply chains. So, how will they work? It's a very expensive model. I have my own brands, products, supply chain, data base.

BT: What about technology?

Biyani: That is available off the shelf. It's more about preparing your organisation to deal with it.

BT: E-tailers have a higher valuation than physical retailers. Is it not a disadvantage?

Biyani: It's good to have high valuations. They should enjoy it. It doesn't matter. It is the job of the investor to give valuations. Our job is to do things we are good at.

BT: How has Big Bazaar Direct performed?

Biyani: It does a business of Rs 25-30 lakh a day. We only have 600-700 franchisees. We are in Rajasthan and parts of Maharashtra. Our dream is to have franchise-assisted commerce in every pin code area.

BT: What are your FMCG plans?

Biyani: We will launch an oats brand. We want to be big in flour. We are launching close to 25 new varieties, which will go up to 100. We are about to launch frozen food. We are getting into personal hygiene. We are launching a brand for sauces and dips. We are looking at personal care, home care, food, staples and multiple categories. We have a wafer biscuit factory. We are getting into ice creams, we are already into dairy, bakery and juices. If you map what ITC has, we are trying to do virtually the same. The food business should be Rs 10,000 crore this year.

BT: What is your vision?

Biyani: My vision is to serve as many customers as possible. We want to build our own brands in food, fashion and home.

BT: Won't it be a challenge to get into FMCG segments where there is stiff competition?

Biyani: We are not getting into areas where there is clutter. There are not many people in oats. In flour, there are many players, but none has 100 varieties. Our ketchup unit will make 25 types of sauces. We have an arm which looks at consumption trends. We plan to build an entire product line on the basis of that. We are not launching ordinary noodles or simple biscuits.

BT: How are you going to manage capital?

Biyani: We have already gone through that pain. Now, we don't need incremental capital to grow. I don't understand where the challenge of debt is. There was no challenge of debt anytime. There have been words which have been created - debt-laden, debt-ridden, cash-strapped - they are all just words. Pure retail companies have Rs 12,000 crore debt with Rs 1,000 crore EBITDA. We have moved past that.

We have not expanded less than a million square feet any year till date, not even during the financial crisis. We thought that to survive we have to convert ourselves into a value departmental store. Selling only grocery will not take us where we want to go. We took a big bet, and that bet was fashion.

BT: What about real estate costs?

Biyani: Once the omni-channel model starts, we will be able to deliver more. Once that happens, the benefits will be huge. If we are able to do 25 per cent deliveries from our stores, the benefits will be huge.

BT: So, it will be full utilisation of real estate...

Biyani: I think the world has moved towards it. Almost $8-9 billion of Walmart's business comes from omni-channel. Almost 8-10 per cent of Tesco's business comes from omni-channel. The only capability pure online has is technology. If you don't have your own product, how will you compete? We have a large physical business. Our buying strength is phenomenal, our sourcing strength is high, there is a cost of business that has happened. This is adding a layer to it.

BT: What is the crediting back discount plan?

Biyani: We have a Future Group wallet for loyal customers. We are creating a price match application in the next 30 days. If anybody sells cheaper than us, the price difference will be credited to the customer's account. The customer will not have to track prices. A third party will do that.

BT: Will that hurt margins?

Biyani: It's been calculated. The price perception will change. I am guaranteeing that our prices will be lower. Now, the other person should be worried.

BT: E-commerce players always sell products at a discount. How will you match prices?

Biyani: We are trying to catch up in the grocery business, where prices are comparable. If someone sells branded products - Colgate, Lays - at a lower price, we will match it. I can't compare non-branded shirts or similar items.

(Follow the authors on Twitter at: @ajitashashidhar; @nevinjl)

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