He’s betting big on small stores to help him reach 10 million households by FY21, report Abhineet Kumar and Raghavendra Kamath.
Future Group founder Kishore Biyani recently cycled from Jodhpur to Jaisalmer, in Rajasthan -- a distance of 280 km. It was part of his itinerary to visit a dozen small towns last month.
These were not pleasure trips but a sort of business recce, as Biyani gets his group ready to meet an ambitious target of selling goods worth ₹1 lakh crore annually by 2020-21.
He plans to do so by selling groceries, apparel and electronics worth ₹1 lakh every year to at least 10 million households.
These trips are helping him meet and understand the needs of potential customers. And he is betting on kirana or small stores.
“I went to a lot of small towns and realised there was no extreme poverty in this country. I am shocked to learn this,” said Biyani, who depends on his team of social scientists, anthropologists and mythologists, instead of economists to chalk out his strategy.
Biyani has maintained the target of increasing revenue by five times to ₹1 lakh crore from ₹22,000 crore, set in June 2015.
The only change to this plan is that Biyani has now targeted 10,000 neighbourhood stores, from 4,000 two years ago. This is expected to bring in revenue of ₹40,000 crore in FY21.
“I think we can even cross our ₹1 lakh crore sales target now, with more small stores,” said Biyani.
The Future group operates through its retail arm, Future Retail; fashion retail business, Future Lifestyle Fashions; and the fast-moving consumer goods business, Future Consumer Enterprises, which also operates small stores under the Nilgiri’s brand.
Future Retail, which has both large- and small-format stores, is led by Big Bazaar, Fashion at Big Bazaar, and Food Bazaar.
Currently, the group has 300 such stores but it does not expect to cross 400-450 in the next four years. “They do not serve all our customers. That’s where our small stores come in. These will serve under-served customers,” Biyani said.
After acquiring Easy Day small stores from Bharti Retail in May 2015, Future Retail has more than doubled the number of stores from 186 to 420 last month.
The company is also in the process of completing the acquisition of the retail business of Hyderabad-based Heritage Foods, which has 124 small stores. Electronics store eZone is also part of Future Retail.
Future Consumer also has 153 small stores under the Nilgiri’s brand, which it acquired in November 2014. It is these small stores that Biyani wants to expand to a network of 10,000 stores.
The small-store growth strategy includes a loyalty plan to get 1,500 members at each store for a fee. In return, Biyani is promising an additional 10 per cent discount on bills, apart from the ongoing offers.
The group also has Future Enterprises, which provides back-end support of the supply chain and logistics.
The strength of the ecosystem, from sourcing, production, supply chain, logistics and deeply penetrated retail outlets, Biyani says gives him the confidence to offer products at a price that cannot be matched by rivals.
Besides implementing big data to acquire and retain customers, the Future Group is targeting ₹20,000 crore of annual revenue by manufacturing fast-moving consumer goods, which would be sold both in its own stores as well as at other retailers.
Biyani has also set up a food park in Karnataka and entered joint ventures to produce biscuits and wheat flour.
“The group has made a course correction in the past five to seven years, moving away from reckless to profitable growth,” said Arvind Singhal, chairman and managing director at management consultancy firm Technopak.
A pioneer of modern retail in India, Biyani’s growth ambitions had led to unmanageable debt on the books of his flagship Pantaloon Retail, as it continued funding loss-making stores, which resulted in the company having to sell its fashion retail business to Aditya Birla Nuvo in May 2012 to reduce debt.
Biyani has changed his approach and is aiming to make the group companies debt-free, barring short-term working capital loans, and is strongly focused on profitable growth.
“Biyani’s ambition looks audacious. But, with a clear strategy, if he reaches the target even a couple of years later, it will be fine,” said Singhal.