When you talk of organized retail in India, no story is complete without mention of The Future Group. From its earliest entities – Pantaloons and Big Bazaar, the group has played an indispensible role in strengthening and streamlining modern /organized retailing in the country. As we step into the New Year (2013), we have a quick conversation with the group’s joint managing director- Rakesh Biyani to have his take on the current and past retail dynamics of the country.
RAI: How would you want to remember 2012 in the history of modern retail in India?
RB: At the beginning of 2012, the business was quite slow, having more to do with inflation pressure that the country was facing. And most of us being in the business of fashion , the pressure was felt all the more. The cost prices had gone up considerably, the issue of excise duty was creating hurdles and other similar factors contributed towards extremely low consumer and market sentiments. This continued till about the beginning of the festive season, post which it gave promising signals. This year the festive season was better than what we saw in 2011 and the market has picked up since then though I must say that things could have been much better. Demand can be higher than what we are seeing today. As retailers, it is getting important for us to spend considerable time and efforts on understanding the changing needs of the consumers.
RAI: When you say things could have been better, can you explain the context?
RB: I think what has happened is somewhere our cost prices seem to have gone for a toss. We have lost control on that. It has become very difficult to price our product at the level where you can create demand and it is more to do with higher end cost, staff cost etc. Hence the productivity gain that you wanted in terms of sales per sq.ft has not happened at the level which would be viable. Unless the retail industry is going to consistently deliver higher double digits same store growths in the next two years, the business is going to be unviable.
RAI: What are the challenges that we are facing?
RB: The challenges are enormous. When I say cost needs to be controlled, we also need to understand that all of it is not within our control. The electricity cost is one such example. The tax policies are suddenly announced and there is a dictate to implement them on a short notice so there is no migration plan that we can have in place. These are some of the things we need to look at. In a consumer business, you cannot change things overnight and the transition period is very important. Even if we look at GST, all taxation policies have been designed for a smooth GST migration but then the decision on GST still remains pending.
RAI: What was the consumer sentiment as seen in 2012?
Rakesh Biyani: The market looked positive October 2012 onwards. We saw a lot more people walking into our stores but the first half was dull. The low sentiments that we see in the market off late has its roots in the uncertainties prevailing due to reasons such as high real estate and rent cost, fuel cost and other expenses which have shot up. All this put together is leaving behind an extremely limited basket space for retail shopping. The costs towards taking care of the necessities are taking a lot more of the consumer’s wallet.
RAI: How do you see the growth of ecommerce in India? Is it a bubble ready to burst?
RB: I think online is a reality and it is here to stay and I have no question on that front at least. Online is a much cheaper and easier opportunity to get in right now in terms of getting the store front ready and thus we are seeing so many new entrants having specialty ecommerce portals – from jewelry to hand bags to footwear etc. What we need to keep in mind is that just as in retail, the only people who shall survive are those who have a better proposition. But online is going to be there and it is not a boom which shall get burst. People just need to be careful to see what is the cost at which they are acquiring customers, what is the cost at which they retaining them and what is the cost they are delivering their products at. So you should not stretch yourself beyond what you can afford. Online business in India is only going to grow bigger and at the end of the day, in a large market like ours, online will have to be an integral part of every retailer’s strategy.
RAI: One key aspect that you think we need to focus on for better sales and what are the growing pitfalls a retailers needs to be cautious about?
RB: I think it is important that we have the right assortment mix for the consumers at a price at which a consumer would pick up the product without any inhibition. We need to work on value-engineering ourselves a lot more than what we do today.
As for the pitfalls, I think we need to be cautious about our costs as in the recent years the costs have gone up and we have not kept pace with it. If you want control over the costs, it is imperative that you must have better efficiency in the business and try to do more with the limited resources keeping in mind the aim – which is to grow sales.
RAI: How would you encapsulate your learning’s for a better 2013?
RB: Majority of us in retail thought that ‘growth’ in terms of ‘expansion’ was the only way forward and I must say most of it was a bit unplanned. We just rushed through the expansions thinking growth was inevitable. Overtime the demand was not as what we expected and there was cannibalization as well. I think the expansion needs to be very careful and the evergreen formula of retail – Retail is Detail is to be kept alive in our memory always. The moment the ‘detail’ part is missed out, the challenge begins. ‘Detailing’ is very important and it needs to start from the top and that is the only culture that makes you survive.
RAI: How do you foresee 2013 for the Indian retail industry?
RB: My gut feeling is that 2013 is going to be a better year to what we saw in 2012 and we believe that the sentiments shall be better. Positivity would be seen in the market. I think we should definitely witness some improvement but again it depends on some of the economic policies which will determine if we can control inflation, implement GST etc. But if we keep aside that and if I talk of my own internal business, there are areas we have clearly not improved upon – be it our availability index, our attention on the various categories we have within our store, the assortment mix we offer etc. Are the assortments moving well with the purchase pattern prevalent in the market? When we do these kind of analysis, we find there are areas where there is a lot of scope of improvement at our end which shall ensure better sales.
RAI: The opening up of FDI is a welcome decision but what are the challenges you foresee for the country?
RB: Rightly said, FDI is a welcome thing but it is going to be challenging. In terms of rules and regulations, everyone needs to comply with them. They are not as complicated as they perceived to be. Next I think is the infrastructure part of it. I think it changes with some of the regulations which are restrictive in nature today and the investment in that can become more simpler and more easy but that would require co-operation and partnership with the State government as most of these rules and regulations come under their control. But the bigger challenge shall always be the real estate price and that is a challenge for both – Indian as well as overseas retailers. It is a bigger challenge in the metro cities.
It is very important that if the State government feels that distribution needs to be modernized and modern trade needs to play a bigger role in providing the products to consumers then it is important to see how we can create the required space and infrastructure to support it. All this no doubt is a long term effort but work needs to begin now. Right now, India is sort of out-planning itself in the real estate cost but it is not that it cannot be controlled and addressed. I am very sure it can be addressed and as an industry we need to approach the Government and make them realize the importance of real estate as part of our development. This is imperative for the growth of the retail industry in India.
RAI: Promising businesses for 2013?
RB: I see a lot of movement in the food business. There shall also be a good demand from the businesses of small appliances, clothing and accessories, footwear and home décor. The business of home décor looks extremely promising.
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