‘Rewrite Rules, Retain Values’ – this simple idea has been at the core of Future Group – which has a strong grip over fashion, food and home furnishing verticals – since its inception. The Chairman of Future Group, Kishore Biyani says he never had a strategy during his early days of starting the business.
Explaining this further, Biyani said at IMAGES Retail Awards 2019: “Ignorance was bliss when we started doing business. We just got into it. Imagine, we used to work without spreadsheets. We learnt the right ways of doing the things when we actually got into the business.”
“Most of the decisions that the group took were based on instinct, guts or were taken accidently. It was not a planned exercise but there was a kind of framework or visualisation of what can happen and within that visualisation the group kept on doing what it was doing.However, today’s world is different. Businesses have to be well-planned and prepared for the future, aside from just working on instinct,” he added.
“Earlier, we used to plan for 5 years, now for the first time we have planned for 30 years together,” he stated. Biyani says that the 30-year vision of the brand is about visualising how customers, technologies and retail experiences will shape the sector.
Exploring Different Categories Future Group has diversified into many categories over the years but Biyani now says that the group will restrict itself to offerings from food, fashion and home furnishings verticals.
“We made mistakes by getting into so many business categories of business. We didn’t have the kind of bandwidth and resources to succeed in all segments.
We then decided to concentrate on the tree categories of which we have deep knowledge – food, fashion and home furnishings. A value chain for food and fashion – from manufacturing to consumers – help us excel. In the furnishing category, we don’t manufacture our own products but buy and sell. We source great products at great prices,” he explained. The brand is expecting the highest ever sales for their furnishings business for the month of August 2019.
Aside from this, Future Group has ambitious plans of building a food grid for India – creating an integrated food distribution centre, which will include logistics and pay attention to the tiniest of details like temperature control. All stores in this grid will not be more than 150 kms away from a distribution centre.
“We have already set up 8 distribution centres and are aiming to create 38 in all with an investment of approximately Rs 1,000 crore. We believe it will be a game changer in building a food and grocery supply chain business in a different way in India. If a consumer wants a product, a neighbourhood store will deliver them to his doorstep within half an hour. If the consumer doesn’t mind waiting for half a day, the products will come straight from the distribution centre,” he stated.
The Future is Fashion
Future Group is extremely bullish on its apparel business, with the management certain that there are a lot of similarities between their Brand Factory and American department store chain, TJ Maxx, which sells at prices generally lower than other major similar stores.
“There is an opportunity to sell a billion garments in this country. Our mission in the organisation is to be the ‘Clothia’ to the nation. We are aiming at 3X growth to reach the billion garments target and that cannot happen only through physical distribution, we have to create a whole sourcing to supply chain to demand creation back end, and that is what we are working on,” Biyani said.
“We have recently introduced Brand Factory online. If you look at our Brand Factory metrics, we only do cash on delivery, our returns are less than 10 percent, our order size per ticket is 4 and our ticket size is higher than the industry average. I think we are learning the business now,” he added.
The group’s plus size fashion brand, ALL, has also gone online and Biyani believes it will get a run rate of 20-25 percent by the end of FY2019 through e-commerce.
The Indian consumer has evolved. His demands are changing, his expectations are high, and his frequency of shopping has increased. Nonetheless, he is still a value seeker. Biyani is of the fi rm belief that in the retail business, the consumer decides how and what they want to consume, and consumer goods retailers must keep on responding to these demands to stay relevant. Consumer goods players will have to learn to operate at a speed at which we have never worked before.
He said that there are three components of every retail business
– Acquiring Customers: Acquiring customers is very expensive, so once we acquire them, we try and sell the maximum amount possible to them.
– Helping Customers in Discovery & Transactions (Payments): We have created a digital space, which can be used to create more discovery. Also, we have our in-house wallet which is being used more and more by consumers. 40-50 percent of our business will come from our own wallet soon.
– Fulfilment: We are doing this by building our own supply chain and distribution centres.
Using Technology to Surge Ahead
Future Group has spent the last few years investing heavily in technology which it is using to collect data. It has line transactions of more than 8 billion which it has processed and has data of more than 5.5 crore customers.The management has a vision – to have more than 1 crore people visit their stores more than 12 times a year each, make them spend Rs 1 lakh each in the Future Group ecosystem, and this – the group firmly believes – can only be done with the help of technology.
“In the next two years, all the decisions in any company will be taken on the basis of technology. Data will be the king. From manufacturing to supply chain to accessing the spending power of the consumers, data will drive all the decisions. At present, we are working on a technology where we can future sense the demand of any product on the basis of the shopping patterns of consumers,” explained Biyani.
Understanding the Deal with Amazon
Amazon has picked up a full 49 percent stake in Future Coupons, the promoter entity of Future Retail, with an option to acquire the entire stake later. Future Coupons currently does not own a stake in Future Retail but had recently subscribed to convertible warrants for Rs 2,000 crore.
“We had subscription warrants of our company and we had to raise money, so the deal was struck. Moreover, the investment by Amazon is strategic to become a part of the online ecosystem. The deal is basically aimed at enhancing the payments portfolio of both the companies. Payments is one platform where we can acquire a good customer base. If customers start using our in-house payment mechanism, then loyalty increases,” Biyani said.
“In the last 12 months, we have been investing quite heavily in e-commerce and in next 2-3 years, we are aiming to build a million-dollar business. We believe it is exponential to add layers to the length and breadth of the business that we have built,” he added.
In coming 30 years, he said, the idea of grocery shopping is expected to change totally. “As a consumption player, we have to keep on evolving. We are working on an idea where we can create a community kitchen where all the ingredients are lying on the shelf and customers come, prepare their food and take home the cooked food,” he shared.
Similarly, the fashion business is also going to change drastically. At present, we are seeing a fashion of used clothes. Sustainability is becoming a big trend,” he added.
Despite all the changes that are going to take place in the retail sector, the group has no plans to test international waters. “I think that is one thing we have been most consistent about. To understand India itself is so difficult, I think it’s better to work in India rather than anywhere else,” he concluded.
(With inputs from Indiaretailing Bureau)