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Tuesday, July 08, 2008

Future Perfect?

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Being the first mover is not enough, one has to constantly innovate to remain relevant. Kishore Biyani swears by this...

“Whenever you enter Pantaloon or Big Bazaar, the first thing that attracts you is their sprawling display. Many in India are now copying Biyani’s ideas. His value for money proposition has worked wonders,” avers Aninda Datta, Financial Manager, Seagram India. And he’s not merely sermonising. We actually met and spoke with him, even as he was shopping in one of the many Pantaloon stores in Delhi. Aninda has seemingly read and re-read Biyani’s life story, as laid out in his book It happened in India; the impact is obvious in Aninda’s almost reverential awe of Biyani’s middle class roots. “Coming from a modest family Biyani understands the price-consious consumer and that’s his flank against the giants,” he says.

You too may have read Biyani’s straight from the heart diatribe (his autobiography) or you may be lining up (with obvious fatigue) to buy groceries at Big Bazaar every month or simply have logged on at futurebazaar.com to avail the lowest prices everyday. Truth is that this fashion to food desi retailer simply cannot be ignored. Sure, a host of biggies have entered the retail space recently, including the Ambanis, Tatas and several of their ilk, but early bird Biyani, is the one reaping benefits of this unprecendented expansion. The retail king admits that his group’s core competency lies in knowing the Indian customer. “Addressing their needs and wants, we have nurtured a long-term relationship with consumers. I think that that’s how we have gradually become one of the admired companies in India,” Biyani told 4Ps B&M.

Tall words these, especially coming from a man who is only now being exposed to a virtual cornucopia of competant competition. But one look at Biyani’s competition-warding strategies over the last one year and you realise that this man is no humble simpleton. In 2007, Biyani added oodles of innovation to his retail ventures. There’s the gigantic 125,000 square feet store in NCR – ‘HomeTown’ – that has ushered in a unique “home making” retail initiative by the group. Then again, he made an ambitious foray into financial services under the banner of ‘Future Capital’ – with a bid to extend credit facilities to consumers, a first by any retailer.

“If you have to survive in the retail industry you have to address all needs of consumers. The more needs you cater to, more you are ahead of competition,” explains Damodar Mall, President-Food Business Division of Pantaloon Retail India Ltd (PRIL), the flagship company of Future Group. Certainly not a hollow boast! The Big Boys of retail, at least for now, are trailing trends set by Future Group. More recently, Reliance Retail is reportedly trying out the Future Capital model, to provide end-to-end services to consumers. Not to be left out from cashing-in on the ‘private labels’ business, Biyani has roped in ace marketer Santosh Desai to create a slew of brands from fashion to consumer durables. The initiative, called Future Brands, is slated to become the next big revenue earner for Future Group.

What’s more, while Mukesh Ambani’s big budget grocery retailing dream is facing stiff opposition from the trader lobbies, Biyani’s slow and steady approach with his Food Bazaar, is instead proving to be a torch bearer in the segment. Biyani test-marketed the concept for five years (under the Big Bazaar banner) and only recently has begun rolling out stand alone Food Bazaar outlets. “Its slow & comparatively small investment policy in the initial phase, has made PRIL win its stake holders and specially investors trust,” feels Gibson G Vedamani, CEO, Retailers Association of India. The group plans to roll out 8 such stores (at the rate of Rs.20crore each) across the country and is targeting a revenue of Rs.300 crore in the first year of operations. KPMG extrapolates that food retailing will grow at 9.2% for the next five years against a total GDP growth rate of 7%. At a time when the world’s largest retailer Wal-Mart is all set to prop up its first store in food retailing in India by 2008, Biyani’s overtures have come at the right time. The company may also launch its IPO in 2008 (now only PRIL is listed), and India’s retail rajah is all set to take the retail mart by surprise.

There’s more! Future Group is planning to set up 1,500 new format fair price shops, which the management claims will be selling the leading brands (over 300 products), almost 10% cheaper than the market price. Even local brands will find favour at these outlets, purportedly selling at a 20% discount. Are the Subhiksha’s and the Wal-Mart’s ready for this fresh Biyani onslaught?

Written by Angshuman Paul, with inputs from Ratanlal Bhagat

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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