Biyani Sees No Future in Speciality Retail Formats
Plans to sell HomeTown, shut Planet Sports and merge Ezone chain with BigBazaar
Kala Vijayraghavan & Sagar Malviya
Mumbai: The Future Group is exiting speciality retail formats as part of a larger strategy to focus on its core fashion and food businesses.
It plans to sell home furnishings business HomeTown, shut sportswear arm Planet Sports and merge stores of electronics chain Ezone within supermarket BigBazaar. The move is expected to affect 180-200 of the about 1,200 outlets that the nation’s largest retailer runs across supermarket, department store and single-brand formats. The Future Group expects the fashion and fast moving consumer goods businesses, along with its focus on young consumers, to drive growth and margins as it seeks to achieve its stated goal of expanding revenue by three to four times to ₹ 75,000 crore to ₹ 1 lakh crore by 2021.
The group is relentlessly cutting down on costs and focusing on the backend to build scale in apparel and consumer goods to help it compete on price, chief executive Kishore Biyani told ET. As much as 70% of the group’s business decisions are driven by data and technology, he said, helping it quickly tweak strategies based on changing consumer demand and behaviour. “We have cracked the food business backed by a platform of brands, product distribution, consumer insight and supply chain. We are going to consistently drop prices in apparel and FMCG products by building scale.” For a man known as the father of modern retail in India, the latest move is a major departure from his original strategy. The group he founded for long ran various formats across consumer segments, including in some low-margin and cash-guzzling businesses. He even dabbled with the idea of entering the online space. About a year ago, the group acquired home furniture portal FabFurnish and said it would merge it with HomeTown to create a separate listed en- Future Group aims to expand revenue to tity, with a target revenue of ₹ 1,000 crore a year. But with competition getting tougher in the ecommerce market, where at least half a dozen firms such as PepperFry and Urban Ladder made their entry in the past few years, Biyani has decided to stay off the space where most companies still burn cash to keep their businesses running.
The Future Group said it has shut down the omnichannel business it launched some time ago. “That is an unviable business. The cost of doing business in ecommerce is too high,” Biyani said. He expects the HomeTown sale to fetch more than ₹ 400 crore for the group.
Increasing competition and the resultant price war are also the key reasons to consider merging Ezone with BigBazaar. In electronics, its focus will now be on in-house brand Koryo.
Consumer electronics and large appliances retailing is the largest business for online specialists such as Amazon and Flipkart. Most online firms have been using these categories as a crowd puller by reducing prices and partnering companies for exclusive launches.
For a year now, the Future Group has been increasing its aggression in fashion and food by bringing premium brands and formats to drive margins.
Future Lifestyle Fashion posted sales of ₹ 1,064 crore and an operating margin of 10% in the quarter ended December 2016 — both higher than Shoppers Stop — with same-store sales growing more than 20%. For its FMCG business, the company aims to post ₹ 20,000 crore in sales from in-house brands by 2021 and push higher-margin products outside its own stores. The group has 27 brands under 65 categories, including food brands like Golden Harvest, Premium Harvest and Tasty Treat. It also has a host of international partnerships, with Sunkist and Hain Celestial of the US and Swiss firm Mibelle AG.
Future Group has been aggressive in fashion and food and has brought in premium brands and formats to drive margins
expects fashion & FMCG to drive growth
plans of merging FabFurnish with HomeTown to create a separate listed entity also shut down sportswear arm Planet Sports
costs and focusing on backend to build scale
premium brands and formats to drive margins Ezone with BigBazaar due to increasing competition and price war