King of cheap retail to go premium

Kishore Biyani, best known for his value retail formats such as Big Bazaar and Food Bazaar, now wants to graduate to being a retailer of premium goods and luxury items to take on Reliance Retail, Lifestyle and Shoppers Stop. He is looking to set up new formats for retailing such goods and also taking some Big Bazaar outlets upmarket and giving them a complete makeover.
Future Group, the country’s leading organised retailer, has so far made a mark by selling cheap and cheerful products. It now wants to sell high margin premium products to keep pace with its evolving consumers. The thinking at the Biyani controlled group, whose formats Big Bazaar and Food Bazaar are household names, is that the organisation needs to develop the competencies for premium retailing as the middle class is expected to swell turning a triangle shaped income pyramid of India to a diamond shaped one. “People’s lifestyle changes as they upgrade their aspirations. As a group we need to learn how to service them at different levels of lifestyles. We’ve mastered entry-level retailing. Now we need to create offerings for good, better and the best,” said Vibha Paul Rishi, group strategy & consumer director and executive board member at Future Group.
The National Council of Applied Economic Research (NCAER) has in a forecast said that the number of Indian households with an income of $1,000-5,000 per annum will expand from 46 million at the end of 2003 to 124 million by 2013. Similarly, the number of affluent households would expand almost fourfold from three million at the end of 2003 to 11 million in 2013.
Narayanan Ramaswamy, executive director at KPMG, said, “They would have to take care of the front-end and the way they position their stores to reap benefits from luxury business.”
Leading retailers such as Landmark group’s Lifestyle has built a distinctive premium positioning, while the Raheja-owned Shoppers Stop has positioned itself as a bridge to luxury. Future Group’s success, on the other hand, is seen as being largely driven by the discount segment format of big box retailing. While discount retail hasn’t seen a slowdown yet, Biyani believes that he needs to build competencies to service an upmarket clientele so that the group’s customers who graduate to a better station in life, do not move outside the group’s fold and become lucrative customers for Pantaloon Retail’s competitors.
Mukesh Ambani-controlled Reliance Retail has a separate vertical, Reliance Lifestyle Holdings, headed by ex-Titan hand Bijou Kurien, which has tied up with a number of premium international brands to launch a series of single-brand retail stores across different specialised segments of high-end retail. Harminder Sahni, MD at Wazir Advisors, said, “There’s definitely potential in premium market. Future Group, with all its expertise in retail and real estate might be able to make a success of it.”
Rishi said, “We have experimented with taking some of our Big Bazaars in upmarket areas. For instance, our Vasant Kunj Big Bazaar in Delhi stocks all kinds of cheese from around the world and has a live kitchen where breads such as Focacia are freshly baked.”
Future Group’s move is seeing a parallel with a number of leading FMCG firms which are finding the demand for premium personal care products such as fabric conditioners, skin lightening creams and face washes soaring. In fact, Hindustan Unilever (HUL) is planning to bring in premium brands from parent Unilever’s portfolio to India to cater to this emerging market. “We can count on Unilever, which has a wide range of products across different price points, to supply us premium brands from their global portfolio to meet aspirational needs of our consumers in India,” a top HUL official told Financial Chronicle.
“The luxury business would be a tough one for Biyani. For so many years if you are focusing on mass —sabse sasta din — then that becomes your ethos. It’s very difficult to change the image. For a player who is so deeply entrenched in the value category, it is difficult to break into the luxury space,” said the head of a leading retail consultancy who declined to be identified.
Rishi said, “We realise that we need to create a success of this and also our first lifestyle venture, Food Hall, in food retailing to get the system focussed on it and get an organisation-wide buy-in to what is still a small part of our portfolio.”
Apart from Rishi, Biyani himself and Damodar Mall, president, integrated food strategy at Future Group, are driving this experiment. The group is also going about creating merchandising and buying competencies for this high-end retailing business. Pantaloon Retail is also in the process of putting in place a group-wide customer loyalty programme to track customers who keep frequenting its formats regularly for purchases. The customer loyalty programme will allow the group to personalise relevant offers to these customers and also track their spends over time. “We have a lot of analysis on the consumption basket of shoppers but save for the Pantaloons format’s Green Card customers this consumption basket data has so far not been tied to individual customers. By marrying the customer data to the consumption basket, we will get deeper insights which will form the backbone of our strategy,” said Rishi. By tracking this data on an individual customer level, Pantaloon hopes to give customers offers in categories they do not normally purchase.