Physical retail in India is still starved of capital: Kishore Biyani

When the godfather of modern Indian retail is speaking, one can certainly expect an interesting, intriguing, informative talk on modern retail in India. Group CEO, Future Group Kishore Biyani laid bare some thoughts about the today and tomorrow of the Indian retail industry in conversation with veteran journalist Govindraj Ethiraj at the India Retail Forum 2016.
What’s driving Indian retail today?
Indian consumers are getting ready, new products are being launched; new categories are getting introduced, which never existed before. People are becoming more experienced, path breaking changes are happening, women consumers are coming out of the cage, which in turn will make a lot of consumption happen.
The next generation will not have any guilt towards consumption. I started business, when there were shortages, but today we live in a society of abundance. There are multiple players for every category today. So it’s a completely different world now. And this will again change in the coming five years.
What do you think about online retail, according to your experience of it in the last five years?
I can talk about that online model, which I understand, which is my model. We run multiple formats of stores, the costliest of them all is Foodhall, where the operating cost is around 23 per cent of sales. But in general, we operate on a cost like 12- 18 per cent of sales. But if you look at the online models, the cost of acquiring a customer is 20 per cent, the cost of wish fulfilment is around 20 per cent and the cost of establishment is ‘you don’t know!’ So the cost of doing business online is much higher than the physical. The customers of the e-commerce space are also very different, much younger, and always eager to have bargains, discounts, deals.
Is e-commerce something that you are still learning?
We have recently acquired FabFurnish and we are trying to make it profitable. I personally believe that operation-wise we should be profitable from October. The mantra is to reduce the expenditure and increase sales: if you don’t want to grow disproportionately, you are going to be profitable.
Start-ups are sexy! What did you mean when you said that?
Start-up as a word has become very sexy. India needs a lot of new entrepreneurs. So in that sense, it is good. But a lot of these start-ups are operating on a really small canvas, that’s the problem.
What are the biggest challenges in retail according to you?
How to have unprecedented supply chain and delivery model like Amazon and how can I forecast the real time demand of a product which I am generating that too at a very, very fast level, collaborative demand and supply forecast.
Do you think the Government needs to be more impartial?
Development of physical infrastructure has given a lot of boost to the retail market. However, the Government is looking at e-commerce as a separate business rather than looking at total retail as a business. Consumption leads the development of any nation. I just want to say that they (online) should not be treated as the only ‘damad’ (son-in-law), we are ‘damads’ as well. Retail needs support from the Government. Traditional, physical retail is still starved of capital, and you have to create businesses which can fund your growth.