Future Group’s Diversification Into Too Many Things Was A Mistake, Says Kishore Biyani
Having diversified into many categories over the years with limited success in some of them, Future Group Founder and Chief Executive Officer Kishore Biyani said it was a mistake and the company will now restrict itself to food, fashion and home furnishings verticals.
"We have made mistakes. We got into so many categories of business. Now I have decided not to move out of food, fashion and home,” he said.
“Earlier we were into multiple categories. I think we have done enough mistakes. We didn't have that kind of bandwidth and we didn't have that kind of resources and we have done too many things," he said while speaking to BloombergQuint at the Retail Leadership Summit.
He also admitted that the brick-and-mortar retailer missed the opportunity in the online space.
“We missed the bus on internet commerce so we are getting into data-driven commerce now (with its blended commerce model Tathastu),” he said adding that he didn’t have the money at that time to get into that bus.
He was critical in his assessment of e-commerce valuations and said nobody understands the economics and the more losses one makes the more valuations they get.
Taking a dig at e-commerce giants like Flipkart and Amazon, who continue to bleed in the market, he said that he doesn’t think he has invested more than Rs 6,000-8,000 crore till date in the business.
“The cost of acquiring a customer in e-commerce is 11-20 percent, the cost of discovery and doing a transaction is 8-10 percent, the cost of fulfillment is another 11-20 percent,” he said, adding that he believes this model doesn't work especially in a country like India where 30 percent of fulfillment is internal debt and the margin operated on is very less.
Biyani said the group plans to have 10,000 outlets of its small-store format Easyday. It operates 1,300-1,400 stores at present and he said the company is trying to add around two-three stores a day.
"Except for Nilgiris which is 80 stores, all are owned and operated by us. We believe this will be our fastest model for growth...We want them (customers) to frequent our stores 150 times a year," he said.
He added that the smaller stores will become much larger than its large stores in the next few years in terms of volume and value of business.
"Our large stores make lot of money and our small stores are not making money. We expect in the next two years they will start making money. We have profitability of large stores which funds our small stores right now," he said.