Will Big Bazaar Direct hurt mother brand ‘Future Group’?

08 Oct,2013

By Kala Vijayraghavan

 

Five years ago, the elder daughter of India’s retail man Kishore Biyani, had an idea to take all the promotional and discount deals offered by Big Bazaar, their flagship retail store, and pack it all into an outlet in areas not serviced by organised retail.

 

Thus Future group, led by Ashni Biyani, set up a 600 sq ft store called Big Bazaar Best Deals in Mumbra, a suburb of Thane in Maharashtra, and started offering deals—in store, through a catalogue and via online retailing. That idea did not gain traction, but it has spawned another idea five years on: Big Bazaar Direct, which marries the reach of the neighbourhood store with the weight of the Big Bazaar brand and the convenience of technology to home-deliver goods and discounts.

 

Kishore Biyani

At its launch late last month, Kishore Biyani, CEO of Future Group, said: “If it works, it will be bigger than Big Bazaar”. The operative words here are two: ‘bigger’ and ‘if’. Big Bazaar is a Rs 11,000 crore operation, the mainstay of the Future Group, and the new business is essentially looking to leverage that brand name.

 

After spending much of the last 18 months on defence, selling pieces of his debt-laden retail empire, Mr Biyani is back doing what he knows best: playing offence, testing another retail format. “I am confident about this one,” he says.

 

“We are venturing into this after making most of the mistakes in the world.” Big Bazaar Direct (BBD) is the first of its kind, at least in India. Even competitors are admiring it for intricacies and ingenuity. They are watching keenly, but holding back judgement to see how it is execution unravels.

 

“The idea is very solid, ambitious and very interesting,” says the CEO of a competing food and grocery retail chain, not wanting to be named. One man who has seen it from closer quarters, even shaped parts of it, is Damodar Mall. Till mid-2013, the chief customer strategy officer of Reliance Retail was in the Future Group.

 

Mr Mall was a close aide of Mr Biyani and he even worked with 28-year-old Ashni on the Big Bazaar Best Deals concept. “If one gets it right, it can be very right,” he says. “But if it goes wrong, it can hurt the mother brand.”

 

BBD invites people — anyone from shopkeepers to insurance agents — to become its franchisee by paying a deposit of Rs 3 lakh. Say, your local chemist becomes a franchisee. At your calling, the chemist will come home with a tablet, which has a listing of Big Bazaar products that have deals on them.

 

You can see the deals and the chemist enters your order on his tablet. Instantly, this is transmitted to the BBD back office, and you receive an SMS. You pay the franchisee cash for the order, which is also acknowledged via SMS. The franchisee’s job ends there. Your order is now with Big Bazaar, which home delivers it in three to seven days.

 

“We have realised that, even today in India, human intervention is required in e-commerce,” says Mr Biyani. Daughter Ashni calls it “aided e-commerce”. The BBD model, thus, is tying to join many dots by making it a win-win-win proposition. The customer, sitting at home, gets goods from Big Bazaar, at its prices and discounts.

 

The franchisees earn a commission on sales for simply going door-to-door and punching orders on a tablet. The company gets a new sales force, one that capitalises on its local knowledge and contacts, and adds ballast to the Big Bazaar engine without the burden of organising working capital.

 

Mr Biyani is leading this project himself, along with the Future Group’s start-up team. Flanking him are Vivek Biyani, his nephew, and a panel of five entrepreneurs who have worked with Mr Biyani closely over the years. Rakesh, Mr Biyani’s cousin and the other senior promoter, is involved in the project to the extent that the technology piece reports to him.

 

According to Mr Biyani, a central thought behind BBD was their reading that Big Bazaar, today, has a greater mind share than market share. In other words, more people know about it than who visit it —primarily because a store is not in their town or is not close enough. BBD aims to bring Big Bazaar home.

 

“Big Bazaar touches around 35-40% of the Indian population today,” says Mr Biyani. “BBD will be able to touch at least 70% of the population.”

 

The new partners

The franchisees will have to enable that touch. BBD has launched in Nagpur (where Big Bazaar has its national warehouse) and Amravati, both in Maharashtra, where it signed up 15 franchisees. Next up: Ahmedabad, Hyderabad, Mumbai and the National Capital Region. “The fulfilment should be checked in one market first before the scale-up happens,” cautions Mr Mall.

 

BBD is currently inviting franchisee applications. According to Abhay Kumar, one of the five entrepreneurs, the applicants include kirana stores, homemakers, chemists, insurance agents and beauticians. But it’s not as if anyone who pays Rs 3 lakh will become a franchisee.

 

The group of five entrepreneurs will vet and decide. This group is also selling BBD. So, for instance, it has targeted an interaction with 4,600 prospective franchisees in October across BBD’s upcoming markets.

 

After the interaction and initial screening, this team meets with applicants in their operating locality to get a sense of them, their business and customer profile. “The biggest criteria we are seeking in our franchisees is entrepreneurship, their ability to collect customers,” says Abhay Kumar, a fabric distributor and garment manufacturer who has been doing business with Biyani for 27 years, and is part of the group of five.

 

According to Mr Biyani, five things need to fall in place: product, brand, franchisees, technology and supply chain. The most critical and the biggest challenge, he adds, are the franchisees, who stand to earn 7-9% of the value of the goods sold through them. “They have to buy into the idea…and I am banking on them to sell the idea,” says Mr Biyani.

 

“And believe me, the entrepreneurs who come and meet me ask a million questions about the venture. Their sign-in is not that easy.”

 

The flip side

Harminder Singh of Wazir Advisor, a retail advisory firm, feels the “biggest flaw” in the BBD model is the franchisee strategy. “Big Bazaar is not a business that has high margins. So, a partner may get impatient quickly,” says Mr Singh, founder and managing director, Wazir.

 

“The partner is an individual with a mind of his own. To have control over one’s business model is a better idea.” Hasmukh B Rambhia, president of Mumbai Suburban Grain & Provision Dealers, a group of kirana stores in Mumbai, seconds that thought.

 

“Maybe some years down the line, when modern retail distribution becomes stronger, it will make business sense to partner big retailers,” he says. “Today, local players have to play to their strengths, of the convenience of buying daily grocery products.” While a Big Bazaar store stocks, on an average, 30,000-40,000 products, BBD will offer 1,800 products in several categories, including non-food, apparel and accessories, furniture and home furnishing, packaged foods and electronics.

 

It plans to keep adding products in time, and also offer foods and grocery, the back-end for which it is working on. It is also looking to reduce delivery time, the eventual aim being same-day delivery. While the sourcing team for the store and home delivery formats are the same, there are two separate teams on the supply side. “What deal entrepreneurs get will depend, to a large extent, on the supply chain and service levels,” says Mr Mall.

 

“The machinery will have to deliver reliably given that it is a hi-tech business.” Adds Wazir: “If there are inconsistent supplies in a form that the Sahara Group experienced, customers will stop shopping.” And, as Mr Mall says, the resultant backlash could even hurt the mother Big Bazaar brand. The CEO of a rival firm quoted earlier says it will be an execution challenge to have several hundred diverse entrepreneurs buy into the same idea. “But then that is Biyani’s approach right from day one,” he says. “He hasn’t been afraid to take risks at all.”

 

Source:The Economic Times

Copyright © 2013, Bennett, Coleman & Co. Ltd. All Rights Reserved

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