Future Group to foray into premium retail

He is best known for his value retail formats aka Big Bazaar and Food Bazaar, but now Kishore Biyani wants a change of image. He is planning to introduce new formats to give stiff competition to Reliance Retail, Shoppers Stop and Lifestyle.

The idea is to move from being a value retailer to a retailer of premium goods and luxury items. Biyani is planning to set up new formats for retailing and also taking some Big Bazaar outlets up market and giving them a complete makeover.

Studies by the National Council of Applied Economic Research (NCAER) has predicted 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. This offers a huge opportunity for the luxury and premium goods market in the country.

In fact, retailers such as Lifestyle owned by the Landmark Group has built a distinctive premium positioning, while the Raheja-owned Shoppers Stop has positioned itself as a bridge to luxury. However, Future Group’s success, so far has been largely driven by the discount segment format of big box retailing. His stores have so far made a mark by selling cheap and value for money products. But now it wants to sell high margin premium products to keep pace with its evolving consumers. The idea being that the organization needs to develop 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. As Vibha Paul Rishi, Group Strategy & Consumer Director and Executive Board Member at Future Group explains, “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.”

While discount retail hasn’t slowdown yet, Biyani believes that he needs to build competencies to service an up market clientele so that the group’s customers who graduate to a better lifestyle, do not move outside its fold and become lucrative customers for Pantaloon Retail’s competitors. Harminder Sahni, MD at Wazir Advisors feels “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.”

Perhaps what may have helped Biyani’s thought is competitor Mukesh Ambani-controlled Reliance Retail has a separate vertical, Reliance Lifestyle Holdings. The company has tied up with a number of premium international brands to launch a series of single-brand retail stores across different specialized segments of high-end retail.

However, experts feel the group will have to plan carefully before venturing into this space. As Narayanan Ramaswamy, Executive Director, 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.” Some experts feel the luxury business would be a tough one for Biyani as for so many years they has been focusing on value for money and that have become their 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.