In June 2007, Future Capital Holdings Ltd (FCHL), a financial arm of the Kishore Biyani-led Future Group, launched its retail financial services offering – Future Money – with the objective of becoming the leading retailers of financial products and services in India. Pursuant to an agreement with PRIL, it has the exclusive rights to provide financial products and services at present and future malls, stores and retail outlets in India which are owned, managed and controlled by PRIL and its subsidiaries.

According to Kishore Biyani, managing director, FCHL, “Within a month, FCHL is planning to foray into distribution of financial products, including credit cards. FCHL has entered into an agreement with ICICI Bank for marketing and distribution of the yet-to-be-launched Future Card, which will be a credit card offering loyalty points to customers. With the move, over five lakh ICICI Big Bazaar credit card holders will be asked to migrate to Future Card after obtaining a written consent. Customers shopping at various stores such as E Zone, Home Town, Central, Big Bazaar – from the House of Future Group – will be able to avail of the Future Card facility. With the move, we hope to increase our customer base extensively.” Currently, the two main retail financial services products are consumption loans (which are loans to finance the purchase of durables, furniture and other consumer goods and personal loans, which are unsecured credit lines to individual customers. “FCHL is also in the process of finalising detailed terms for acting as a corporate agent for Future Generali India Insurance Company Ltd for general insurance products and, for Future Generali India Life Insurance Company Ltd for life insurance products.

Since Kerala is the strongest market for Pantaloon in the South, four branches would be opened in that state in the near future, he said. On the new scheme, Dharmendra said the company has come out with an exclusive ‘Wednesday Bazaar’ for women, by which a new weekend is being created for them. Free facials, free mehendi and free tattoos would be organised for all lady customers during Wednesdays, he said, adding that Wednesday Bazaar would also offer discounts on all products, ranging from 5 to 50 per cent.

When contacted, Future Group CEO Kishore Biyani said: “We have been evaluating the option of creating a new entity for our value retailing businesses.” Last year, Pantaloon Retail had secured board approvals for hiving off the businesses into independent subsidiaries that could be listed at a later date.

Under the proposal, Pantaloon Retail will be a holding company. Pantaloon officials familiar with the development said the group is examining a structure that would eventually enable it to strike a JV with a global retailer. Pantaloon Retail has been in talks with Carrefour, the world’s second-largest French supermarket group, for a JV in India.

Under the scheme of things, Future Value Retail would serve as a major supply-chain entity for all Future Group store formats and help the company prune costs, a group official said. Technically, the sourcing and back-end of the store formats would be one while the front ends would continue to operate as separate entities. Currently, all Food Bazaar outlets, comprising its food and grocery supermarket business, are located within Big Bazaar formats.

While Big Bazaar is the group’s hypermarket business and has 109 stores, Food Bazaar is a supermarket chain that has 152 stores with most of them housed adjacent to Big Bazaar. Food Bazaar’s business model resembles the value model of global retailer Wal-Mart. According to Nielsen data, Food Bazaar’s share in the FMCG space in terms of modern trade is about 28%. Pantaloon Retail is estimated to report sales of Rs 10,000 crore for 2008-09 while the combined revenues of Big Bazaar and Food Bazaar are estimated to touch Rs 5,000 crore.

A proposed joint venture with a foreign retailer would enable the Future Group access sizeable dollar funds needed to expand its business. A foreign partner will also help the group bring in more efficiency in sourcing and logistics, helping it drive down prices and boost margins. Besides Big Bazaar, the Future Group runs Food Bazaar, KB’s Fair Price shops, Pantaloons, Central, Home Town, eZone and Aadhaar. The Pantaloon Retail stock closed at Rs 130.15, up 5.46%, on the BSE on Monday.

In a challenging consumer environment, bargain hunters are flocking to modern value-retail formats like Big Bazaar, Food Bazaar, D’Mart and More, which have been coming up with discount offers to attract customers. This reflects a global trend, wherein value-retail formats are growing despite the overall slowdown in the economy. Last month, US-based Wal-Mart reported a strong 5.1% increase in same-store sales (excluding gasoline sales) in the US, even though lifestyle chains, like Target, Macy’s and Abercrombie & Fitch, suffered a drop in sales.

RETAIL BLISS

Pantaloon may use the new format to strike JV with France’s Carrefour
A proposed JV would bring in the required funds for Future Group to scale up its business Presence of a foreign partner, in all likelihood, will have a positive impact on the efficiency level, which would bring down prices and help margins

For starters, the group has decided that the price of products sold through the Pantaloons chain will be reduced to the level of 2007. It expects such a strategy will provide a compelling entry-level price point to consumers vis-à-vis competing retail chains. Also, on the cards are plans to expand the Pantaloons private-label portfolio.

Confirming this, Pantaloon Retail India CEO-Pantaloons, Sanjeev Agrawal said that the company has taken a conscious decision to reduce product prices at Pantaloons to that of two years ago. “This will build a value-for-money proposition for consumers and will help to grow sales. Even the new private labels will have a similar pricing strategy,” he said.

Future Group currently operates 44 Pantaloons outlets across India over a total of 1.2 million sqft. The group plans to open six more Pantaloons stores by October, including two in Bangalore and one in Kolkata. On an average, each of the Pantaloons outlet has an operating space of around 25,000 sqft.

“While we are on track with our expansion plan for Pantaloons, but the slowdown of mall construction across the country might eventually impact our rollout plan. This is mainly due to the fact that the Pantaloons format is largely mall-centric and have very few high-street outlets,” Mr Agrawal told ET.

The group is also driving operational efficiency at Pantaloons outlets. This is through tightening of supply-chain and maintaining an optimised product replenishment system. “In fact, our same store growth has also been as per expectations,” said Mr Agrawal. While he did not elaborate further, according to Future Group’s latest investor update, the same store growth for lifestyle retailing in March has been 4.28%.

NEW LOOK

The group expects that the strategy will provide a compelling entry-level price point to consumers vis-à-vis competing retail chains It is also looking at tightening supply-chain & maintaining an optimised product replenishment system The group, which currently operates 44 Pantaloons outlets, is planning to open six more stores.

After several months of declining sales, value retailers such as Big Bazaar, Vishal Megamart and Pantaloon have witnessed a smart recovery, while mid-priced and premium lifestyle format stores such as Shoppers’ Stop, Provogue and Life Style are lagging behind with almost flat sales growth, according to industry estimates.

“Broadly, value retail segment has regained an average sales growth of around 7-8% in the past two months, while lifestyle formats are growing at around 0- 4%,” said Rahul Mehta, president of Clothing and Manufacturing Association of India (CMAI). Consumers are clearly not in a mood to shell out a premium, and apparel retailers are now working around the current consumer sentiment, said Mr Mehta. “Lifestyle formats are recording flat growth rates and, in fact, growth was (-)3% in January,” said BS Nagesh, managing director & CEO of Shoppers’ Stop.

Retailers are hoping for an upswing in the lifestyle segment by September 2009 on account of festive buying. Analysts believe that economic turnaround will first benefit the value retail, which would propel the future growth in organised retail sector. In April, Pantaloon, with value and lifestyle sales ratio of 60:40, has marked a sales growth of 23% and 18% in the respective segments. It was 5% and 4% in March, and there was a negative growth in December. Provogue recorded (-)9% sales growth in December. However, in April and May it rebounded to 10-12%, based on same store sales, said Nikhil Chaturvedi, MD, Provogue India.

Roughly, value and lifestyle segments share the organised apparel retail market in a proportion of 3:2 in tier-I and tier-II cities, and recorded an year-on-year growth of 10-12% in the corresponding months of last year. Organised retail has been under pressure since September last year. Apparel retail was worst hit during the period. With consumers starting to cut back on spends, most of the retail outfits suffered negative growth in the second half of the last year. However, with the start of new financial year the organised retail sector has seen a gradual improvement.

GOING SLOW

Value retailers like Big Bazaar, Vishal Megamart and Pantaloon witnessed a smart recovery
Mid-priced & premium lifestyle format stores such as Shoppers’ Stop, Provogue and Life Style are lagging behind with almost flat sales growth Retailers hoping for upswing in lifestyle segment by Sept ’09