Future cuts prices on commodity fall

The Future Group, owned by Kishore Biyani, has cut prices on some products to pass on the benefits of a sharp decline in steel, copper and polymer prices.

The group says the drop in commodity prices has helped them buy steel utensils, plastic ware, fabric and other items from manufacturers at cheaper prices. "We are getting benefits due to fall in most of the materials like polyester, steel, copper and polymer. We have cut prices in some categories,'' said Kishore Biyani, chief executive of the Future Group.

Steel, bronze, copper prices have fallen 30-40 per cent in the last four months due to lower demand. Prices of ethylene and propylene have declined 75-80 per cent in the last four months as crude oil prices, the main component of ethylene and propylene, dropped.

The group’s hypermarket chain, Big Bazaar, which has cut prices on steel utensils and plastic ware, plans to pass on more benefits to consumers if prices fall further.

"We will give discounts in more categories as we get them at better prices," said Rajan Malhotra, chief executive of Big Bazaar. The magnitude of savings for retailers, from the drop in commodity-linked products, is substantial. For instance, the Future Group is expected to make a savings of 30 per cent in its shopping bag bill of Rs 63 crore in the current financial year due to fall in ethylene and propylene prices, the main ingredients of polythene bags. The company's fiscal ends on June 30.

"There is a lag effect between fall in commodity prices and merchandise prices. We have seen a 10 per cent cut in merchandise prices and expect it to go down by 25 to 30 per cent further," said Malhotra. Biyani also said the group is also making 25-30 per cent savings on furnitures and fixtures, elevators and escalators among others as the group is expanding its operations in the country.

The group plans to have a retail space of 15 to 16 million sq ft by March 2009 from 11 million square feet last fiscal. Furniture ad fixtures constitute 40 per cent of store set-up costs of all retailers.