Without Reliance deal, future uncertain for Kishore Biyani's firms

This week, the Delhi High Court directed Biyani's flagship company to maintain the status quo on its Rs 24,713-crore deal to sell his business to Reliance

He has never been afraid of taking on the multinationals. So in 2005 when Nestlé  started offering South African hypermarket Shoprite at a price lower than they charged Kishore Biyani’s retail outlets, he promptly withdrew its entire range of products from his stores in retaliation. His confrontationist strategy, alleging that the Swiss major was indulging in predatory pricing, worked. Nestlé relented and its products were back in Biyani’s stores. 

Yet, 16 years later, Biyani’s battle with the world’s largest e-retailer, Amazon, is not going in his favour. This week, the Delhi High Court directed his flagship company to maintain the status quo on its Rs 24,713-crore deal to sell his business to Reliance. Without the deal, Biyani, who is steeped in debt of around Rs 13,000 crore, could be in serious trouble. 

The order came in response to Amazon’s petition asking for his detention and also enforcement of an arbitration order in Singapore to scrap the deal. The spat revolves around a 49 per cent stake in an unlisted Future Group company together with the right to acquire the listed flagship Future Retail Ltd if the Centre were to revoke its ban on foreign ownership of multi-brand retailers. Amazon has claimed the Future-RIL deal violates the contract it signed with  Biyani's firm. Biyani has appealed against the high court order. But his problems expanded this week with the Securities and Exchange Board of India ordering that Biyani be banned from the securities market for one year for indulging in insider trading in 2017. Biyani will appeal against this, too.    

Biyani has always viewed multinational retailers with reservations. He has admitted that while he has learnt a lot of tricks of the trade by emulating them, he is not ready to follow them blindly. In an interview, he said he made it a point to stay away from Walmart or Macy’s when he was abroad. “By going to a Walmart or a Macy's, you could get overwhelmed into thinking that was the best model and stop learning,” he had said.

He has said he’s read virtually every book on Sam Walton or Marks & Spencer and other top retailers, including Zara. From Walton, he realised the importance of being merchandise-driven, which primarily meant concentrating on product and cost to drive operational efficiencies. Taking a leaf out of his book, Biyani replicated the Walmart model of appointing category managers to oversee product categories. 

Marks & Spencer taught him the importance of building in-house private labels (an art he mastered), where margins are better and quality easier to control. And from Zara, Biyani picked up the concept of “mind to market” in fashion, which was to crunch the time taken between ideation to the display rack by anticipating what consumers want. 

But he also learnt from desi retailers to address Indian consumers’ particular preferences. In 2007, he told Wall Street Journal that initially, he discovered that Indian consumers often walked out of his stores with their wide aisles and orderly displays. So he designed his stores to make them untidy, cramped and filled with noisy, haggling customers — spending Rs 50,000 crore to introduce narrow, crooked aisles and other changes.  

His first independent venture was a small plant to make trousers under the Bare brand. It is here that he learnt a key lesson — shout louder than the rest. So while his revenue from the brand in the first year was Rs 7 lakh, he spent Rs 16 lakh on advertising. Promoting the various retail brands was a key element in making Future group a force to reckon with.   

He also understood the challenges for a retailer due to the diversity of customer behaviour in different regions of the country. For instance, in a discussion he pointed out that in Hyderabad customers like loud colours, while Bengaluru prefers subtler shades. He converted this into a subtle science by creating specialised regional diversity tracking systems so that he had the right product in the right city. 

Despite this extreme customer-centric approach, Biyani failed to spot and respond to the biggest change in retailing — the explosion in e-commerce from Amazon and Flipkart (now owned by Walmart). In 2017, he publicly stated that online retail was not a threat to his group; instead, Future was a threat to the big global boys since even Alibaba and Amazon were now buying physical retailers. He did flirt with the idea of collaborating in e-commerce with on-again, off-again discussions with Amazon, recently claiming that he had approached Amazon eight times to rescue the group when its debt was burgeoning, but the Seattle-headquartered giant did not respond. 

That spectacular error of judgement now finds him caught between one of the world’s fastest growing e-commerce companies and the Reliance juggernaut. The jury is still out on what the retail space will look like in the next few years. But it is a fair bet that Biyani will not be there to claim his title as the badshah of Indian retail.