Meet India's king of retail

Pantaloon's Kishore Biyani has become India's largest retailer, but still has several aces up his John Miller shirtsleeves.

In India's chaotic markets, Kishore Biyani is the unchallenged king of retail. He has the knack of catching rivals off-guard and striking where it hurts most.

And now that he's set himself the task of retaining control of the largest retail space in the country, he won't let anyone "" suppliers or international promoters included "" catch him slacking.

The latest to face the wrath of the 43-year-old is South African hypermarket Shoprite, which opened shop in Mumbai last month through a franchise agreement with local company Nirmal Lifestyle.

The hypermarket began retailing products from big boys Nestle, Unilever and Procter & Gamble at consumer discounts of 20-30 per cent, lower than even Biyani's purchase prices in his Big Bazaar and Food Bazaar stores.

Instead of chewing his nails, Biyani turned confrontationist, asking why the multinationals were offering Shoprite better prices, even withdrawing Nestle products from his stores when the company did not respond.

Two days later the Nestle products were back, but not before the company had clarified its stance. Says Biyani, "Shoprite is involved in predatory pricing. There are rules against this in every part of the world."

But as a result of his tough stance, the three MNCs have asked Shoprite to roll back the offers or face withdrawal of supplies, he says.

Pantaloon man

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Unlike most people, Kishore Biyani makes no bones about his simplicity. He's the man you're most likely to ignore at the Pantaloon or Big Bazaar store, as he stands in a corner observing the way you shop. But make no mistake, what he may lack in sartorial style, he more than makes up through his observation powers.

You'll never catch him in a tie and jacket. He isn't a stickler for large cars, and has just graduated from driving a Honda City to a Honda Accord, though he's just as content driving around in a junior manager's Maruti 800.

He is a strict vegetarian, and is currently off cheese and fried foods, but will otherwise eat anything that is green.

According to him, golf is a waste of time. Instead, he's addicted to a daily half-hour walk and does yoga twice a week.

He used to be a lawn tennis regular but gave it up citing lack of time. He can't understand the fuss about gyms and hasn't visited any.

Biyani loves films and has even produced some, but was never part of that industry. His personal preference is films by Guru Dutt, Yash Chopra and Sanjay Leela Bhansali.

He believes in taking quick decisions. The deal with Bennett, Coleman & Co was done in seven days flat. He has never met V Banga of Unilever in his life, and leaves the task of relationship building to his managers.

Instead he spends time with property developers "" Sanjay Chandra of Unitech is a pal "" merchant bankers and investment bankers.

Biyani's victory isn't unexpected. India's own Sam Walton (the legendary promoter of Walmart) is quick to seize any advantage. Which is why the denim manufacturer who quit the trade because "it wasn't creative enough" commands over 1.3 million sq ft of retail space.

But even size hasn't made a difference to Biyani's vaulting ambitions and he's on an even faster trajectory of growth. He's booked over 4.5 million sq ft of space across the country, and will utilise 3 million sq ft by this year's end in 23 Indian cities.

He will invest over Rs 200 crore to make this dream a reality. Says R S Roy, editorial director of the magazine Retail, which tracks the industry closely: "Mall developers have him in mind before they start constructing. His presence ensures footfalls and a premium for the mall."

Even Biyani concedes, "We have a store opening virtually every fortnight; Ihave lost count now of how many I have opened."

But don't let Biyani fool you. He keeps a close watch over his empire with the assistance of his two brothers, who are directors in the company.

He might have over 6,000 employees and 300 managers, but the buck stops only with him. Every time a store opens, managers have to rush daily reports for the first 45 days, and it isn't unusual for Biyani to be fixing any lacunae either over the phone or personally in the store.

Weekly targets are fixed and reviewed every Monday.

The badshah of the bazaar jets between his stores across the country to "spend at least six or seven hours every week in the stores", he says. Even when he's in inspection mode, Biyani takes time off to cut more deals.

Last week he snapped up Indus League Clothing, a garments company in which he picked up 68 per cent equity for Rs 24 crore. The following day, he sold 4.98 per cent equity in flagship Pantaloon Retail to Bennett, Coleman & Co for

Rs 70 crore "" a substantial premium on the prevailing price of the shares in the market.

Biyani hasn't always played in the big league. Having quit the family business, which supplied denim to Arvind Mills, in 1987, he collected Rs 7 lakh and set up a small plant that produced 200 trousers a day.

In the crowded market of readymades, Biyani learned his first lesson "" to be heard, you need to shout louder than the rest. As a result, though the turnover for his Bare brand was only Rs 7 lakh in the first year, he spent Rs 16 lakh advertising it.

He also added John Miller shirts to his portfolio. This year, Pantaloon will spend Rs 85 crore advertising its various store formats.

The shift from manufacturing to retail was the critical point in Biyani's career. Distribution costs were the reason brands were snuffed out in the market, so Biyani decided to rewrite the rules of the game.

In 1993, he experimented with a small store format, and Pantaloon Shoppe was launched in Panjim, Goa, "where we could make mistakes without anyone noticing them".

From the shoppe to the large store format in 1998 "" this time in Kolkata ("If you can conquer Kolkata, you can conquer other markets too. Calcuttans, contrary to perception, have money and are loyal customers. They are emotional people and get emotionally attached to a brand.") "" was a carefully crafted plot.

And he was proved right when the Kolkata Pantaloon store became a raging success and Biyani stepped on to the turf as a super retailer.

Other professionals have wondered where Biyani picked up the tricks of the retailing trade. Some he learned from his own mistakes, he admits. Others he picked up from the big boys of international retail.

"I read every book on Sam Walton, Macy's, Marks & Spencer. And management gurus like Tom Peters whose book Reimagine impressed me." Even now he reads a management book every fortnight "" Stephen Covey, Robert Kaplan or James Collins.

But unusual as it might seem, he also made it a point to stay away from these stores. The reason: "By going to a Walmart or a Macy's, you could get overwhelmed into thinking that was the best model and stop learning," he says.

That might sound like stunted logic, but Biyani already knew from Sam Walton that you needed to be merchandise driven (to concentrate on the product and the price) so operational efficiencies could follow.

Macy's was useful for understanding the importance of size and large store formats. Marks & Spencer reinforced the importance of building in-house labels and the obsession with quality. He picked up the idea of "mind to market" from Spanish retail giant Zara.

Quick sale

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Kishore Biyani is on to another idea, and he isn't letting go of it because it could change the face of the retail business. The goal is simple: to dramatically scrunch the time it takes from when a product is conceived to the time it takes to get to the stores. His target: 45 days flat.

In the world of fashion, it takes four-six months for an approved idea to make it to the stores.

Biyani says that forecasting trends has too many variables and the chances of getting customer needs wrong are high. In such cases stores are stuck with huge unsold inventories.

"The aim of 'mind to market' is to respond to the demand of the market rather than try to forecast it months in advance," he says.

Pantaloon has already started pilot projects. In October 2004, the company detected a demand for trendier trousers. The company launched Fashion "F" Trousers based on this tip-off in December.

To cater to the demand, all departments "" design (he has hired fresh design graduates to work with him), production, category managers, marketing and fabrication "" came together on the project plan.

The team created a range of fashion styles and jointly agreed upon the fabrics that would be used, and the various price points at which the products would be launched.

Says Biyani: "We were able to put these trousers on the shelves of our stores all over India in 40 days."

At margins of 65 per cent, the pick-up offered great returns. No wonder Biyani's already on to the next project "" he won't tell us the product though "" where the lead time will be a meagre 22 days. Only Spanish retailer Zara's 15-day lead time is faster.

To translate theory into practice, Biyani took a leaf out of Walmart's book and appointed category managers. "We have over 150 product categories and each is looked after by a manager who is responsible for its growth and profit," says Biyani.

In-house labels constitute 8 per cent of the turnover of food items in his stores, something he wants to up to 20 per cent by end-2005.

Similarly, Pantaloon also has its own manufacturing facility for garments, and 15 per cent of his fashion and garments turnover comes from there.

But the underlying message in books on retail strategy was the one thing India had been wary of "" big is beautiful.

Biyani wasn't above picking up the gauntlet and launched Big Bazaar, a hypermarket in Mumbai as a gamble, financing it mostly through a loan (the share price was so low he could not have raised equity). To India's surprise, the format worked and the rest is history.

Detractors now attack him and say he is growing too fast. "He is leveraging his balance sheet to expand, and that could be a problem if some formats fail, and his margins are under pressure "" his net profit as a percentage of sales is only 3 per cent," says a competitor.

Points out another Biyani watcher: "You cannot have two or three Big Bazaars or Pantaloons in one area, which is why he is desperate about getting new brands like Indus League."

Others rise to his defence. Says retail equity analyst Sanjay Dam: "He now has a size where some failures of format will not make a difference. That explains why Bennett, Coleman & Co was ready to pay a premium on his shares."

Biyani remains unperturbed by most comments. He points out that he does not negotiate less than 60,000 sq ft of space, using it to leverage rentals that are 60-70 per cent lower than what others pay in the same mall.

The volumes, he says, have ensured that, as in Walmart, 50 per cent of the store products are bought directly from the manufacturers, passing on the middlemen's margins to the customer. Other rules have been learned through a process of trial and error.

He will not increase the share of food and groceries to more than 25 per cent of the turnover because "that is the percentage of their salary that families spend on food. And margins in food can be as low as 5-8 per cent compared to 40 per cent in fashionwear."

The larger challenge has been to understand the diversity in customer behaviour where even Hyderabad and Bangalore are as different as chalk and cheese.

"Hyderabad is conservative, male dominated, where customers like loud colours and shop in groups," he says.

"Bangalore is modern, where customers want subtle shades and shop on their own." In fact, Biyani has turned the study of community behaviour into a fine science through a specialised regional diversity tracking system.

He goes personally to people's homes, talks to local community leaders and spends weeks walking streets of bazaars to get a feel of what products should be stacked in a new store.

Biyani's current project is improving inventory management "" though he replenishes entire stocks for grocery 30 times a year, and garments six times annually, he is not satisfied.

Explains Biyani: "This will be the key differentiator between the winners and losers because it reduces working capital requirement and improves return on capital." And if Biyani gets it right, his retail juggernaut could well be unstoppable. 
 

MEASURING UP
Pantaloon Retail
Total space:	1.3 million sq ft
Turnover:	Rs 650 crore (2003-4)
Retail formats:	39 stores that include Big Bazaar, Food Bazaar, Central and Pantaloon
Target:	To double retail space to 3 million sq ft by 2005 end and reach a target of over Rs 1,000 crore by 2005-6 (This does not include another over 1.25 lakh sq ft of space being developed for "Home Sound",  in a joint venture with Delhi-based real estate developers Unitech Ltd. The store will provide  everything you need to build your home.)
RPG Group
Total space:	About 7 lakh sq ft
Turnover:	Rs 550 crore (2003-4)
Retail formats:	Controls over 343 stores that include FoodWorld, Giant, Music World, Health and Glow, among others.
Target:	Projected turnover of Rs 2,000 crore by 2006-7
Shoppers' Stop
Total space:	7.40 lakh sq ft
Turnover:	Rs 404 crore (2003-4)
Retail formats:	16 stores in 8 cities under the Shoppers' Stop name
Westside
Total space:	2.20 lakh sq ft
Turnover:	Rs 120 crore (2003-4)
Retail formats:	Has 16 stores in 9 cities. Recently opened Star India Bazaar, a  hypermarket in Ahmedabad.
Lifestyle
Total space:	3.25 lakh sq ft
Turnover:	Rs 230 crore (2003-4)
Retail format:	7 stores in 5 cities under the Lifestyle brand
Target:	A turnover of Rs 700 crore by 2008 end and at least 21stores by 2006-7
(Figures are based on details from the still to be published Images-KSA India Retail Report 2005, and also companies)