Kishore Biyani’s Future group could generate higher volumes and improve profits through reduced fixed costs and supply-chain expenses if talks with Amazon go through.
Biyani is in talks with Amazon to sell his private labels and sharing back-end facilities.
On the other hand, Amazon would get a number of brands on its portal that would help it drive footfall, consultants said. The Future group has private labels across categories such as as apparel, food and fast-moving consumer goods (FMCG).
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“We are yet to finalise the name of the e-commerce players we will tie up with. It could be Amazon, Flipkart or anyone else, but there will soon be a tie-up,” Kishore Biyani, chief executive of the Future group, said.
“Our own online venture is part of our omni-channel strategy, which is an extension of physical retail. Our tie-up with an e-commerce player will be about the Future group entering into pure e-commerce. It is a significant move for us,” Biyani said. The group recently unveiled its omni-channel strategy to sell products.
“The Future group has many formats and operates in many categories. They need alternative channels to market their products. The deal with Amazon will give them new a channel to reach customers,” said Dipankar Halder, chief executive of PingStripe and former head of Bharti Retail supermarkets. “Besides volumes, it can also improve their profitability due to lower costs in operations,” he said.
Added Prashant Agarwal, joint managing director at Wazir Advisors, “Amazon today supplies goods across the country. The Future group can get access to all those cities without being present.” He said the Future group could drive cost efficiencies in logistics, supply chain and sourcing.
Amazon is also expected to gain from the deal. “The Future group’s distribution centres supply to stores across the country. Amazon can make use of those centres and reduce logistics costs,” said Halder of PingStripe.
According to Agarwal, Biyani’s private labels will also boost Amazon’s portfolio. “More the brands, more the footfalls. If Amazon seals the deal, it can sell many brands of the Future group online,” he said.