Future Group founder Kishore Biyani, 59, is known for his candid views on life as an entrepreneur. On Wednesday, he made his first public appearance since selling his retail assets to Reliance, admitting he had no option but to exit the business in the face of mounting debt and revenue loss triggered by the Covid-19 pandemic and lockdown.
"We got into a trap with Covid-19. Never did I imagine that our stores would be closed for 3-4 months at a stretch, but it happened. We lost Rs 7,000 crore of revenue in the first 3-4 months. Rent and interest did not stop even if sales took a hit (due to the pandemic). No company could have survived losing so much money," he said at the Phygital Retail Convention, a virtual conference.
Steering clear of commenting on Future's ongoing legal dispute with Amazon, Biyani said there were lessons he had learnt in the last seven months. This included thinking small and becoming digital-first.
"The last six to seven months was a good time for introspection. India is a large country and one cannot do every market or assortment in one go. I've realised that small is also beautiful. We did too many acquisitions in the last 6-7 years. That was a mistake. The single biggest lesson for me has been to think local rather than national. Stretching one's balance sheet behind new business development can be tricky, avoid it. And digitisation is the future using AI, machine learning, and data," he said.
Ironically, Biyani's endeavour to digitise his own retail business under a programme codenamed 'Tatasthu' flopped as the pandemic struck and his group defaulted on repayments to lenders. However, he hopes to kickstart this programme again as a manufacturer of consumer and fashion goods, now part of the residual business sitting in Future Enterprises. "I've been gung-ho about the food sector for the last 10-15 years. Fashion is something I started with," he said. "And home retailing is a separate business altogether."
Biyani's home retailing interests have been housed in Praxis Home Retail, where he has actively explored the convergence of online and offline retail.
"The Covid crisis is not over yet. So I do not know how the retail world will look like in the post-pandemic world. But if I look at the scenario now, less is more for consumers. Social interactions have reduced. Physical is making way for digital, so the excitement of shopping in stores is down. Retailers will have to get consumers to spend more.That is the moot point for business to revive."
India’s consumer confidence dipped to its third successive all-time low in September, as household perception of economy and employment prospects worsened, the Reserve Bank of India said in its consumer confidence survey on Friday. The central bank also said that more respondents had reported a curtailment in both overall and essential spending during the past one year.
Biyani admitted that the road ahead for retailers would not be easy in the face of these challenges. "Retailers have designed their business to be profitable at 90 per cent of their targets. In the current context, most will not be able to touch even 70-80 per cent of their targets, since the propensity to spend is low and out-of-home shopping is down. If the health crisis persists longer, it will not be easy for offline retailers," he said.
Reliance Retail, he said, offered important lessons in terms of growing scale. The retail unit of Reliance Industries remains the largest organised retailer in the country with over 12,000 stores. The Future acquisition will take its store count to over 13,500. The company recently raised Rs 37,710 crore from investors, offloading 8.48 per cent stake, and proposes to grow its new commerce venture JioMart.