PLACE: THE BIG BAZAAR in your neighbourhood. Time: Four years from now. You enter the store after a gap of a couple of months, and the trolley greets you by name, and adds that it’s been a while since you visited this store. You push the trolley along at speed, wanting to get the shopping out of the way. The trolley says it can help; all you have to do is tell it what you want. Cheese, you say. An in-store navigation system on the trolley gives you turn-by-turn directions to the dairy section. You pick up a package of processed cheese, and you’re asked to swipe it on a scanner on the shelf. Every detail about the cheese flashes on a screen, as well as other varieties you may want to try. And then, the screen lights up with a suggestion that you may want to try a low-fat cheese, given your buying history of generally choosing only low-fat and healthy food. You’re hooked, and forget about getting out in a hurry.
So they’ve managed to innovate with food, you think. What about clothes? How much can the helpful trolley do there? And so you head to the apparel section, where you decide to try on a classic blue button-down. Then a checked flannel shirt catches your eye; just the thing for your hiking holiday. Ask for a trial room and you’re sent to a semi-private space with no hangers or hooks. Just a large mirror, and a sign that tells you to stop at a particular point and look straight ahead; you hear a click and a whir. A menu comes up on what you thought was the mirror, and you are directed to hold up the barcodes of the shirts you want to try on. You do as you’re told, and the mirror turns into a screen, showing you in one shirt and then the next. Size and colour options come up; offers of trousers are made, all on screen.
You’ve had enough mind-boggling experiences for one shopping trip, so you head to the checkout counters. As your bill is being made, the assistant asks if you want to take your purchases with you, or want them delivered, whether you want to pick them up later, or want them put in your car that’s parked in the basement.
Are you grinning as you read this, telling yourself that this will never happen in India—especially not in a Big Bazaar store—and definitely not in the near future? After all, Kishore Biyani founded Big Bazaar to take retail to the heartland; it was never intended to be a hi-tech shopping destination. Biyani, characteristically, says he can do both. He calls it “connected commerce”.
The prototypes of the smart trolleys have been made, the smart shelf will be up and running at one of Big Bazaar’s new stores coming up in Noida in early 2015. By 2018, he would like the world to know Future Group for connecting humans through technology. “We believe that we are going to be a data and technology company,” he adds. The smart shopping trolley, smart shelf, smart trial rooms, and sci-fi-like augmented reality are part of the consumer lab at Future Group, which has roped in MIT Media Labs as its technology partner.
For Biyani, marrying technology with retail is his second innings of creating disruption. The first was played out in the late 1990s, when he brought in the large, modern retail store format to the suburbs and non-metros, where shoppers were more familiar with local kirana stores. In India, the reach of modern retail is restricted to the top 100 towns, says Nitin Bawankule, industry director for e-commerce, classifieds and entertainment at Google India. “But there are consumers with a lot of income and appetite in smaller towns.” They are the customers Biyani has been targeting.
This time around, he’s bringing in what’s being called the omni-channel in retail. It means what it says—all channels of shopping in one place. So, smart trolleys and shelves give way to an “endless aisle”, which is simply a touchscreen that offers products currently not on the shelves. To use another buzz phrase to explain the omni-channel concept, it’s a “seamless experience across channels”—offline merging with online.
IT’S NOT A NEW IDEA in retail; international chains have been experimenting with similar technology for more than 10 years now. British retail chain Tesco has tried variations of the smart shelf and smart trolley from 2003; today, all the big names in the industry either already use smart shelves or plan to introduce them in their stores.
The concept of endless aisles is also something Tesco has successfully implemented. Indian chains, however, haven’t yet experimented with technology, apart from some improvements in supply chain management. If Biyani’s ambitious plans are implemented in entirety, they could well change Indian retail as we know it. As we discuss elsewhere (India in the Age of Disruption, page 108), Indian businesses are rarely disruptive in the classic sense. What they do is bring in an idea new to the market, and execute it as flawlessly as possible. That’s what Biyani did with Big Bazaar in the early days, and that’s what he wants to do now.
But here’s the thing. Tesco has a robust e-retail channel, which it integrated with the physical stores to provide shoppers with an “endless aisle”. Biyani had experimented with e-commerce in 2007, with futurebazaar.com, but that was a failure because the group was still chasing footfalls at the physical stores. Insiders blame the supply chain, which struggled to meet demand; the systems were just not geared to keep the physical stores stocked adequately before supporting online sales.
Biyani claims the idea was ahead of its time, a defence that loses some credibility when you consider that Flipkart, India’s big e-retail story, was also founded in 2007.
What Biyani doesn’t overtly acknowledge is the fact that the rampant success of e-commerce is a key reason for customers getting familiar with technology and for companies to understand the importance of data. Sandeep Murthy, partner, Lightbox, a technology-focussed venture fund that has invested in futurebazaar.com, says e-commerce is a race to acquire data. “Whoever can understand the customer better will have a significant advantage,” he says.
Also, without robust e-commerce support, how will Biyani’s bold new world of omni-channel shopping work? The reply is typical Biyani. Everyone assumes online retail is here to stay, he says, “but it will not survive in its original form”. The new shape will be the omni-channel. This goes back to Biyani’s long-held conviction that Indian customers look at shopping as entertainment, which the smart trolleys and shelves, interactive trial rooms, and endless aisles will address. (It’s an idea that has some support internationally; last year, Tesco launched what it calls a shopping and leisure destination in Watford, a town near London, because it sees more and more people shopping as a leisure activity.) Of course, what’s unsaid is that Biyani will need to have a strong e-commerce operation going.
While he’s a little fuzzy on e-commerce, his plans for a technologically sound backend are crystal clear. Over the past year or so, Future Group has been working on tech-enabling its supply chain. Recently, it announced that it would be working with British company Hybris, a software firm that specialises in retail. (Last year, Hybris was acquired by enterprise software giant SAP.) Future Group is investing Rs 100 crore in Hybris over the next 18 months to create an omni-channel experience. “We will be able to create context in our customers’ shopping basket and be more relevant to them,” says Rakesh Biyani, Future Retail’s joint managing director (and Kishore Biyani’s cousin), adding that he is very excited about the endless aisle, which Hybris will facilitate. He says revenue from retail could go up by 9% in two years with omni-channel retailing.
“The certainty is that consumption is going to take place irrespective of the medium,” says Kishore Biyani. Consumers drive formats, and not having them at the heart of decision-making causes failures. Internationally, successful retailers are the ones who do not operate in silos. They focus on how to engage with consumers, no matter the medium they come through. “And that is possible through technology, which is channel-agnostic,” says Kees de Vos, London-based chief customer officer at Hybris.
As a retailer, Biyani admires Domino’s and thinks of ways to use Future Group’s space and stocks more effectively. Domino’s uses technology on an order and delivers pizza to the customer from the nearest outlet. And its enhanced profitability is an outcome of using space and resources better. “If we can get more out of the same store and customer, we can be more profitable,” he says.
Biyani sees the omni-channel model helping stores sell what customers want, rather than just what makes sense for the store to stock. “Rationalisation of merchandise, bigger packs, and bundled offers are some mistakes that modern retail has made over the years,” he says, adding that Big Bazaar has been as guilty of these mistakes as any other chain. With an endless aisle, the store can stock the most popular brands and sizes on the shelves, and offer options online.
BIYANI IS CLEAR that he does not plan to compete with e-retailers, who, he says, attract customers only by offering huge discounts. “We have evolved from that space,” he says. “You give discounts and incur supply chain costs above that, so where do you make money?” Rather, he plans to “use technology to amplify the term ‘profit’ in every possible way”. An example: The group plans to offer a smartphone app to its Big Bazaar Profit Club members. The app will store scanned copies of Big Bazaar bills, and prices will be compared with at least three competitors. When Big Bazaar prices are higher, the difference will be immediately credited to the member’s account. That’s the kind of intersection between technology and customer retention that Biyani wants to occupy.
According to Deb Deep Sengupta, chief operating officer for the Indian subcontinent at SAP, most Indian companies are leveraging technology to evolve their business to meet customer expectations and scale up. “Technology is not just an enabler; it has become the business now,” he says. Biyani doesn’t agree entirely: “For us, data is the business and technology continues to remain the enabler”. Data analysis showed that most Big Bazaar outlets saw a slowdown between 1 pm and 3 pm; the stores immediately launched a lunch coupon scheme, which led to a 30% increase in sales in those two hours.
Future Group has data on more than 28 million customers; the group has long seen the sense of analysing customer data, and has had graduates in social sciences and religious studies on its rolls for many years. It has now begun hiring data scientists. In fact, Biyani says he wants to set up a consumer lab in Bangalore. He wants to use data mining and technology to understand how customers respond to special offers and seasonal discounts. “Predictive analytics allows businesses to spot the most effective promotions,” explains de Vos.
Big Bazaar execs say that the stores cater to only some 30% of what its customers consume. The aim is to get a 60% or 65% share of the customer basket. “That upward shift of even 10% of our customer database will be a phenomenal number,” adds Biyani. Any evolved market, he says, generates 8% to 9% of the total business through the online medium. Of that, nearly 5% is through omni-channel. “But the noise of e-commerce is far more whereas omni-channel is not understood in its true perspective.” That’s something he plans to change. And, he adds proudly, the group has passed the stage where it needs to seek money to fund expansion. “We are making our balance sheets stronger and our investors are coming back and backing us,” says Biyani. Future Group has been investing 1.5% of its revenue in technology every year, claims Biyani. On an average operating margin of 9.12%, this is significant.
Biyani claims that Future Group has reached a stage where it will clock operating profits of Rs 2,000 crore from FY16. In the interim, Future Retail has a rights issue of Rs 600 crore lined up. A few more divestments will also help Biyani prune some more debt and reduce interest outgo, which in turn will leave more profits on the table. It’s interesting to note that rental outgo as a portion of operating profit has reduced from 88% in June 2009 to 53% as of March 2014, even as Future Retail’s footprint increased from 9.7 million sq. feet to 16 million sq. feet.
As long as the new tech-enabled shopping experience does not intimidate customers in Middle India, Biyani’s target audience so far, Future Retail’s plans to go hi-tech could turn out well. Biyani is pragmatic. “Our job as a retailer is to make customers shop.” And with a little help from the trolley, that’s exactly what he’s doing.