Many years ago Mr. Kishore Biyani started the business of organized retail of readymade garments. Few years later he expanded his offering to groceries, electronics, furniture, ethnic crafts etc. He grew fast through organic and inorganic methods. He brilliantly assessed the markets and conceived the business formats to suit those markets. Established good quality stores across the country and gave organized retail a strong foothold in the country, before the likes of Tata, Birla, Goenka, Damani and Ambani entered in the fray. However, business of Mr. Biyani always remained in stress. Lot of hopes were raised when he reorganized his business post global financial crisis by selling his flagship Pantaloon format to Birla and rechristened his business group as Future Group. However, as I understand, inventory and financial mismanagement always kept the group under stress.
For some years it was very clear that Mr. Biyani will have to materially dilute his stake in the group to mitigate the corporate and personal stress. The deal with Prem Ji Investment and Amazon Inc provided a glimmer of hope that Mr Biyani may resurrect and continue to be a dominant force in the promising Indian organized retail market. However, the denouncement that came over last weekend was not expected.
Mr. Biyani has been forced to out rightly sell a substantial part of his retail, logistics and real estate (warehousing) business to the mighty Reliance Industries. The wording of the statement made by Ms. Isha Ambani, Director of Reliance Retail - the entity which has agreed to acquire the business of Biyani's Future Group, succinctly summarized the situation and the circumstances of the deal.
Ms. Ambani said, "Pleased to provide a home to the renowned formats and brands of Future Group. Hope to continue the growth momentum of the retail industry with our unique model".
To me this statement implies two things:
1. The Future Group under the stewardship of Mr. Biyani had become directionless like an orphan child. The Reliance has obliged by adopting it and providing a shelter. Obviously the Future Group's brands and reputation will be obliterated in next few years.
2. Reliance believes that their "Unique Model" is the best way to grow retail industry in India.
I first did my monthly grocery shopping from Big Bazaar (BB) 17yrs ago. Since then I had been visiting BB once every two months. It has mostly been a pleasant experience. The stores have been consistently improving in terms of ambience, layout and offerings. The places have always been clean, well lit, and well organized. The people there have been mostly trained, active and willing to help the customers. The pricing has been competitive. The quality (even of house labels) of the goods and the variety also has been mostly good.
To the contrary, the Reliance Retail stores have usually provided the worst possible shopping experience. I have one Reliance Fresh store very close to my home. I sometime go there for picking up a thing or two. The place is dirty, disheveled, badly lit, and unorganized. The people there are poorly trained and mostly uninterested. The quality of merchandize is poor, especially the "house labels"; and the variety is limited. I am confident that many readers will agree with me on this. The same thing is mostly true with Reliance Jio stores and services also.
If this "unique model" is applied to Big Bazaar, I will have to certainly find a new place for my bimonthly outing to buy grocery and conduct a market survey.
Given the size and reach of the Reliance Retail post consummation of the deal, it is obviously a potential threat for many regional and local organized retail players. More so, considering that many retailers are already in distress due to extended lockdown.
