Future Retail units beat demonetisation woes by offering deep discounts
Future Retail is offering consumers 10% cash back on downloading its FuturePay wallet and another 10% cash back on spends through it
Mumbai: Future Group, the parent of listed retail companies Future Retail Ltd and Future Lifestyle Fashions Ltd, took a number of steps to counter the effects of demonetisation such as requesting mall owners to reduce rents and consumer goods makers to partner with it in offering deep discounts—steps that paid off as the retail group’s sales are now up 30-40% year-on-year for December.
Within two weeks of the demonetisation announcement, Kishore Biyani, chief executive officer of the group, wrote to mall developers seeking reduced rentals following the “shocker" of demonetisation. Biyani also asked consumer packaged goods companies and suppliers to partner with him as he stepped up promotions and discounts to draw consumers back into stores.
“demonetisation was a kind of shocker. The cost of doing business following demonetisation has gone up as we had to put in more effort to do business," Biyani said, as he reached out to mall owners, brands and consumer packaged goods companies to share the increased costs.
In the last two months, the company offered consumers 10% cash back on downloading its FuturePay wallet and another 10% cash back on spends through the wallet, besides introducing a limited period offer of a 5% discount for credit card and debit card users. “FMCG companies were asked to part fund this," said Vinay Bhatia, chief executive officer, loyalty and analytics, Future Group.
The retailer also offered deep discounts across some of its departmental store formats such as Brand Factory and Central. For instance, from 16 to 18 December, Brand Factory ran a promotion across its 50 stores where consumers buying goods worth Rs5000 at maximum retail price (MRP) had to pay only Rs2000, which was also returned in the form of a free shirt valued at Rs1000 and a gift voucher of Rs1000. For consumers using MobiKwik wallets, the cash back component was higher at Rs2400.
During the 6-8 January weekend, department retail chain Central ran a scheme under which consumers shopping for Rs8000 at MRP had to pay only Rs4000 which was given back to the consumer in the form of two free garments valued at Rs2000 along with a Rs1500 gift voucher and cash of Rs500 on the FuturePay wallet. For consumers using Paytm wallets, there was an additional Rs400 cash back offer which could be used to watch movies.
Future Group will continue running its deep discount schemes and offers during its Big Bazaar Republic Day sale called Sabse Saste Din. The sale will run for seven days as compared to 3-5 days in the past, a company spokesperson said.
The deep discounting schemes are similar to those usually offered by etailers like Flipkart and Amazon which are known to incur huge losses. However, Biyani said he is not incurring any losses and has made money. The Brand Factory sale registered business of Rs115 crore and at Central, the retailer made sales worth Rs200 crore over the last weekend.
The deep discounts and schemes were made possible as companies and mall developers agreed to Biyani’s request. “We have got a positive response from them. Otherwise how else would we have got the consumers back?" Biyani asked.
To be sure, modern retail has been a beneficiary of the demonetisation move. According to a survey carried out online by Nielsen, a market insights provider, between 25 November and 1 December 2016 every second consumer has chosen modern retail and online for household purchases like food essentials including atta, rice and oil over neighbourhood stores. The shift is perceptible in categories of household (laundry, floor cleaner, utensil cleaner) and personal care products (lotions, soaps, shampoos) and daily staples (milk, curd, fruits and vegetables).
This is true for Future Group as well. Following demonetisation, sales in the first week were up by 15% on average across formats, on a week-on-week basis. On a year-on-year basis, business was up by over 25%. Now two months later, sales are up by 30%, said a company spokesperson.
Meanwhile, for the larger packaged consumer goods industry, demonetisation has led to a decline in overall spending. “About half the consumers have cut down their household spends significantly with one out of five housewives has reduced spending by 50% or more," said Nielsen.
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