Mumbai: Battling slowing growth and high operating costs, Future Group has consolidated its back-office operations by merging teams at different store formats into one. The group, which runs the country’s largest chain of retail outlets, is reducing the size of some stores and could walk away from properties that have turned unviable, company officials say.
“Our back-end operations have been converged to cater to multiple formats as a part of our cost-cutting and efficiency enhancing exercise,” said Rajan Malhotra, chief executive officer of Big Bazaar, the group’s flagship. “Earlier, there used to be separate teams for different formats catering individually only to that format, but now the teams have been merged over last year. Presently, the teams cater to multiple formats across the group.”
India’s organized retail chain operators have slowed ambitious expansion plans and begun restructuring their operations by shutting, relocating or reducing the size of their stores in an attempt to cut costs and boost their margins.
Cost-cutting measures: Shoppers at a Big Bazaar store. The company had planned to increase the number of Big Bazaar stores to about 140 from 104 by June. It will now lower its target to about 130. Harikrishna Katragadda /Mint
Future Group is also looking at reducing the size of some Big Bazaar outlets and closing the worst performing ones, said another executive at the company who didn’t want to be identified.
“We are looking at the bottom few Big Bazaars, of which some would be rightsized and some unviable stores may be shuttered,” this executive said. “Presently, the options are being evaluated.” Shutting stores will be the last resort and the group will first try and reduce store sizes to to make them viable. The group has already closed at least two stores in Ahmedabad.
Previously, the company had planned to increase the number of Big Bazaar stores to about 140 by the end of June 2009, from 104. It will now target about 130, said Malhotra.
He said the company is reconsidering all property rental agreements signed earlier and may even cancel any that had fallen behind schedule. In many cases, he said, the developers themselves had scrapped plans; some properties have been delayed inordinately.
“Most of the agreements are signed given a time-frame of 18 months to three years,” Malhotra said. If the projects are not following the schedule that had been agreed to, “definitely we will reconsider and may cancel the property.”
Future Group is trying to keep its expansion plans on track although some projects are getting delayed because builders are strapped for funds.
The group will also focus on rolling out stores that are smaller and stock a narrower range of merchandise than the larger Big Bazaar stores. Such stores are easier to launch in smaller towns as well as in locations where real estate prices are high, Malhotra said.
It plans to open one Big Bazaar Express in Tinsukia in Assam, and four Big Bazaar stores in Chandigarh, Nashik (Maharashtra), Surat (Gujarat) and Ghaziabad (Uttar Pradesh). While Big Bazaar outlets vary from 30,000 sq. ft to 100,000 sq. ft in size, Big Bazaar Express Stores are between 15,000 sq. ft and 20,000 sq. ft and stock a narrower range of merchandise. The company currently operates two Big Bazaar Express stores in Tarapore in Maharashtra and Salkia in West Bengal.