Future Retail to step up pace of setting up new FBB stores
Future Retail is also planning to lower FBB’s entry price points across categories by 4-5% to drive volumes
Future Retail Ltd will open as many as 35 stand-alone FBB apparel stores in the year starting 1 April, more than double the number it opened this year, and cut its entry price points by around 4-5% to boost sales.
FBB, which competes with Landmark Group’s Max chain stores, has 53 stand-alone outlets and also sells its products within 282 Big Bazaar hypermarkets.
“We’ve done a lot of work over the last couple of years on our categories, assortment, sourcing and quality. So we are there now. We have a very large scale, we have the back-end sorted to a large extent and I think it’s time to leverage on that,” said Rajesh Seth, FBB’s chief operating officer.
Seth expects to open 30-35 stand-alone FBBs in the next fiscal year versus 15 in the year ending 31 March. In comparison, by end of next March, Max would have opened 40-45 stores and taken its total count to around 220, said Max executive director Vasanth Kumar.
“I think FBB’s got their model right and they seem to be confident about the economy. So now, it is all about playing up. And given the way the market is valuing some of the retail IPOs (initial public offerings) which are coming in, I think (founder Kishore) Biyani is becoming aggressive about his own business plans,” said Harminder Sahni, founder and managing director of retail consultancy Wazir Advisors.
While the average size of existing FBB stores varies from 9,000-12,000 sq. ft, the newer ones will be bigger at 12,000-15,000 sq. ft. Currently, around 70% of FBB’s stores are located on high streets and the remaining 30% in malls. In future, the ratio of stores within malls could increase as the firm looks aggressively at those, Seth said. FBB is also planning to lower its entry price points across categories by 4-5% to drive volumes. Most of its products are already priced below Rs1,000 with the cheapest—kids’ T-shirts—at Rs99 and the most expensive—its festive wear collection—at about Rs1,899-1,999.
In kidswear, which FBB is banking on in future, its most expensive products cost around Rs599-699.
“Kidswear has such a large potential in this country and is also a very unorganized sector right now. There is a dearth of brands and those (brands) that are available are very expensive. So it gives us a huge opportunity to really establish this category at a price point which is probably half or one-third of what a national brand would offer,” said Seth, who expects that kidswear could even grow at an 80-100% rate over the coming year if planned and handled right.
Kidswear currently accounts for around 20-22% of FBB’s business (55% girls, 45% boys). Women’s wear contributes around 35-40% and the rest comes from men’s wear.
“Kidswear is still a very under-served category. It is also complex because it is a price and value sensitive category, since kids outgrow clothes in four-five months. But from the production point of view, kids’ garments are almost as expensive to make as those of adults. It’s a margin sensitive category and most people are unable to manage the cost versus price balance,” said Devangshu Dutta, chief executive of retail consultant Third Eyesight.
There is, however, an opportunity in the segment and since Future Retail’s roots are in garments they have the DNA to manage it, said Dutta.