Biyani acknowledged that the group did too many acquisitions in the last 6-7 years, specially of small-format stores
He said covid will prove to be a huge setback for India’s consumption story and retailers and marketers will need to work hard to get shoppers to come back to stores again
New Delhi: A series of acquisitions over the last few years compounded by the covid-19 crisis that rendered several businesses to temporarily halt in India, prompted Kishore Biyani to sell his chain of retail stores, warehousing and logistics business to Reliance Retail in a slump sale amounting to Rs24,713 crore earlier this year.
“I think with this business, we got into a trap, to be very honest with covid...if you look at the first 3-4 months, we lost around nearly ₹7,000 crore of revenues and there was no way we would have survived losing ₹7,000 crore of revenue. The problem is, the rent doesn’t stop and the interest doesn’t stop…" he said. Biyani was speaking to B. S. Nagesh, Founder, TRRAIN & Chairman and non–executive director, Shoppers Stop, in a nearly hour-long chat at a Phygital Retail Convention hosted on Wednesday.
He acknowledged that the group did too many acquisitions in the last 6-7 years, specially of small-format stores. “Somehow everything came together with this covid—when we saw it coming, I thought there was no other answer but to exit," he said.
Biyani said that group had other options but it needed to find a “holistic solution" to clear up its mounting debt than to part ways with one entity or format.
Biyani, who sold his retail business spanning 1,800 grocery, lifestyle and apparel format such as Big Bazaar, Foodhall, Fashion at Big Bazaar, Nilgiris, etc. in a slump sale to Ambani’s Reliance Industries in the month of August, is now left with a very limited part of the group's consumer-facing business—namely manufacturing of packaged consumer goods. However, Biyani who has been in the news lately spoke at length and ease about the future of consumption in the country.
Biyani said covid will prove to be a huge setback for India’s consumption story and retailers and marketers will need to work hard to get shoppers to come back to stores again. He said consumer behaviour and patterns have changed. Biyani said curbs on mobility has rendered several large format stores useless at this point as consumers are preferring to make trips to shops closer to them.
Last six months has been a good time for introspection and how customers have changed, he said. The pandemic will contract India’s economy as forecasted by several financial agencies. “….our economy is going to shrink and we will have to restart our life again from there. So, we will have to rebuild consumption in a way, our consumption is definitely going to drop," he said. Biyani who has built several businesses around lifestyle, apparel and daily essentials retail said going forward how we consume and what categories we consume will undergo a change.
He warned that for retailers the worst is yet to come. Biyani gave the example of fashion and apparel retail saying that the business, including exports, is close to $85 billion. “I personally believe it will shrink by $15-20 billion dollars when we start again. Currently the shrinkage will be much higher and we will have to cover it up," he said.
Consumers sentiment is mixed given restrictions on mobility and the economic fallout that the pandemic has had on consumers here.
“Consumers are in a different mood now—people are saying less is more. So how do we make them again come back to a spending and consumption mode?", he said. With mobility restrictions, the future of retail will look very different. “The bigger issue is mobility—we have become less mobile, in a way. Our distances which we are going to travel for shopping will be very different and that will have a huge impact on retail and when we restart our lives again in a post-covid world…our stores were designed to be destination places. That would also change.
Biyani’s remnant consumer-facing business i.e. manufacturing of fast-moving consumer goods will meet vastly new consumers, those that have reset their shopping habits, thanks to covid. Many Indian households are now also adept at shopping online—capabilities that Biyani’s Future Group struggled to scale at a time when Flipkart, Amazon and Reliance Jio have pumped more money into online commerce. Biyani said the company will think digital first going forward.