Defied skeptics to emerge as the #1 retailer in seven years
manic Monday at Knowledge House. Standing behind his desk, Kishore
Biyani is answering e-mails on his compact Sony Vaio hooked up to
a 15-inch Flatron monitor, simultaneously talking on the phone and
sipping tea, when one of his two cellphones rings. Few conversation
bursts later, he clicks it shut and barely has he turned, fists
on the table, towards this writer to guide him through the de rigueur
PowerPoint corporate presentation, that coo Ved Prakash Arya pops
in his head to say that everybody is waiting in the boardroom for
the Monday review meeting. Wearing an open collar sky-blue Arrow
shirt, navy blue trousers and a disarming smile, Biyani doesn't
have any of the craggy patrician features and commanding presence
one typically associates with high-powered corporate CEOs. The energy
and sense of purpose on the second-floor corner room of Pantaloon
Retail's corporate headquarters-tucked away in the far-flung Mumbai
suburb of Jogeshwari, best known for its theme park Fantasy Land-
though, is very palpable and real.
For one, the ideas just keep gushing out-spouting
as if from the proverbial fountainhead. Flagship brand Pantaloon
is in the midst of a brand overhaul. Perceived as a men's apparel
brand, the lifestyle format is being worked upon by two design teams.
"It has to be fashionable, youthful and fresh," Biyani
is emphatic, doodling furiously with a pencil on an A4 pad. Then
there is his dream mall: a 350,000 square feet (sq. ft.) shopping
space filled entirely with his own brands and services-Pantaloon,
Big Bazaar, Indigo Nation, Planet Sports, quick service restaurants,
Marks & Spencer (M&S), and food courts. Brands, retail and
real estate; Pantaloon's three growth engines coming together as
one. Squibbles, scratches, and circular lines... the doodling continues.
Then there is Home Town. The first 250,000-sq.
ft. home store shall open in nine months and stock everything from
white goods, furniture, hardware to electricals, besides offering
property services. Five stores are planned in quick succession,
involving an investment of Rs 250 crore, against projected revenues
of Rs 1,500 crore. By the time Biyani, who calls himself Chief Knowledge
Officer, has moved to outlining the contours of his proposed Rs
250-crore real estate venture fund, Kshitij, two scribble-covered
sheets lie torn and crumpled beside him. Questions about how these
towering ambitions are to be funded are dismissed with his characteristic
entrepreneurial flourish. "Raising finances has never been
an issue with us," he says.
RETAIL: Mistakenly perceived as a men's store, the lifestyle
chain is being repositioned to appeal to younger shoppers
Malls is another area where Biyani has big plans. He
has floated a company to develop retail properties
But then again, the 43-year-old has always thought
big, and won. Pantaloon Retail, his listed company, expects to close
this year with a turnover of Rs 1,100 crore-for perspective, last
year revenues were Rs 650 crore. Go back not too far-1997 actually-and
you'll find that Pantaloon has grown from being a three-store retailer
with just Rs 60 crore in revenues. Yet, when the financial year
ends in June, Pantaloon Retail would be spread over 2.2 million
sq. ft. and 75 stores across 12 cities. In fact, these days it's
not unusual to hear senior managers talk of working towards a revenue
target of $2 billion (Rs 8,800 crore) and a sprawl of 10 million
sq. ft. within the next four years.
Coming Into His Own
A little over seven years ago (August 1997,
to be precise), when Biyani opened his first Pantaloon family store
in Kolkata's Gariahat, few retailers could have dreamt that the
commerce graduate, who started off with an investment of Rs 7 lakh
and capacity of 200 trousers a day, would rise so rapidly. When
Biyani talked about his "pan-Indian retailing model",
reactions ranged from good-humored incredulity to downright derision.
That is, till Biyani proved them wrong. Take the test case of Kolkata.
He invested Rs 5 crore in the first Pantaloon store, including a
Rs 40-lakh promotional campaign-unheard of for a retailer with just
one store. Surprisingly enough, the response was overwhelming. With
daily footfalls of over 1,200, it notched up Rs 10 crore in sales
in the first year. Small wonder, the hard-nosed businessman still
has a soft corner for Kolkata. In quick succession, Biyani opened
two other Pantaloon stores, followed by the first Food Bazaar. His
transformation from a manufacturer-he'd started off in the family
textile trading business-to a retailer had begun.
|BIYANI'S GET-BIG-QUICK STRATEGY
The good and bad of it.
| The Pluses
built up scale faster than any other retailer
willing to experiment and make bold bets
"Indianised" all accepted norms of global retail
more on what matters to the customer
his resources thin with diversifications
still largely a one-man show, although that's changing
yet invested in IT systems in a big way
spending enough time on consolidating the business
On the face of it, there's hardly anything outstanding
about Pantaloon Retail's business model. It's a fairly textbook,
multi-format store, though heavily Indianised and focussed on the
mass consumer. What's different is the combination of old-fashioned
entrepreneurial abilities (like being able to read the consumer's
mind, taking gigantic risks coupled with shrewd business sense)
and excellent networking that's swung the fortunes in Biyani's favour.
Says Shashi Kumar, General Manager, The Hub, a 2.5-lakh sq. ft.
mall at Goregaon, Mumbai, who used to work for Shoppers' Stop: "More
than a pure retailer, he is an entrepreneur, completely unafraid
to use unconventional methods to achieve his goals, while keeping
the bigger picture in mind."
In fact, Biyani-who says he can size up a person
in the first few seconds-has an uncanny ability to gauge what the
consumer is really looking for. So, while many competitors were
blindly trying to apply Western merchandising and retailing models
in the Indian marketplace, Pantaloon zeroed in on one single attribute:
the average Indian consumer's obsession with bargains. This was
the single platform around which he built both his value businesses:
Big Bazaar and Food Bazaar. He also wagered on the fact that in-store
ambience per se doesn't matter if there's enough discounting happening.
Ergo, Big Bazaar can get away with stockpiling everything from plastic
containers to loose rice in gunny bags, reducing the aisle width
to just about fit in a cart.
As any retailer will tell you, it's the combination
of efficient merchandising (buying and promoting the goods the stores
carry) and operations (running the stores) that makes a successful
retailer. Biyani, ever the contrarian, has always believed that
once you get the merchandising right, the rest fall into place.
And once convinced, he backs it up with full financial might. Within
six months of the Kolkata Pantaloon launch, he had rolled out Hyderabad
and Nagpur, investing a further Rs 5 crore towards an untested format.
In October 2001, three Big Bazaars were rolled out in the space
of 22 days. The 50,000-sq. ft. stores stocked anything between 80,000
and 90,000 SKUs (stock keeping units) and involved investments of
Rs 10 crore each. This was followed by a similar flurry of Centrals-125,000
sq. ft. seamless malls in Bangalore and Hyderabad (250,000 sq. ft.),
with one in Pune coming up next month.
BAZAAR: Firmly positioned as a value chain, Big Bazaar
and Food Bazaar focus not so much on consumer comfort as savings.
They symbolise Biyani's retail philosophy, which is essentially
"pile them high and sell them cheap", like Wal-Mart's Sam Walton
How does Biyani manage to be fast and decisive?
By relying primarily on his gut and instinct, cultivated by observing
and interacting with thousands of customers over the years. While
many consider this foolhardy, it seems to have paid off handsomely.
So, while other retail chains spent months crunching numbers, poring
over spreadsheets trying to factor in catchment areas, approach
infrastructure, socio-economic profiling, all it took Biyani was
a walk round the block to identify the most critical factor in the
retail business: location.
Relying often on gleaned insights like the
fact that while most people prefer to do their everyday shopping
in the neighbourhood, they like to head farther off when it comes
to satisfying their aspirational needs, Pantaloon managed to lay
hands on prime properties. Going against popular perception has
not just fetched him favourable rates, but also earned the goodwill
of mall developers like Atul Ruia of Phoenix Mills who even today
remains a close friend. Mid-February, Biyani cemented the friendship
by picking up a 16 per cent stake in Mumbai-based Ruia's Galaxy
Entertainment, which owns sports bars and bowling alleys.
|FoodWorld (Raghu Pillai,
President & CEO, seen here) possibly best understands large
format food retail, but has been slow to expand nationally
Big Gets Bigger
Today, even competitors privately admit (though
most of the large retailers Business Today approached for this feature
refused to comment) that Biyani's bets have paid off. His retail
empire successfully rests on four robust formats: Big Bazaar hypermarket,
the food and grocery business Food Bazaar, original brand Pantaloon
and "seamless malls" Central. Arvind Singhal, Chairman
of retail consultancy KSA Technopak, who till a year back felt that
Pantaloon was doing nothing right from a classical retail point
of view, is today a convert. "Closest to achieving economy
of scale, national footprint, widest share of consumer spending
basket (food, groceries, clothing, house wares, accessories), extraordinary
dynamism and entrepreneurship, lightning fast execution, and very
good performance of the stock in the last 12 months allows great
flexibility in raising further capital to fund growth," he
And growth for Biyani shall come from a larger
share of the Indian aspirational consumer's wallet. Currently, Pantaloon
claims to have a little over half the consumer wallet, through offerings
in the food, apparel and home need segments. Biyani plans to up
this significantly by entering new formats like home improvement,
leisure and entertainment, and specialty stores. So, be it indoor
cricket or an Indian alternative to coffee chains like Barista,
Biyani's proposed ventures are once again unconventional. Says a
senior manager with a South India-based retail chain: "Whether
he'll be successful in all areas depends on how success is defined.
Even if he succeeds in three out of six, it will still be a success
and he can always quit the unsuccessful ones by about 2008 or 2009."
|Shoppers' Stop (MD
& CEO B.S. Nagesh seen here) is the biggest player in department
stores, and plans to expand following its IPO
Among the experiments planned is a "farm
to plate" format in food retail, which currently accounts for
a fourth of Pantaloon's revenues, but is expected to drive future
growth. The new strategy involves, at one end, getting into contract
farming and private labels and, on the other, offering adds-ons
such as freshly ground spices and wheat, bakery, and takeaway gravies.
Once again, it's a typical Biyani brainwave: unorthodox, but based
on a shopper's real needs.
It's lunch time. Biyani, accompanied by coo
Arya and four family members (elder brother Vijay handles banking
relations and Anil looks after production; cousin Rakesh is in charge
of Central and brand relations while another cousin Sunil handles
production), is sitting down to a pure vegetarian Marwari lunch.
As the little steel and glass bowls move around the revolving table,
most of the talk centres around shops and how they're doing. Biyani
and his family as promoters hold 40.48 per cent of the Pantaloon
stock, which in the last one year has soared from Rs 297 to Rs 836.
This values Pantaloon at Rs 1,679 crore (as on February 16) and
pegs the value of the Biyani family's holding at Rs 680 crore. Kamlesh
Ratadia, Analyst at Mumbai-based Enam Securities, sums up the appreciation
succinctly: "Valuation is a function of ideas, execution and
scalability, and Pantaloon scores highly on all the three parameters."
Meanwhile, Biyani is working hard to remove
the perception that Pantaloon is a one-man show. Realising the importance
formalised structures and technology will play as it takes the next
leap forward, he's begun to put together a core team of professionals,
typically drawn from top-notch FMCG companies (see Biyani's A-Team).
But what's really brought Pantaloon into the public eye is the series
of high-profile deals it has recently pulled off. Pantaloon Retail
acquired a majority stake in Bangalore-based Indus League Clothing,
paying Rs 24.09 crore for a 68.29 per cent stake. In a single stroke,
Biyani has gained access to a 60,000-piece-a-day manufacturing unit
at Bangalore and, more importantly, two strong national brands,
Indigo Nation and Scullers, which will help Pantaloon position itself
as a branded apparel player.
The Man From Bentonville
| Secreted away
somewhere is a heavily underlined (and dog-eared) copy of Sam
Walton's classic, made in America. One of Biyani's treasured
possessions, it is said to contain the secrets to his retailing
success. And what Sam could not teach the 43-year-old commerce
graduate from Mumbai's HR College, the streets did. Organising
sponsorships for dandiyas, trading textiles to selling denim,
he has done it all. Hailing from a conservative Marwari business
family-he still stays in the same Napean Sea Road flat with
his brothers and parents-Biyani says it's a combination of luck
and being a contrarian that has helped him get where is. While
he travels nearly three days a week, he still sticks to his
daily regimen of 40 minutes of yoga and an evening walk along
with his strict adherence to a cheese- and butter-free pure
A voracious reader-he gave up reading fiction 20 years ago-he's
a die-hard fan of management and motivational literature.
Influenced by writers like Stephen Covey and Anthony Robbins,
framed pictures of whom grace his office walls, Biyani picks
up a topic for a year and reads all the available material
on that. This year, it's design management and change that's
caught his fancy. While most mornings are spent in meetings
at Oberoi's Belvedere or Taj's Chambers, which double up as
a second home, he likes to reach home by nine, to spend evenings
with wife Sangeeta, who runs a wedding decorations boutique,
and daughters Ashni (19) and Avni (14). Apart from a few childhood
friends, Biyani nowadays spends most of his time with real
estate developers like Atul Ruia of Phoenix Mills or Pia Singh
of DLF. The two Hindi movies he's produced may have bombed
at the box office, but he still rates cinema as the best form
of creative expression.
Then there was the 49 per cent it acquired in
Planet Sports, the sole franchisee of M&S, which also holds
distribution and licensing rights for sports brands like Wilson,
Puma, Speedo and Converse. In terms of outlets, there are six of
M&S and 25 of Planet Sports. Says KSA's Singhal: "While
one gives him an excellent vehicle for acquiring and managing brands,
the other fills gaps in his product portfoliio." Before the
ink could dry on this deal, Biyani sold 4.98 per cent stake in Pantaloon
to media giant Bennett, Coleman & Co. for Rs 70 crore. While
Biyani says it's purely a financing arrangement (money in return
for stock), insiders say that a tacit understanding has already
been reached with the publishers of The Times of India that of the
Rs 80-90 crore Pantaloon plans to spend next year on advertising,
a significant portion (Rs 15-20 crore) would be given to them. Finally,
with a stake in Galaxy Entertainment, Biyani will get to go after
the leisure and entertainment segment, which is said to account
for 6 per cent of the aspirational consumer's spend.
Such aggressive deal-making is what could hold
the difference between survival and death. With almost all large
retailers stepping up growth plans, the Indian retail space is getting
increasingly competitive and will become cut-throat, with foreign
direct investment almost certain to be allowed in. Shoppers' Stop,
still the leading departmental store in the country, has a formidable
presence in clothing and accessories, especially in the metros.
Armed with an incisive customer database and strong technology backbone,
the K. Raheja group company, whose Red Herring prospectus has already
been filed with the Securities and Exchange Board of India, is sure
to kick off growth once its initial public offer comes through.
Then there is the Dubai-headquartered Landmark
Group's Lifestyle. With a successful presence in the Middle East,
it straddles a product portfolio ranging from clothing and footwear
to house wares and accessories. Often said to have a format closest
to Pantaloon, its Baby Shop and HomeCare concepts hold tremendous
potential. While predominantly in South India, RPG Retail's FoodWorld
has a good grip on the large format food and grocery retailing.
However, it does not see itself taking on Pantaloon headlong. Says
Raghu Pillai, President and Chief Executive, RPG Retail: "Our
strategy is to look at higher share in the total grocery spending
of the consumer, whereas Big Bazaar with its portfolio of businesses
is aiming at the share of the wallet." Westside, promoted by
the Tata Group company Trent, is a competitor too. With a successful
mix of private labels and national brands, Trent is said to have
one of the best operating margins in the lifestyle segment.
| Biyani's A-Team
|The man and his men: Biyani with
COO Ved Prakash Arya (second from left, rear) and other
Today I'm looking for people
who can control me," says Kishore Biyani. These are strange
times at Pantaloon. For someone who's publicly stated that
he lays little store by an MBA degree, five IIM graduates
(no less) have come aboard recently. As have 52 assorted MBAs
and 36 chartered accountants. Over the next 15 months, employee
strength at Pantaloon shall double to 14,000. Pantaloon's
entrepreneurial energy, street smarts and can-do attitude
is clearly being supplemented with more formalised skills
and learnings. Heading Biyani's professional line up is Chief
Operating Officer Ved Prakash Arya, the 35-year-old former
head of retail house Globus, who came aboard a year back.
C.P. Toshniwal is an old Biyani hand and bears the critical
designation of Head (Corporate Planning). Supplementing Toshniwal's
analytical and logistical prowess is Sanjeev Agrawal, Head
(Marketing), who has 14 years of experience in FMCG biggies
like P&G and HLL. Bina Mirchandani, an MBA from Jamnalal
Bajaj, is Category Manager-Pantaloon and, with over 25 years
of experience in merchandising, is responsible for apparel
procurements, as is Rajan Malhotra who heads the same function
for Big Bazaar. Chinar Deshpande, the 36-year-old Chief Information
Officer whose 14-year stint includes assignments in the US,
is responsible for automating the entire value chain as efficiently
as possible. Then, there's Rakesh Mittal, who heads manufacturing,
while Hans Udeshi heads general merchandise at Big Bazaar.
Swelling the ranks are FMCG veterans like Damodar Mall, a
former business head at HLL's Sangam Direct, who joined as
President (Foods) a few days ago. Representing the family
are elder brother Vijay who handles banking relations, and
Anil who looks after production. Cousin Rakesh is in charge
of Central and brand relations while another cousin Sunil
Retailers, especially in a price-sensitive market
like India, make money from making the supply chain more efficient.
Through a combination of cutting costs and sweating assets, it's
possible, say industry experts, to improve the return on capital
(roc) by 10-12 per cent, which for an efficient retailer should
be 30-40 per cent. Thus optimum inventory stock, maximising realisations
per square feet, identifying products with highest margins, and
ensuring depth and width of products is the name of the game. Says
Ireena Vittal, Partner, McKinsey: "Retailers need to not only
understand and roll out successful formats, but also constantly
replenish them with newer formats."
In other words, there's much more to retail
than piling them high and selling them cheap. To be successful,
retailers will need to renew formats quickly, as formats that earlier
lasted, say, 10-12 years, today burn out in three to four. Here
Biyani will need to be on his toes. But as global experience in
the industry shows, it's often easier to get a format wrong than
right. There are inherent risks to building a super-sized retail
empire. The retailer must learn to strike a balance between economies
of scale and regional (even store-wise) disparities. In addition,
when retailers ramp up in anticipation of a consumer boom like what
India is currently experiencing (see I'll Take Two, page 80), they
must know how to manage when there's a downturn. That's what differentiates
a Wal-Mart from a Kmart. At the moment, though, the only risk Biyani's
Pantaloon seems to run is of growing too fast, too soon.