Pratap, The Hindu Businessline
28 August 2015
online shopping grows more popular by the day, Kishore Biyani,
the man who catapulted brick-and-mortar retail to new heights
in India, found himself scouting for the next big idea. The founder
and chief executive officer of Future Group has now identified
a new frontier to conquer customers at Rajasthans
public distribution system (PDS) outlets. This group of buyers
includes those below poverty line and beneficiaries of various
food programmes of the state government. All of them get a monthly
quota of sugar, wheat and kerosene at subsidised rates. Biyani
wants to sell them deodorants, mosquito repellents and floor cleaners,
besides fairness creams and noodles, at the hundreds of PDS outlets
across the state.
Consumer aspirations are rising and they want to try new
products. You can sell a lot more through fair price shops,
says Biyani, explaining the potential inherent in the Annapurna
Bhandar Yojna, a public-private partnership (PPP) scheme between
the Rajasthan State Food and Civil Supplies Corporation and Future
Consumer Enterprise (FCEL).
Rajasthan has nearly 25,000 fair price shops. As much as 67 per
cent of the states 6.8-crore population, about 4.5 crore,
visit PDS outlets at least twice a month.
That presents a huge business opportunity for Biyanis Future
To begin with, the company will tie up with 5,000 PDS store owners,
turning them into entrepreneurs. Currently, these stores operate
not more than six to seven days a month, and remain closed after
the monthly ration has been distributed. After the tie-up with
Future, the store owners will have an incentive to remain open
longer and sell more.
It is an experiment, but the results so far have been encouraging,
says Biyani, referring to the five stores that have been launched
in Jaipur on a pilot basis.
This is a different market. (The products) in these stores
will be limited to just 250 SKUs (stock keeping units),
So rather than every kind of household item, the shops will initially
stock grocery, personal healthcare and homecare products.
Although other brands will be available too, a majority of the
products will belong to the groups own brands, as that will
allow it to offer competitive pricing and drive volumes.
Margins on private label goods are, on average, about 10 per
cent higher than those on similar branded products. Retailers
pass on the benefit of higher margins to customers in the form
of lower prices. So those using Rajasthans PDS services
will now have access to a wider range of products at prices that
are lower than those of national brands.
It is a good opportunity for both Future Group and the
customers, who get much more variety on the shelves. Mr Biyani
is an experienced retail entrepreneur and he would be able to
select the right merchandise for this segment, says Arvind
Singhal, chairman at consultancy firm Technopak.
Devangshu Dutta, chief executive at retail consultancy Third
Eyesight, says the tie-up gives the company a phenomenally stronger
presence through the additional outlets. They get a vast
geographic reach through these stores, he says.
The second advantage is the access to a different segment
of customers. The customers coming into PDS shops are different
from the people visiting the modern retail outlets that the Future
group has. It gives the group a better critical mass and can help
it grow the business more efficiently and profitably, he
The group is also ready with the supply chain for the backend,
as it is present in Rajasthan through its Big Bazaar and Food
Bazaar formats. We have the backend operations already in
place, says Biyani
This new experiment, for Biyani, is an attempt to ride the storm
of competition whipped up by e-commerce players and corporate
giants such as Reliance and AV Birla group in the retail sector.
If it succeeds, the Rajasthan government might invite bids to
bring more PDS stores under the ambit of the tie-up. Eventually,
other state governments are likely to follow suit.
That is what we want to replicate this model in
other states, Biyani says.
And when that happens, the Indian retail sector will get to chase
a new and bigger opportunity this time, right at the bottom
of the pyramid.
(Published in The