A financial supermarket

Retail firms are planning to offer financial products in their stores. While picking up vegetables next time, you may also put a couple of mutual funds in your basket.

Retail firms are queuing up to sell credit to the burgeoning consumer class. In the process, they are offering a basket of financial products to them.

The Kishore Biyani-promoted Future Group has unveiled an ambitious plan in the consumer credit space. Its arm, Future Capital, is launching Money Bazaar, a financial supermarket, in the next two months. Initially, the group is planning to open 400-500 stores, and has set a business target of Rs 40,000-50,000 crore in the next five years.

"It will be a Big Bazaar of financial products, with the outlets selling consumer credit including mortgage, insurance and mutual funds," says Sameer Sain, CEO, Future Capital.

The stores could be either in the standalone or kiosks format. After one year, the company would also start an online portal "" moneybazaar.com.

Future Capital may also explore the micro financing segment, with the aim of lending to the poorer sections of society, he says.

"Retail and finance complement each other. Making finance the main business could spell danger for a retailer. Ideally, a retailer should run a profitable venture and create capacity to consume," adds Sain.

The company has a co-branding agreement with ICICI Bank to sell credit cards to its customers.

There are reports of Mukesh Ambani's Reliance Retail planning to foray into the automobile and consumer loans segment. The idea is to provide a one-stop shop to Reliance Retail customers.

According to an analyst, RIL's foray into consumer financing fits well for the group as it is rolling out its consumer durables and auto retail ventures soon.

The industry is abuzz with news of Reliance Retail planning to set up an NBFC arm that would operate as a micro finance institution. The company is believed to be planning huge investments in this venture, and is also looking at partnering existing MFIs.

Another conglomerate, Bharti, is also contemplating entering the micro finance segment to support its retail supply chain, as it sources fruits and vegetables from farmers for Fieldfresh, Bharti's JV with Rothschilds.

A Mumbai-based analyst says that Bharti could also leverage on its JV with AXA to sell insurance, mutual funds and pension funds in its stores, which it plans to open in JV with Wal-Mart. Bharti could also utilise the wide network of Airtel customers.

"There could be perfect synergy between group companies regarding financial products," says a Bharti spokesperson.

Some other new players in the retail sector are also planning to foray into the financial products space. For instance, retail chain Spinach plans to sell financial products including housing loans and credit cards.

It also plans to venture into micro financing, as it sources fruits and vegetables from a large number of growers all over the country.

"We will definitely support farmers' co-operatives since we source from them. The finest example is milk, in which producers came together for their mutual progress. A business can be prosperous only when there is assurance from buyers, and continuity, and price advantage for suppliers," says Dippankar S Halder, CEO, Spinach.

Halder believes that offering financial products is a natural progression for retailers. "We are talking to a big bank for co-branding credit cards, and housing and durable loans. Once we consolidate our position in the foods business, we will foray into credit and micro financing," he says.

Another retail chain, Subhiksha, also has similar plans. "Our basic intention is to provide customers with appropriately valued products and services at our outlets. We are open to selling financial products through our outlets as long as they add value to our customers and to us," says Subhiksha marketing president Mohit Khattar.

Khattar believes that consumers not only end up paying higher interest rates to avail credit, they also end up paying a lot more to the local grocers.

"Subhiksha can help provide lower and far more sensible rates of interest, and far more economically priced goods," he says.

SNIPPETS

Magic franchise
Retail franchising is here to stay. There are approximately 700 franchisers and more than 50,000 franchisees in India.

According to C Y Pal, president, Franchising Association of India, the size of the franchising industry is around Rs 1,000 crore, and is growing at 35-40 per cent.

In the US, 50 per cent of retailing comes from franchising. However, in India, only 2 per cent of it comes from franchising.

To drive home the point, he says the success rate of independent business is 22-30 per cent, whereas the success rate of franchisee business is 90 per cent. In comparison with the retail sector, which is expected to grow at 10 per cent per annum till 2010, franchising is likely to grow at 35 per cent per annum, says Pal.

Beauty business
Future Group is growing rapidly and in divergent areas. Indivision India Partners Fund, Mauritius, promoted by Future Capital, a Future Group company, has infused Rs 50 crore in the beauty and wellness chain VLCC.

According to a company source, the fund has invested in convertible securities of the chain. "It is pure investment, and the company does not intend to acquire any majority stake in the company. VLCC is a leader in the wellness and beauty category and the investment is of strategic value," the source says.

The group has more than 40 initiatives in retail.