Blending tech with brick and mortar: Future Group's formula to grow sales

Future Group's Tathaastu model has helped it identify unmet consumer needs and unlock new markets

What do you do when you are already the second largest retailer in the country and own 25 per cent of the nation’s $20 billion organised retail market? You would probably want to own the consumer as well.

That's precisely what Future Retail had in mind when the group's maverick founder and chief executive officer, Kishore Biyani rolled out the group's Retail 3.0 business model, Tathaastu, in November 2017. The idea was to reach revenues in excess of $1 trillion by 2047. 

The Tathaastu model blends technology with brick and mortar. For Biyani and his team, a key focus area under Tathaastu has been to grow and transform the group’s fast moving consumer goods (FMCG) business. Housed under Future Consumer Limited (FCL), the FMCG business has witnessed significant gains since the launch of a host of house brands, says to the retailer. Ashni Biyani, managing director, FCL, says, “Our aim is to use data to move closer to the consumer. Tathaastu is all about building the consumer’s kundli (profile) as each one of them is unique. It’s like owning the customer and being able to meet all her demands under one roof. Data will help us increase our own responsiveness — to meet consumer demand and promote loyalty.”

FCL has been registering 40 per cent compounded annual growth rate over the last four years. The company clocked sales worth Rs 30 billion in financial year (FY) 2018 and it is looking to close FY 2019 at Rs 40 billion. Overall, sales of the retail business of Future Retail Ltd. and Future Lifestyle Ltd. stood at about Rs 227 billion in the financial year ended March 2018. Future Retail’s store count crossed 1,350 with the acquisition of Hypercity and the addition of 131 stores during the period.  

With a sharper focus on data mining and analytics, the FCL team says it is getting better with mapping consumer preferences and predicting their purchase basket mix. Since the launch of Tathaastu a year ago, the group’s FMCG business has reported 20-25 per cent conversion rates from its captive database and potential buyers for some of its key products such as Kosh (oats brand) and Think Skin (body wash) among others. “In retail, everything boils down to understanding and getting the store and customer mix right. With Tathaastu, we are moving further into building detailed consumer profiles,” says Sadashiv Nayak, chief executive officer, Future Retail Ltd.

He says most FMCG companies have their roots in traditional retail and so a large majority among them continue to operate as a faceless channel. Future Group has the advantage of not owning any baggage — it was born as a modern trade brand and is looking to harness data sharpen its competitive advantage.

Why does Future Retail think data will make or break going forward? Well, it is like this: Everyone has access to data but it is the smart ones who will slice and dice that data to push for a sharper and more targeted assortment at the store level, encourage new product trials and purchases by influencing consumer habits, and cut down delays in the value-chain. That sounds quite a mouthful but then there is no other way.

Take the volume of stock keeping units. The retailer offers 59 varieties of atta (flour) alone. Now not all varieties are relevant across geographies and markets. To be able to make the most relevant assortment available at each of its stores, the team needs to know the consumer profile on the basis of the population-mix and migration patterns in that particular market. All this data and consumer knowledge is necessary for the company to determine its inventory — in terms of what it needs to stock, how much it needs to stock, and when it needs to move the stock. In the process, it gets to minimise consumer distraction, loss and wastage involved in overstocking and avoid the attendant problems of understocking.

Ashni Biyani Managing director, Future Consumer Limited

Future Group has also played a neat hand with its loyalty programmes and locked in a large chunk of its regular consumers with its credit cards and co-branded company cards, says Vineet Trakroo, chief executive officer at Evolution Strategy Advisors LLP, a strategic consulting and marketing firm. “They are best placed to track the customer and her activities — they know where the customer is going, what and how their purchase basket looks like and so on. With Tathaastu, the retailer seems to be organising its data and further sharpening its analytics capabilities. Knowing the customer in and out will help it improve store layout, push relevant products and promote loyalty and improve per store sales through targeted messaging.”

Biyani says Future Group does not believe in the traditional hierarchy of management; rather it practices holacracy led by decentralised management teams which makes customer feedback that much easier to collate and deploy. This manner of product management has also helped the firm zero in on new products that need to be introduced in a market and older products/categories that can be dropped altogether to create space for the new. The retailer runs 45-day product trials in select geographies before launching a new product in that market.

FCL has also been tapping into parent Future Group’s vast database to create and promote new product categories through what it terms ‘desire creation’. Nayak says the company has used this strategy to create and push new product categories such as body wash or even staples. A case in point: Its oats brand under the name Kosh.

That said, “data may not be able to give you 100 per cent correct answers all the time”, Nayak points out. But what it will certainly do is give the team a good idea of where to start — how much and what items an individual consumer is likely to pick up or not pick up from a store.