 "Will Biyani's door-to-door concept ring a bell?")
Biyani was also the first retailer to introduce the concept of sale around Republic Day, a trend which other retailers were quick to catch on to.
And now he has come up with an e-commerce-enabled direct marketing venture called Big Bazaar Direct. Customers now need not go to his stores to buy groceries, cutlery etc. The initiative will empower a network of franchisees, which will include individuals and grocery stores, who would go from door to door to take orders from Big Bazaar customers. Customers will have to make payments to the franchisees and Big Bazaar will deliver the goods within three to seven days. These customers will also be privy to Big Bazaars exclusive deals and offers.
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Biyani is aiming to enroll 100,000 franchisees for the e-venture within the next two years. The selected franchisees will have to make an investment of Rs 3 lakh which will include a refundable security deposit, initial advance, set-up charges for the tablets (to take orders), charges for initial branding, one-year training and so on.
Future Group already has an e-commerce venture called Futurebazaar.com but through Big Bazaar Direct, the company plans to reach new customers who do not have access to computers or the Internet, says a Future Group executive.
According to ballpark estimates, the group is expected to generate cash flows of Rs 3,000 crore over the next couple of years if it manages to get 100,000 franchisees and if all of them pay the initial joining fee of Rs 3 lakh. Future Group executive says of the total fee, Rs 2 lakh will go towards working capital and towards tablet and branding, and the company will only get Rs 1 lakh as security deposit.
"We are essentially trying to combine franchisee-led front end and our sourcing and merchandising capabilities in the back-end," says the executive who does not want to be named.
AK Prabhakar, senior vice-president (equity research), Anand Rathi Financial Services, says: "They are experimenting with many things. Even if two out of five things work, it will be good for them. You have to be innovative to get market share."
Retail consultant Technopak pegs the country's direct marketing industry at $1 billion, of which 90 per cent is in the organised sector. The segment is growing at 20 per cent compounded annual growth rate. Certainly, the opportunities there for Biyani are huge.
Analysts say although the new venture may not help the company in lowering its debt, it will shore up the group's cash flows. According to a recent report by JP Morgan, the group's flagship company, Future Retail, needs to bring down its debt given that the company is generating negative free cash flows and high single digit return on capital employed. Future Retail had a debt of Rs 5, 200 crore as of June 2013, the JP Morgan report said.
"Inventory days at 110-115 have not seen any significant improvement either. We believe sustained pick up in discretionary spending and more financial prudence would be needed to help improve cash flow generation," said JP Morgan analysts Latika Chopra, Arjun A Bhatia and Ebru Sener Kurumlu in the report.
Many others like Anand Rathi's Prabhakar believe that the new e-venture will help the company get back some of the volumes that it lost after it closed a number of loss-making stores. The group shut ten Big Bazaar stores last year and five stores have been closed so far this year.
"They get discounts from suppliers if they have high volumes. They have to get volumes after the closure of stores. This franchisee model will help get them volumes, cash flows and increase margins in the long run," says Prabhakar.
Arvind Singhal, chairman of management consultancy Technopak Advisors, says for Future Group, which is trying to deleverage and grow, the new direct-marketing model will boost the company's top line without it having to make large investments.
To be sure, there are already several online grocery stores such as BigBasket.com, AaramShop.com and LocalBanya.com. Big Bazaar will have to compete with not just them but also with direct-marketing companies such as Amway and Tupperware.
However, Future Group executives and retail consultants believe Big Bazaar's brand, wider reach and a larger assortment of goods will give it an edge over others. For instance, Amway and Tupperware focus only on personal care and lifestyle products.
"We are providing a whole range of products. We are offering luggage, cutlery, electronics, apparel and many more categories," the Future Group executive quoted earlier says. Analysts agree that Big Bazaar will have an edge over multi-level marketing firms such as Amway when it comes to product range. Some, however, say Future Group may have to speed up delivery of goods as many online stores provide the option of same-day delivery.
Other players in the market are far from enthused with Biyani's new venture. "I do not understand this model. Anyway, people can always shop online or go to a kirana shop for their daily needs," says the managing director of a retail chain.
Some also have doubts about the sustainability of the model. "I do not think it is a scalable model. Selling on the net is not viable for now. We have to see how this business will grow," says a food and grocery chain's chief executive who does not want to be named.
A NEW DEAL
* Big Bazaar Direct is an e-commerce-enabled direct marketing venture
* A network of franchisees enrolled with Big Bazaar will go from door to door take orders on tablets provided by Big Bazaar
* Customers make payments to franchisees, while Big Bazaar does the delivery of goods
* Franchisees need to pay Rs 3 lakh to Big Bazaar to meet training and other expenses