Kishore Biyani, widely considered the pioneer of modern retail in India and credited with taking convenience shopping to the masses, is finally bowing to the winds of change blowing across the sector, handing over the reins of what he nurtured for over three decades to Reliance Retail.
Biyani (59), who started his business in 1987 by launching Manz Wear which later adopted the brand name Pantaloons, has agreed to hand over the control of his retail empire to relatively new entrant in the sector, Reliance Retail, a part of Mukesh Ambani-led Reliance Industries, in a Rs 24,713 crore deal.
He is a mentor and role model for many Indian entrepreneurs and a thought leader in Indian business. Over the past two decades, he has created and led some of India’s most popular retail chains, including Big Bazaar, Food Bazaar, Pantaloons, Central, Home Town and eZone.
A believer in the group’s corporate credo, ‘Rewrite Rules, Retain Values,’ Kishore considers Indianness as the core value driving the group.
In an interaction with BS Nagesh, Founder, TRRAIN at Phygital Retail Convention, Kishore Biyani shares pioneering achievements, challenges faced by him and life lessons learnt in Kal Aaj Aur Kal – Revealing the Untold session.
BS Nagesh: How do you see the consumer of India in the next 5-10 years when every retailer is wanting to go Phygital? Now relate this consumer to consumption in the India story.
Kishore Biyani: These last six months have been good for introspection for us. We have seen how the customer behaviour has changed with regard to pre-COVID and post-COVID. Nobody knows what is going to happen as the consumption has not yet started. My assessment is that India will have to reboot and restart at around US$ 2.6 trillion. Our economy is going to shrink, and we will have to restart our life from there and consumption is going to drop. We will have to rebuild consumption.
The way we are going to be consuming things is going to change. The categories we are going to consume will also change depending on social interactions, how weddings will happen, how festivals will be celebrated etc. as we do not know how long COVID-19 will last.
Mobilities are changing, consumer categories will change, our social interactions are going to change and when things will become normal in a new era, we will be starting with a smaller economy as compared to what we were in and we will have to deal with that.
Fashion as a business – which is close to US$ 85 billion in India right now including exports – will shrink by US$15-20 billion when we start again. Currently, the shrinking will be much higher, and we will have to cover it up.
Consumers are in a very different mood now and they are saying less is more. So, all of the retail community will have to do our part in making them spend more and this part has yet to start.
Mobility is going to be a big issue in the post-COVID world. Earlier, stores were destinations that consumers came to from far off places. Now this will change. We have become less mobile and don’t want to travel long distances to shop.
BS Nagesh: It looks like that the industry and the whole country, in terms of consumption and retail, has gone to around 2015-16. If you look at the last 4-5 years of growth, like-to-like growth was around 6-10 percent. According to a survey the customers who came to stores were coming from a radius of less than 2.5 kms and because all these were very definitive customers, therefore the transaction size was very large, but the number of customers was very small. We also found out that 50 percent of customers came for the first time and they showed their trust in the retailer they came to. It is true that the consumer is going to change, but what will happen to the youth of this country? Will Gen Z and Millennials start behaving differently post lockdown and post COVID?
Kishore Biyani: We are observing some behavioural changes in the youth. They are staying a lot with their parents, which they never did, so in terms of thinking parents are becoming younger and the Gen Z is becoming older, there is a shift happening here too.
BS Nagesh: The newer generations are bonding better with their parents now, which will lead to a lot of changes. Couple with this the pandemic and families are becoming very tech-savvy which means they can manage the tech situation outside in and inside out. How do you see this – consumer, consumption, retail – impacting the future of the business?
Kishore Biyani: Technology has always been a part of our lives. There is no need to be afraid of technology. Also, I fell that in order to compete with the younger generation, the older generation has to be adaptive.
BS Nagesh: We were expecting a phygital transformation to happen at a slower pace, but this pandemic has enabled the Amazons and Flipkarts of the world to grow at a rapid pace. I do not think that most retailers have the ability to grow at the same pace, apart from maybe someone like Reliance as they have the resources to do it. Do you think that creating a big shift in this country in the way consumption as well as retail will move?
Kishore Biyani: Retailers like us, who have stuck to physical retail have a different sense of the world, while Amazon and Flipkart have seen a different world since they are digital first. There is a difference of generations in the way that they have started their business and we, ours. Now both physical and digital are converging and this convergence has accelerated due to COVID-19. Post-COVID, no physical retailers will think of having a physical only presence anymore. There is no survival in retail if you do not go digital. We think 30 percent of the business in retail will come through digital transactions.
It is a new world we are getting in and there is no survival in this digital world if you do not go digital. We have to think digital first whether we are creating a product or a proposition for consumers.
BS Nagesh: People who have invested in the last 5-10 years in physical and who hope to grow through physical and then get 5-10 percent of digital, would you say that they are stuck somewhere in between for they cannot let go of physical and they cannot invest in digital in a big way. I am talking of smaller players who always have had limited resources. Also, today, even larger players have limited resources due to COVID.
Kishore Biyani: If you are willing to do business or you are trying to make your older business bigger, you have to destroy your thinking and you have to become digital-first in your thinking.
BS Nagesh: What are the things that you are going to destroy in your mind for the future? What would you like to carry forward for whatever you want to create?
Kishore Biyani: We are destroying lots of things in the form of old thoughts on which we built something. So, this time when we think of building something, we do not take the baggage of the past. It is destroyed in terms of thoughts. You can think afresh on any category whether it is fashion, food or home. We are going to change digital first and that is what we are sure of what we are going to do.
Secondly, how can you make an organisation in which you do not have to invest money? One of the biggest things that we have learned in the 25 years of doing business is do not invest too many resources into your new developments.
Digital is the new future, AI and machine learning is the new future, data is the new future and so, you start using your resources and balance sheet to build them up. One has to build a new model out there. You have to learn to create a business and a balance sheet which can help you in innovating, experimenting and let you do new things.
BS Nagesh: All of us in the current avatar are more or less convinced that there is enough money which can come in. See how the world has poured money into the Reliance Group on various formats of the future. Is there a learning for us from there?
Kishore Biyani: In India, we have not been able to create large businesses in a digital way yet, especially in e-commerce. Most of the players which have come in are from international arena and not from the homegrown teams and that requires a lot of resources, capital and mindset is very different. So, whether we can play that role is something that waits to be seen, especially now when there is no past baggage.
BS Nagesh: Is there any learning on one needs to think through that because smaller players are stuck somewhere in between, larger players like you have had the chance to exit. But for those retailers sandwiched somewhere in the middle, this is a huge problem. How do they go, where do they go and where do they start again?
Kishore Biyani: I think they should not think national. They have to think territorial, regional. You cannot enter all markets together because you have to build a supply chain and customer understanding. Also, the products are so different in every market, so one has to pay it brick-by-brick.
BS Nagesh: Would you agree that suddenly we have in our country, a way forward where we can see people and organisations that are becoming inclusive maybe it is a part of the business model, maybe there was no option and the best way was to become inclusive? For example, Amazon, Flipkart or Reliance Jio which are wanting to include retailers. Is there a new India which has cooperation, collaboration, inclusiveness or is it a new India where the bigger players will gobble up smaller players in the garb of saying that it is inclusive India?
Kishore Biyani: India is a big country and a big market in terms of consumption. I always believe that there is
India 1 – which consumes 100,000 items in a lifetime
India 2 – which is learning to consume 20,000-25,000 items in their lifetime
India 3 – which is at 1,500 items in their lifetime.
So, there are going to be SKUs, items which will go across India 1, India 2 and India 3. You have to target right. One player cannot achieve everything in this country. It is not so easy to create a market for India 1, India 2 and India 3 at the same time. India needs many entrepreneurs and businesses and then we will see lots of business will emerge and regionalisation of businesses, lot of localisation.
BS Nagesh: Will you see bigger businesses emerging where they can encompass all these entrepreneurs?
Kishore Biyani: It will evolve. I would love to see Indian businesses becoming big using digital as a medium and spreading their wings across the country, reaching as many customers as possible.
BS Nagesh: You say, even today there are possibilities of people coming with money, capital and digital thinking to come and build up an organisation which would be a US$ 10 billion organisation in the next 5-10 years?
Kishore Biyani: It is extremely possible.
BS Nagesh: And you are saying it in the phygital space, digital space or maybe just outside retail?
Kishore Biyani: This is a consumption business. How do you create your model – do you want to manage the value chain yourself totally, do you want to be a part of that value chain? One has to decide upon the model and follow it. In a new avatar, I would never think of doing 20,000 – 30,000 SKUs.
BS Nagesh: Tell us about your new avatar. What is the thinking behind it?
Kishore Biyani: We are living in a lot of complexities in the form of our own making in a way and one has to undo them and during that period of time you have to think about what you are supposed to be looking at the post-COVID world. In a post-COVID world, there is no certainty, but still you have to build on thoughts. However, I feel that one should not do everything. One cannot do each and every item and assortment, one cannot do every market together. Retailers have to think digital first and small is also beautiful.
BS Nagesh: Can anyone stop Kishore Biyani from thinking big and doing many things or trying to do multiple things?
Kishore Biyani: Age mellows you down and in a way the events that you have gone through also makes you humble because it is a different world now. It is not the same arrogance which you can show in some sense.
BS Nagesh: The world saw Kishore Biyani as famous as Future Group but at the end of the day it was a family business. You had your cousins and family involved in it. When you go through this kind of a situation, where you want to exit or you need to exit a business, what are the lessons that you have learnt here for the future? What would be you advice for the future Indian business families because we see a lot of opportunities and a lot of challenges in small businesses and medium businesses which are family run? What has the family gone through, what is the family thinking today and how would you recast this business for the future for yourself and the family?
Kishore Biyani: I am very lucky as when we did this transaction, we had a board meeting. I got overwhelmed while talking to them that they have been unbelievably supporting to us. Nobody deserted us, nobody wanted to leave and everybody was like there will be a solution that will be coming up and the kind of the support that I got fro the extended Future Group family, somehow, got me going. And then I looked into it an introspected that why this happened. Because we have got great people alongside us.
Secondly, the kind of support that I got in the last 6 months is something which is unparalleled. It is all about the support, family support. You do not say much but there are unsaid things that people understand, and they also understand the kind of challenges that one is facing. Nobody was transferring the problems to one another. Everybody was handling problems at their end. Everybody played a role. We never had any arguments and we never had any differences. We were in a situation and we had to come out of the situation.
BS Nagesh: Would you recommend people to integrate family businesses in such a way that the future of everyone gets intertwined?
Kishore Biyani: Everybody thinks differently. I have trained my daughters not to be emotional about what we create, and we have been lucky about it and I have spoken about it earlier also. We are not attached to what we have created. There will be challenges as everybody’s identity is attached to us in a way, but you have to deal with that. That is something which every individual will have to deal with. I have dealt it with quite easily and my daughters have been trained to deal with it and in some way everybody learns to deal with it.
The second thing is how do we build that identity again, something which we have not fully come up with. There are some thoughts around it. There are some ideas around it and I believe that this transaction is still 4-6 months away. I do not want to think about it too early. We want to build the current business getting into stability of some kind and need to be a part of it until required and in meantime think about what can be done in the new business that we are going to build – which is food business, fashion business, insurance business or a furniture business. We are there in food, fashion and furniture in some way and how each and every member of the family can play a role in making things happen and create an identity for ourselves.
BS Nagesh: I heard someone saying that the future of business is agriculture because 8 billion people will have to eat and COVID has shown that food is a very important part. You are already in food parks, FMCG products. How do you see that part of the opportunity, especially for India?
Kishore Biyani: I was also very gung-ho on food as a business for a long period of time, although my origin started with fashion, but food is something that excited me in the last 10-15 years quite a lot. I have been managing the entire value chain from primary value addition to secondary value addition to converting it into a packaged product. In India with the new farmer laws and new age consumption, there is a scope to build businesses. Whether agriculture can be that business waits to be seen. It is a very different and difficult business, and it has its own nuances, and we are not very well equipped to deal with that yet. However, we can build it from a different lens – like through Foodhall we were able to create a demand for Avocados in India. So, I was wondering, why cannot we produce Avocados of this imported quality in India in some temperature zones? So, one can create demand for olives, one can create demand for a lot of products.
BS Nagesh: Would you say food-processing would be an interesting thing to do because you are taking low value and converting it into larger value and then if there is a branding available there then there will be tremendous value creation?
Kishore Biyani: Absolutely, and that is an opportunity that we see today in this country.
BS Nagesh: With limitations and value, do you think, you can still create big businesses, since India is also becoming driven by value?
Kishore Biyani: If you have to get into volumes, it will only come by value. If you look at the Kiwis market, which has been created in India at Rs 20 a piece, it will come done to Rs 15 and ultimately to Rs 10 if we build volumes. It is all about building volumes of new products and new categories but at a price. Unfortunately, India does not produce most of the items which are getting consumed now.
BS Nagesh: How has been the enabling environment of this country both in terms of banking and in terms of laws and government for entrepreneurs especially when we have actually faced challenges? What do you think is the enabling environment of this country for companies which are in the last mile business and in consumption-led business – companies which can actually make India big?
Kishore Biyani: In India, the government and policy makers still think that the country will go through investments and every policy is still working on building upon infrastructure, investing money and then from there the consumption will happen and we will grow. The time has now come to look at investments which can keep on happening parallelly, but consumption should drive investments and not the other way round. I think that is a big policy shift that India requires and until we do not see that kind of policy in making, we are not going to get there. If you look at the emerging markets, we have given the people the money to spend. Consumption will drive development, manufacturing, and everything else. We are still not a consumeristic country in that sense. We have a lot to consume.
BS Nagesh: If I go back and see the way you built Pantaloons and sold it and then Future Group was built and sold, would you start calling yourself a serial entrepreneur? Would you start building businesses to sell for the future?
Kishore Biyani: Selling Pantaloons was very different from selling this business. We got into a trap with COVID and during the first 3-4 months, we lost around Rs 7,000 crore of revenues and there was no way we would have survived with losing Rs 7,000 crore of revenues and the problem is that the rent does not stop and the interest does not stop. All our growth and development that we did was not through equity as much as we should have done. We made too many acquisitions in the last 6-7 years specially of smaller stores. And everything came together with COVID. When we saw it coming, I thought, that there was no answer than to exit. When we were evaluating options of exiting, we thought that we have to now find the solution because our businesses were so intertwined, we needed holistic solutions rather than for a particular entity or a particular format and maybe this was the answer for us.
BS Nagesh: Entrepreneurs – small or big or large – still have a tremendous belief in the future of India and specially in retail, they are willing to put a lot of equity which is their hard-earned money or willing to borrow and willing to put capital for the future where they believe that the growth will be substantial and now that you have said that catchments are shrinking, you cannot open 1,00,000 – 50,000 sq. ft. stores in one city. In this situation, would you suggest people put aside this kind of money for growth when we do not know what growth will look like in next 3-5 years?
Kishore Biyani: Now is the time to reflect. Now is not the time to be very enterprising, to open large stores at least and we have to see how the market evolves. When the post-COVID world restarts, how do the consumers behave. Personally, I believe that there will be a lot of changes and catchment areas can shrink and maybe catchment areas can expand. When a particular trend comes in, then there is a contra-trend which also comes in. What is that contra-trend? These contra-trends can also be very interesting. The social interaction has reduced so much that everybody has an experience of their life. Ultimately, that is what a physical space provides, so we do not know how the experiences would be, how the new stores come about. If you look at the Foodhall business during COVID times, despite our restrictions on the number of people allowed inside, we managed our work and business did not drop at all because of the kind of experiences that we gave. These experiences made people comfortable coming to us.
However, as the pandemic progressed, a lot of people have started home deliveries of every item what we used to sell, so, we have to bring in our experiences in a better way because we are still not allowed to do quite a few things. The experiences of a physical store has not much meaning anymore. Unless you do not create the excitement again, people will not come and shop especially in today’s environment.
BS Nagesh: Also, retailers do not have the resources, they have been badly squeezed due to COVID. To manage the resources, maintain salaries, pay whatever rent after negotiations, they have to bring in fresh capital. People are going and getting in fresh capital to cover up these losses. I have never seen a loss like this in a quarter ever. It is not an easy shock to sustain for anybody.
Kishore Biyani: I still believe, for retailers the worst is yet to come because we have designed businesses to be profitable of 90 percent of our targets and in any scenario I am not planning that we will be able to touch anywhere between 70-80 percent. Our break-even point may come down but if you look at the long-term planning – 5-10 years’ planning – for a physical store, it is not going to be so easy.
BS Nagesh: The challenges are very new. A lot of us have cut costs by up to 50 percent, so even at a 75 percent business down, you may break-even but do not forget that the future 20-30 percent is going to be online and making money online is not easy. So, if 30 percent of the business is not going to make money for 3-5 years and 70 percent of the business is in a break-even situation, this could get real tough. Winners will emerge but it is not going to be easy. I guess we just watch, wait and reflect over the next few months, see how post-COVID goes and then probably take the plunge.
Also, India is not going to go away, the population is still going to be there, consumption will still be there. However, maybe things have slowed down and maybe you have to think very differently for the future. What would be your advice?
Kishore Biyani: My advice is that we will have to come together, we will have to build that consumption. Consumption has gone slow because we have not done anything in the last 6 months. We have not played from the front foot yet. If you look at the FMCG numbers in September, they are not looking great because there are no products launches, big packs are not selling, there are no offers and we have actually created consumption of so many categories. Everybody will have to work very hard to bring consumption back.
BS Nagesh: A lot of consumers must have felt that it would have been better to say that one of the reasons why people are still coming back is that Indians actually saved money and therefore are not feeling so insecure but there is another set of Indians who feel that they should have saved more money so that they do not go through this challenge again where there are salary cuts and nothing coming in their hands. If they had saved, they could have lived a better life. Saving is going to play a role on both side – positive as well as the negative side. What do you think?
Kishore Biyani: I agree. But as a retailer, I also have challenges in a mall environment. How will we bring back people to the mall? We will have to work hard. The tenant mix is also going to change because we have too much of fashion.
BS Nagesh: Too much of fashion and it is not that the mall owners are actually capitalising and sitting on lot of cash. They also will go through a struggle after not having received rents, systems not working, theatres will come back but we do not know what will happen, food courts are going through challenges. It is better to reflect. You have to think yet be willing to take the plunge and be very active. It is a kind of conundrum that we have got into.
Kishore Biyani: Somehow or the other, we have to come back to that mode of creating consumption. This time it is going to be much more different than it was ever because it is all about starting all over again.
BS Nagesh: Not only in these 6 months, but if you go back 5 years in time, not too many events were done, not too many experiences were created for the consumer…
Kishore Biyani: Banks are going to come up with schemes which is a one-time settlement of two-years postponement of your challenges. A mall developer can still recover in that those two years, but a small business cannot recover. The lease is not going to increase by two years without any rentals. The other challenge is for retailers. Mall developers will still recover their money, it is possible for him in two years’ time, but where is the retailer going to recover his losses from?
BS Nagesh: What are the three dos and don’ts that you have learned for the future and from your past?
Kishore Biyani: Though there was a learning, but I do not see as an error as such. You learn with every environment. We at Future Group always did scenario planning and never in my worst of dreams I would have thought that stores would be closed for so long. And what will be the backup plan if there is a closure for event like this. We were majorly in malls and malls suffered the most.
How to create a dooms day scenario is what I have learned.
Technology play is better done with somebody else’s money. You cannot create any permanency in business of retail or consumption business because things are going to change much faster than you can imagine. Creating organisation structures should be changed to organisation denial – anything which can be broken and created afresh. We should get more people who understand digital first. We should be able to understand consumers first, rather than consumers understanding us.
We invested a lot in small business or small stores which with limited SKUs and membership will help us know so much about the consumers that we will produce accordingly, data will help us to do business. I created processes automatically through AI and machine learning and businesses could have run on machines and that dream remained unfulfilled in a way. We were nearly there. We were 2 years away from there but COVID impacted it badly.
BS Nagesh: Future Group always kept on trying new things. You have been an experimentative person both an individual as well as at an organisational level. And now you are saying that you cannot create organisation structures, you have to create organisation designs that can be broken. So will you start applying these thoughts as you go forward and see or still continue to be the same Kishore Biyani, same Future Group equivalent to what you have been – creating new things, going fast, fail fast, move fast?
Kishore Biyani: We have been moving at ‘fail fast, look forward’ for a long period of time. We have experimented with everything. We have got lot of success in our e-commerce business lately. We are doing some very interesting numbers on lot of our brands. Some of our specialty brands have come back to 90-100 percent level also. I do not know what I am going to be doing but there is so much of wisdom now and there is so much of knowledge that we have and with the wisdom and energy which younger generation has, we can create a combination which is interesting in food, fashion and home space. Whatever we will do, there will be lot of things which can be done now without the baggage of the past. That gives you a great opportunity to think and do something without the fear of failure. That fear of failure is not in us today also.
BS Nagesh: From April onwards, you are likely to have a very clean slate.
Kishore Biyani: Whether we will have the scars of failure I don’t know. Maybe in some sense, yes. We played well. Whatever we created, consumers still like it today and they continue to like it as it goes forward, but I will always have a regret that I wanted to create an organisation which runs on technology which maybe we were not able to do but in the new innings we will try and do that.
BS Nagesh: What is your advice to fashion retailers for next 6 months to 1 year?
Kishore Biyani: The way people are going to behave socially will determine the way we are going to consume and our new social behaviour in the post-COVID world is something which we all should wait and watch for and maybe things will come back to pre-COVID times, but there might be some changes and we have to bring about that change in our business model and in the way we make consumption happen.