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Biyani’s next big thing: Central & Brand Factory

Raghavendra Kamath, Business Standard
Mumbai, November 19, 2012

His rivals and analysts may not agree, but Future group Founder and CEO Kishore Biyani insists that his mall concept, Central and discount chain Brand Factory, have become “the largest department store network” in the country.

Central and Brand Factory, whose financials are integrated, posted a turnover of Rs 2,200 crore in FY 2012, while Raheja-owned department store chain Shoppers Stop posted sales of Rs 2,167 crore and Westside, the department store of Tata-owned Trent, posted a turnover of Rs 770 crore.

“Both the formats are bigger in sales than all other fashion retailers and we feel they have the potential to touch the billion-dollar mark in the next couple of years,” Biyani said.

Early this year, he had sold a majority stake in department store chain Pantaloons to the Aditya Birla Group for Rs 1,600 crore to reduce the burgeoning debt of the group.

“Central plus Brand Factory is bigger than Big Bazaar and Pantaloons put together in cities such as Hyderabad and Bangalore. But in cities such as Mumbai, we are constrained as Central requires large spaces,” Biyani says.

With a turnover of Rs 270 crore and Rs 200 crore in Hyderabad and Bangalore respectively, stores in those cities are one of the largest among all retailers in the country, he claims.

Rivals beg to differ. “Everyone seems to be claiming that his is the largest department store chains even when he is not running any department stores. You should have a certain yardstick for calling yourself a department store,” says a top executive at Shoppers Stop.

Adds Abneesh Roy, associate director, institutional equities-Research at Edelweiss Securities: “You can’t compare Central and Brand Factory with others. Both Westside and Shoppers Stop are far bigger brands than Central. I think it is not proper to combine both Central and Brand Factory.”

But a Pantaloon executive says Central can be easily transformed into a department store format given its average size of 100,000 sq ft and over 500 retail brands.

Biyani also has grand plans for these formats. He wants to double the business of these two formats in the next three years. Currently both of them have a total retail area of three million square feet and Biyani plans to double that count in the next two to three years.

After covering big cities, Biyani says he wants to take them to tier II cities such as Pune, Ahmedabad, Nagpur, Mysore among others and expand the footprint of Brand Factory which competes with discount chains such as Megamart, Promart among others.

From a 22-store network, Central will become 38 stores during the next two-three years and Biyani is planning same number of stores by 2015.

Some like Edelweiss’s Roy say it is a challenging task. “It is fragmented and a me-too market. It is a tough task for anybody to double the business in the next two to three years,” says he.

“I think it is a fairly aggressive growth target though not impossible,” says Devangshu Dutta, chief executive of Third Eyesight, a retail consultant.

Besides expanding network, Central is also doing customer activations and getting exclusive ranges and collections from fashion brands to get more shoppers into its stores.

Central is doing ‘Trouser festivals’, ‘Partywear collection,’ and Ethnic wear festival’ with brand such as Van Heusen, Arrow, AND, Biba, 109 and others where brands launch new collection and range during those events.

During such events, Central creates something called ‘switch areas’ where additional spaces are created to highlight the categories and visual merchandise.

“When you organise such events, the depth and width of the category increases and we have seen 100 to 200 per cent jump in sales during such festivals,” says Rajesh Seth, vice president, sales at Central.

Central has also added new categories such as novelties and gifting under ‘OMG’, dollar store style offering under ‘Top Buys’ and baby products under ‘Baby World’. The chain has completely revamped home category and launched Home at Central at its stores.

Seth says the chain has recently launched exclusive western wear brand ‘Oxygen’ in partnership with apparel brand 109 and looks to launch two to three more brands.

However, other chains such as Shoppers Stop are also doing such activities to boost sales. Shoppers Stop recently did ‘Makeover marathon’ in association with leading cosmetic brands. It also did event around watches and ladies western wear.

“The key point is that you have to able to differentiate yourself to different customer segments. Your whole communication and offering has to be tailored in a way to tap that segment,” Third Eyesight’s Dutta said.

This festival season was the worst in 4 years, say retailers

Priyanka Pani, The Hindu Businessline
Mumbai, November 16, 2012

Mahesh Patel, owner of a departmental store in suburban Lokhandwala in Mumbai, is disappointed with the festival sales this year. Patel, who also trades in crackers, said there was a 20 per cent decline in sales this time.
Several big box retailers such as Shoppers Stop, Pantaloons and Croma, which form some 6 per cent of the retail market (according to retail advisory firm Technopak), were reported to have witnessed a bumper sale. The rest 94 per cent feel that this festival season was the worst in the last four years.

The only segment that grew was personal gadgets such as mobiles and tablets, said Nilesh Gupta, MD, Vijay Sales, a consumer durable retailer.

He said this year there was 8-10 per cent growth compared with 15-18 per cent last year.

Girdhar Bagari, an apparel retailer in Angul, a tier III town in Orissa, said his three-floor store used to remain open till late in the night during festival time. However, this Durga Puja he had to shut shop by 10 p.m.

“Diwali sales were the only respite this time as people bought several traditional wears and sarees but overall there was a 25 per cent slump in sales compared to last year,” Bagari said.

Mahesh Agarwal, a retail commission agent in Raipur, said that there was less demand for branded/premium apparels this season from Orissa, Chattisgarh, Jharkhand, Bihar and Madhya Pradesh. “The sales for high-end (Rs 1,500 and above) was down by 30-40 per cent,” he added, while saying the demand dropped drastically in West Bengal.

However, a few markets in Andhra Pradesh fared well during the Vijaya Dashami celebrations. Om Prakash, owner of Kanak Durga Silks in Warangal saw sales worth Rs 40 lakh per day. While Delhi and other northern markets had a subdued Durga Puja celebrations, Diwali wasn’t able to add any sparkle to the overall business as the prices of crackers and sweets doubled over last year.

“The decline in sales could be due to the extended sale/discount period this year. High value items were impacted and clothing. The economy is slow and companies are looking conservative,” said Devangshu Dutta of marketing research firm Third Eyesight.

Meanwhile, Arvind Singhal of Technopak Advisory said that the economic slowdown in the last 12-18 months has led to a low volume growth for almost all consumer firms. “Most of the companies grew in single digit from 10-15 per cent last year even as consumers restrained themselves from discretionary spends on back of high inflation of 8-10 per cent. If this continues, we expect this to decline further to 5-6 per cent in the next few months,” he added.