In his spartan office in suburban Mumbai, Kishore Biyani points to a portrait of Mother Teresa. Beneath the portrait is the message: 'Gift till it hurts.'
That might seem like an unusual motto for a hard-headed businessman, but Biyani, the chief of the Pantaloon retail chain, says these are words that guide his highly successful career in retailing.
"In retailing the key is to offer customers more value than they can ever imagine. It could be in terms of price, quality or service. That's the only way to retain customers. That's what Mother Teresa has taught me."
Landmark Chairman M W (Micky) Jagtiani is unlikely to quote Mother Teresa or to state his goals in quite the same way.
But, he's figured out the way to customers' hearts -- in the Middle East, Britain and now in India. His LifeStyle chain, started in 1999 is now moving into overdrive.
It currently has five stores in cities like Chennai, Hyderabad and Gurgaon and will be keeping up its retail blitzkrieg by opening six more in the next one year.
Says S Kumar, managing director, LifeStyle International Pvt Ltd: "We want to offer 500,000 sq ft of shopping space by next year."
These are the two new retail powerhouses that have mastered the art of keeping the cash registers ringing. In the next 12 to 18 months -- LifeStyle and Pantaloon will offer over 2 million sq ft of retail space.
Look at it another way -- the two super retailers will cover over 10 per cent of all mall space in the country by end 2004.
The speedy retail onslaught won't stop at that. On the drawing board are plans for 40 superstores -- out of which about 20 are currently being built or will be ready in the next 18 months. These will offer everything under the sun from groceries to readymade and furniture to cosmetics.
Just look at the action on the ground. Biyani's Pantaloon is already working in double quick time to open eight new hypermarkets under the 'Big Bazaar' brand across Mumbai, Kolkata, Nagpur, Bhubaneswar and Ahmedabad.
All of them will be up and running by early next year. And the company is forking out over Rs 100 crore (Rs 1 billion) for this massive expansion.
That's not all. It's also expanding the Pantaloon chain, which sells garments from 14 to 18 by December end. In addition, it's opening three independent Food Bazaar stores.
Biyani is also offering innovations that retailers abroad don't offer. He has just launched a new section in his hypermarket called Gold Bazaar where jewellery is bought and sold.
And he is also setting up Victoria Memorial, a 150,000 sq ft shopping mall in Bangalore. Victoria Memorial will experiment -- following the Selfridges model -- by displaying high-profile readymade brands and collecting a commission on their sales.
In terms of financial size, Pantaloon has already raced to the front to become the country's largest public limited retail giant.
With turnover at Rs 400 crore (Rs 4 billion) it has overtaken even Shoppers Stop (turnover Rs 303 crore), the Raheja chain that started the retail revolution in India in 1991.
Mind you, Pantaloon's turnover is smaller than the RPG group's consolidated retail empire of over Rs 450 crore (R 4.5 billion).
But that comes from a bevy of brands including Food World, Music World, Giant and Health and Glow. Many of these brands were rolled out in 1996-97.
By comparison Biyani's first megastore opened in late 1998 in Kolkata. Biyani's ambitious target currently is to shoot ahead and become a Rs 1,000-crore (Rs 10 billion) mega retailer by 2005.
LifeStyle is not far behind though it has been a late starter. It is aiming at turnover growths, which are virtually unmatched in the industry.
Says V Muralidharan, vice president-operations, LifeStyle International: "Our goal is to more than double our turnover from Rs 135 crore (Rs 1.35 billion) in 2002-3 to Rs 280 crore (Rs 2.8 billion) in the coming financial year".
The retail chain is making a big bang entry in Mumbai where it will have three stores. And stores are on the anvil in Kolkata, Ahmedabad and Pune. Each store will range from 15,000 sq ft to as much as 50,000 square feet. Stocks in each store will cost Rs 7 crore (Rs 70 million).
LifeStyle is a powerful group outside India. Jagtiani, who maintains an extraordinarily low profile, rules over an international retail chain powerhouse, which includes over 300 stores globally.
Just two years ago he took a gamble by buying out Ciro Citterio, a near-bankrupt UK chain. He has already turned round the 131-store chain.
The runaway success of the LifeStyle stores shows in the fact that around 2,500 customers turn up in the stores on weekdays and that leaps by three times on weekends.
So what has been the secret of success for the two retail brands?
Especially in an industry when many have fallen by the wayside. Big retailers like Kds(run by the Doshi family in Mumbai) Garwares and Nanz had to close shop. And even Shoppers Stop made losses before it restructured and has turned around.
LifeStyle's executives believe that their experience in running retail chains abroad has made all the difference -- even though conditions in India aren't anything like the Middle East or Britain. They've made a few strategic decisions, which they believe have stood them in good stead.
Instead of setting up different stores catering to different segments -- the model used in the UAE -- the company decided to put it all together under one roof and call it LifeStyle. The reason: the high cost of retail space did not justify separate stores in India.
Also, from the start the company concentrates on building up operating efficiencies so that it can cut costs from day one. The way to do that is to monitor every item sold in the stores and take them off the shelves if they aren't moving.
For instance, LifeStyle closely monitors all fashion items for 30-45 days and then takes a call whether to order more or get rid of stocks by having a sale.
Then, there's inventory and stock management. On an average it keeps stocks of around 90 days and the stock turnaround is around 60-75 days.
The third element is to acquire and retain customers-so that they come back to the stores again and again. The reason for that is simple: repeat customers spend more than the average customers and need to be encouraged to return. That's why the store has started offering special discounts to customers who join its loyalty card programme.
Says Murlidharan: "As much as 35 per cent to 40 per cent of our customers are repeat customers who are part of our loyalty programme."
This is good news as regulars spend upto 30 per cent to 40 per cent more than other visitors.
In another direction, LifeStyle has also focused on building direct relationships with manufacturers -- rather than buying products from middlemen.
This reduces margins and it enables the store to pick up the products it wants quickly. Again, that enables it to have lower inventories.
Its international clout also comes in handy. Landmark, the parent company, buys furniture for the entire group from Denmark and the Far East.
Since it buys in bulk it can sell much more cheaply. That apart it can offer exclusive products as these are tailor-made to its designs.
Even the warehousing strategy has been fine-tuned so that costs are kept to a minimum. In Mumbai, for instance, the three stores will be served by a single warehouse. It hopes to put together a similar strategy in Delhi where it wants to open a second store.
Keeping costs down is clearly the cornerstone of policy at both chains. Pantaloon chief Biyani ensures cheaper prices by keeping watch at every step.
Says Biyani: "We do three things -- buy directly from the manufacturers so that the middle man is eliminated. We buy in cash and get a cash discount, and manage our stocks turns so that we don't have money stuck up. The benefits are passed on to the customers."
So, for instance, as many as 60 per cent of Big Bazaar's products are bought directly from the manufacturers and the saving could be anywhere between 6 per cent and 40 per cent.
Cash discounts (for buying goods upfront in cash) on the other hand could range from 2 per cent to 10 per cent. And the company pushes for a stock turn of 40-50 times a year for its food items, and once a month for ready to wear.
Backward integration is the name of the game in Pantaloon stores -- and they help to keep costs down dramatically. Almost 70 per cent of the ready-to-wear products in the store are manufactured by the group's own garment units. As a result it is able to offer prices in ready-to-wear that are virtually 30 per cent cheaper than competitors.
Even in the hypermarket business, Biyani and his men are banking on a contarian strategy to make it viable. In hypermarkets like Giant as much as much as 65 per cent of the retail space is devoted to food and groceries.
But in Big Bazaar, Biyani reckons that only 30 per cent of the revenues will come from this segment. He argues that this is the percentage that most households spend on food.
Of course, all this is backed by high-decibel advertising. The company is forking out a substantial Rs 17 crore (Rs 170 million) to promote the Big Bazaar brand name and another Rs 7 crore (Rs 70 million) on Pantaloon. As the group expands, it is also getting into television advertising.
But will the game of rapid expansion work? Says a retail analyst: "Biyani is taking Big Bazaar into too many cities instead of concentrating on a few cities and building up large warehousing facilities to reduce costs. He could have opened up 50 Big Bazaars in Mumbai. I think his strategy will be suicidal."
Other analysts point out that Biyani is banking heavily on his strength in apparel to produce large volumes in Big Bazaar. He could easily be in trouble if the equation does not work.
Similarly, there are critics for the LifeStyle model. "The LifeStyle model is too much of a me-too of Shoppers Stop so I don't see how it will continue its massive turnover numbers after the novelty for the brand wears off," says an analyst.
There are other factors that could weigh against such stores. Says Bala Deshpande, director, investments in ICICI Venture Funds, which has investments in the retail space including Pantaloon.
"In India the kirana shop where we go for our daily needs will continue because of the low purchasing power and need for liquidity. The large hypermarkets will cater to higher volumes and large client purchases."
Says R S Roy, editor of Retail, the country's only retail magazine: "The key in this business is to expand quickly so that you get advantage of volumes. Then you must balance this with effective cost and inventory controls. Any dissonance can put the model off balance."
Of course, both Pantaloon and LifeStyle are aware of the challenges. And one way that they are trying to increase margins is by pushing their own in-house labels.
In Big Bazaar, for instance, gross margins on grocery and food products from in-house labels is around 4 per cent higher than competing brands.
As a result the company has been pushing these products, which constitute 25 per cent of sales currently.
A similar tack is being followed at LifeStyle. The company has developed its own brands like Splash, Nexus and 2Extremz in the apparels department, which currently make up about 11 per cent of the company's business.
For most retail chains the adventurous move into organised retailing has been fraught with peril. Pantaloon and LifeStyle seem to have been on a faster learning curve than others. But, as they expand massively, the key question is whether they can keep it up.
