08-10-2007, 05:09 AM
<!--emo&:argue--><img src='style_emoticons/<#EMO_DIR#>/argue.gif' border='0' style='vertical-align:middle' alt='argue.gif' /><!--endemo--> http://online.wsj.com/article_email/SB1186...OTUwMTkxWj.html
THE WALL STREET JOURNAL ONLINE, PAGE ONE
CHAOS THEORY
In India, a Retailer Finds
Key to Success Is Clutter
Consumers Like Noise,
Bins, Mr. Biyani Says;
Narrowing the Aisles
By ERIC BELLMAN
August 8, 2007; Page A1
MUMBAI -- On a tour of one of his supermarkets, Kishore Biyani notes that shopping carts are getting stuck in the narrow aisles, wheat and lentils have spilled onto the floor, black spots cover the onions and itâs difficult to hear above the constant in-store announcements. He grins and congratulates the store manager.
Mr. Biyani, 45 years old, has built a large business and a family fortune on the simple premise that, in India, chaos sells.
Americans and Europeans might like to shop in pristine and quiet stores where products are carefully arranged. But when Mr. Biyani tried that in Western-style supermarkets he opened in India six years ago, too many customers walked down the wide aisles, past neatly stocked shelves and out the door without buying.
Mr. Biyani says he soon figured out what he was doing wrong. Shopping in such a sterile environment didnât appeal to the lower middle-class shoppers he was targeting. They were more comfortable in the tiny, cramped stores -- often filled with haggling customers -- that typify Indian shopping. Most Indians buy their fresh produce from vendors who keep vegetables under burlap sacks.
So Mr. Biyani redesigned his stores to make them messier, noisier and more cramped. "The shouting, the untidiness, the chaos is part of the design," he says, as he surveys his Mumbai store where he just spent around $50,000 to replace long, wide aisles with narrow, crooked ones: "Making it chaotic is not easy."
Even the dirty, black-spotted onions serve a function. For the average Indian, dusty and dirty produce means fresh from the farm, he says. Indian shoppers also love to bargain. Mr. Biyani doesnât allow haggling, but having damaged as well as good quality produce in the same box gives customers a chance to choose and think they are getting a better deal. "They should get a sense of victory," he says.
The approach has made Mr. Biyani rich. His company, Pantaloon Retail (India) Ltd., is now Indiaâs largest retailer; it expects to report sales of more than $875 million for the fiscal year ended in June. He and his family own a 42% stake in Pantaloon, valued at about $630 million.
Mr. Biyani is proving that modern retailing, with a bit of spice, can work in a country where traditional markets dominate. On the back of his success -- and rushing to close his head start -- are some of the worldâs largest retailers. While few may subscribe to Mr. Biyaniâs chaos theory of retail, all will be struggling to find ways to attract the millions of Indian consumers who are shopping at branded chain stores for the first time.
Wal-Mart Joint Venture
Wal-Mart Stores. agreed this week to set up a joint venture with Bharti Enterprises Ltd. -- which runs Indiaâs largest cellular company -- that will open wholesale stores to sell goods to small retailers, manufacturers and farmers in India. Bharti plans to spend $2.5 billion to build a nationwide network of supermarkets and small stores. Wal-Mart has to use this route into India because Indian regulations donât allow multiple-brand retailers to sell directly to consumers -- but they can run wholesale operations and provide support to Indian retailers. Tesco PLC of the United Kingdom and Carrefour SA of France, are also eyeing India. Petroleum refiner Reliance Industries Ltd., one of Indiaâs largest companies by market value, plans to spend more than $6 billion in the next five years to open thousands of supermarkets.
All are hoping to tap into the rampant consumer spending sweeping India amid fast economic growth. Indiaâs total retail market is about $370 billion a year and will expand more than 55% in the next four years, estimates Technopak Advisors, a New Delhi-based retail consulting firm. It says sales of branded chain stores now represent less than 5% of total retail sales -- but are expected to grow more than five-fold by 2011, accounting for 17% of retail sales.
Many more Indian women are working today and donât have the time to visit several mom-and-pop stores. "I canât go to 10 different stores to get 20 different things. Iâm a working mother," says Candice DâSouza, a 28-year-old public-relations firm manager, who recently became a convert to Mr. Biyaniâs Big Bazaar stores.
Wealthy Indians often employ servants who do most of the shopping. Many of Mr. Biyaniâs unique touches are designed to make the household help, rather than their employers, feel comfortable shopping. Indeed, he says that the greatest potential pool of customers for retail chains in India comes not from the wealthy but from those who work for them.
Mr. Biyani divides Indiaâs 1.1 billion people into three types of consumers. "India One," as he calls them, are those with good educations, good jobs, and much disposable income. They also are the target audience for many foreign companies seeking to sell their wares here. Mr. Biyani estimates that such customers comprise about 14% of the total population.
Where he sees the greatest sales potential is among consumers he calls India Two: the drivers, maids, cooks, nannies, farmers and others who serve India One. He estimates that 55% of Indians -- roughly 550 million people -- fall into this category. They are seeing their wages rise and their children frequently pursue further education and careers that will vault them up the social ladder. India Three, he says, is the rest of the nation -- those at, or slightly above, subsistence level, who donât represent much of a market for modern retailers.
He thinks any retailer that tries to re-create a Western store in India will miss most potential customers. "People like to do what they think works in the West," but India is different, he says.
Mr. Biyani has been studying Indian consumers for more than 20 years. Though many of his innovations are distinctly Indian, he credits icons of U.S. retailing as his inspiration. His copy of Wal-Mart founder Sam Waltonâs book "Sam Walton: Made in America" is battered from constant use. From Mr. Walton, Mr. Biyani says he learned how to "rewrite the rules" in retailing. Mr. Waltonâs photo hangs on his office wall below Mother Teresaâs. He also has written his own autobiography called, "It Happened in India."
In the 1980s, Mr. Biyani left his family textile business to launch a business selling "stone washed" denim. He started his own line of shirts and trousers at a time when few Indians bought ready-made garments, and later opened clothing stores because he couldnât get others to carry his products. When he decided to enter the supermarket business in 2001, his friends and executives told him India wasnât ready. He thought otherwise.
Food Bazaar, Mr. Biyaniâs Western-style supermarket, now has 93 outlets in the country. Big Bazaar, which sells household goods and clothes and frequently is housed under the same roof as Food Bazaar, has 65 outlets. Mr. Biyani also has expanded into other businesses, including restaurants, bars, property, mall management, media, a private-equity fund and a bowling alley. All his businesses are loosely gathered under an umbrella company called the Future Group, based in Mumbai.
The Big Bazaar and Food Bazaar stores make up more than 60% of the annual sales of Pantaloon, the main listed company in the group.
Public Market
Both Big Bazaar and Food Bazaar stores seek to invoke the atmosphere of a public market, Mr. Biyani says -- albeit in the air-conditioned malls that are springing up around India. The outlets have floors of gray granite tiling, common in markets and train stations, so newcomers who have never been in a large, modern store feel at home.
Instead of long aisles and tall shelves, the stores cluster products in bins and on low shelves. With long aisles, he says, "the customers never stopped. They kept on walking on and on so we had to create blockages."
The bins let customers handle products from different sides. Decades of shopping from stalls also means that most customers feel more comfortable looking down when they shop, he says. Narrow, winding aisles create small traffic jams that make people stop and look at products. Last month, one of his first stores in Mumbai changed from long, straight aisles to the haphazard cluster design. "Sales are up 30% since the change," Mr. Biyani said, as he struggled to walk through the knots of shoppers at the store.
Indian consumers arenât used to processed and packaged goods, so the stores sell wheat, rice, lentils and other products out of large buckets. Housewives want to grab handfuls, checking them out for pebbles, quality and smell, he says. Mr. Biyani tells his staff not to tidy up, as he noticed that customers are less likely to check out a product if it is in neat stacks. He scoops up a handful of plastic razors from a pile in a bin. "When it is like this," he says, "it feels like a good deal."
Because he says Indians like to talk and consult and bicker as they buy, the stores have up to three times the number of employees per square foot than a typical Wal-Mart. A few employees walk around the store using megaphones to announce promotions, adding to the din from constant music and commercials playing in the background. Mr. Biyani doesnât want his stores to be quiet or relaxing. Many of the stores arenât air-conditioned -- on purpose.
The announcements and ads are done in Indiaâs many local languages to make non-English speakers feel welcome. "We advertise in the language that people dream in," says Mr. Biyani, who is proud he isnât one of the many business leaders in India who has lived or studied abroad. Though he speaks the language, "I donât dream in English," he says.
Mr. Biyaniâs chaos theory of retailing extends only so far. When it comes to taking in money and making sure there are plenty of goods for customers to peruse, his stores strive to be as efficient as any in the world. They run software from German technology giant SAP AG to find out when a new brand of noodle isnât selling well in Bangalore or the supply of curds is running low in Kolkata. More than 50,000 items are delivered using just-in-time inventory. And the stores have large numbers of cashiers to ensure that the checkout process is fast.
Not all his efforts to replicate the feel of a market have worked. When thousands lined up in front of each of his Big Bazaar stores for an annual sale in 2005, he had to shut down stores early and call in the police to avoid rioting. In Bangalore, the police forced the management of one Big Bazaar to extend the sale by one day to calm the angry crowd. Now his annual sales run for three days and he uses ropes to control the long lines.
The approach also has its limits. Mr. Biyaniâs department stores, called Pantaloon, are aimed at wealthier Indians, who are likely to have either lived or traveled abroad and expect a different shopping experience. There, floors are scrubbed, the air is cool, and every item is carefully arranged on shelves.
As others now roll out their own supermarkets, Mr. Biyani says there is enough business for everyone, but that it will take years for newcomers to catch up with him. He also argues that India doesnât need foreign mass-market retailers yet and is part of retail-industry associations that support restrictions on foreign investment. He says foreigners might dump products on India to gain market share and ruin Indian retailers before they have a chance to grow. He has voiced concerns about foreign companies taking profits out of India.
In the meantime, he is taking his experiments into what Indian consumers want into a different domain.
Former Milking Shed
Across Mumbai, on the site of a former milking shed, is Orchid City Centre Mall. Mr. Biyaniâs Pantaloon Retail owns the mall and manages most of the 20-plus stores inside. It is a petri dish to test new retail formats and adapt them for Indian consumers. It has the Future Groupâs own bookstore, electronics, childrenâs clothing, plus-size clothing, home furnishing and drug stores as well as a video arcade, food court, gym, beauty salon and banquet hall.
While he expects brisk demand for the banquet hall from weddings, he has already figured out that his customers donât want $1.50 coffee. The gourmet coffee shop has shut down and stands empty while he thinks of something else to put in its place.
The biggest pull in the mall is still the chaotic Big Bazaar and Food Bazaar. He put them on the top floor, to force shoppers to see the rest of the mall when they come to buy rice. It seems to be working. The penthouse grocery store is packed and the mall is crawling with shoppers pushing grocery carts.
"Nobody knows," what will sell until they try, says Mr. Biyani. "We all have to discover by doing."
--Tariq Engineer contributed to this article.
Write to Eric Bellman at eric.bellman@awsj.com
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THE WALL STREET JOURNAL ONLINE, PAGE ONE
CHAOS THEORY
In India, a Retailer Finds
Key to Success Is Clutter
Consumers Like Noise,
Bins, Mr. Biyani Says;
Narrowing the Aisles
By ERIC BELLMAN
August 8, 2007; Page A1
MUMBAI -- On a tour of one of his supermarkets, Kishore Biyani notes that shopping carts are getting stuck in the narrow aisles, wheat and lentils have spilled onto the floor, black spots cover the onions and itâs difficult to hear above the constant in-store announcements. He grins and congratulates the store manager.
Mr. Biyani, 45 years old, has built a large business and a family fortune on the simple premise that, in India, chaos sells.
Americans and Europeans might like to shop in pristine and quiet stores where products are carefully arranged. But when Mr. Biyani tried that in Western-style supermarkets he opened in India six years ago, too many customers walked down the wide aisles, past neatly stocked shelves and out the door without buying.
Mr. Biyani says he soon figured out what he was doing wrong. Shopping in such a sterile environment didnât appeal to the lower middle-class shoppers he was targeting. They were more comfortable in the tiny, cramped stores -- often filled with haggling customers -- that typify Indian shopping. Most Indians buy their fresh produce from vendors who keep vegetables under burlap sacks.
So Mr. Biyani redesigned his stores to make them messier, noisier and more cramped. "The shouting, the untidiness, the chaos is part of the design," he says, as he surveys his Mumbai store where he just spent around $50,000 to replace long, wide aisles with narrow, crooked ones: "Making it chaotic is not easy."
Even the dirty, black-spotted onions serve a function. For the average Indian, dusty and dirty produce means fresh from the farm, he says. Indian shoppers also love to bargain. Mr. Biyani doesnât allow haggling, but having damaged as well as good quality produce in the same box gives customers a chance to choose and think they are getting a better deal. "They should get a sense of victory," he says.
The approach has made Mr. Biyani rich. His company, Pantaloon Retail (India) Ltd., is now Indiaâs largest retailer; it expects to report sales of more than $875 million for the fiscal year ended in June. He and his family own a 42% stake in Pantaloon, valued at about $630 million.
Mr. Biyani is proving that modern retailing, with a bit of spice, can work in a country where traditional markets dominate. On the back of his success -- and rushing to close his head start -- are some of the worldâs largest retailers. While few may subscribe to Mr. Biyaniâs chaos theory of retail, all will be struggling to find ways to attract the millions of Indian consumers who are shopping at branded chain stores for the first time.
Wal-Mart Joint Venture
Wal-Mart Stores. agreed this week to set up a joint venture with Bharti Enterprises Ltd. -- which runs Indiaâs largest cellular company -- that will open wholesale stores to sell goods to small retailers, manufacturers and farmers in India. Bharti plans to spend $2.5 billion to build a nationwide network of supermarkets and small stores. Wal-Mart has to use this route into India because Indian regulations donât allow multiple-brand retailers to sell directly to consumers -- but they can run wholesale operations and provide support to Indian retailers. Tesco PLC of the United Kingdom and Carrefour SA of France, are also eyeing India. Petroleum refiner Reliance Industries Ltd., one of Indiaâs largest companies by market value, plans to spend more than $6 billion in the next five years to open thousands of supermarkets.
All are hoping to tap into the rampant consumer spending sweeping India amid fast economic growth. Indiaâs total retail market is about $370 billion a year and will expand more than 55% in the next four years, estimates Technopak Advisors, a New Delhi-based retail consulting firm. It says sales of branded chain stores now represent less than 5% of total retail sales -- but are expected to grow more than five-fold by 2011, accounting for 17% of retail sales.
Many more Indian women are working today and donât have the time to visit several mom-and-pop stores. "I canât go to 10 different stores to get 20 different things. Iâm a working mother," says Candice DâSouza, a 28-year-old public-relations firm manager, who recently became a convert to Mr. Biyaniâs Big Bazaar stores.
Wealthy Indians often employ servants who do most of the shopping. Many of Mr. Biyaniâs unique touches are designed to make the household help, rather than their employers, feel comfortable shopping. Indeed, he says that the greatest potential pool of customers for retail chains in India comes not from the wealthy but from those who work for them.
Mr. Biyani divides Indiaâs 1.1 billion people into three types of consumers. "India One," as he calls them, are those with good educations, good jobs, and much disposable income. They also are the target audience for many foreign companies seeking to sell their wares here. Mr. Biyani estimates that such customers comprise about 14% of the total population.
Where he sees the greatest sales potential is among consumers he calls India Two: the drivers, maids, cooks, nannies, farmers and others who serve India One. He estimates that 55% of Indians -- roughly 550 million people -- fall into this category. They are seeing their wages rise and their children frequently pursue further education and careers that will vault them up the social ladder. India Three, he says, is the rest of the nation -- those at, or slightly above, subsistence level, who donât represent much of a market for modern retailers.
He thinks any retailer that tries to re-create a Western store in India will miss most potential customers. "People like to do what they think works in the West," but India is different, he says.
Mr. Biyani has been studying Indian consumers for more than 20 years. Though many of his innovations are distinctly Indian, he credits icons of U.S. retailing as his inspiration. His copy of Wal-Mart founder Sam Waltonâs book "Sam Walton: Made in America" is battered from constant use. From Mr. Walton, Mr. Biyani says he learned how to "rewrite the rules" in retailing. Mr. Waltonâs photo hangs on his office wall below Mother Teresaâs. He also has written his own autobiography called, "It Happened in India."
In the 1980s, Mr. Biyani left his family textile business to launch a business selling "stone washed" denim. He started his own line of shirts and trousers at a time when few Indians bought ready-made garments, and later opened clothing stores because he couldnât get others to carry his products. When he decided to enter the supermarket business in 2001, his friends and executives told him India wasnât ready. He thought otherwise.
Food Bazaar, Mr. Biyaniâs Western-style supermarket, now has 93 outlets in the country. Big Bazaar, which sells household goods and clothes and frequently is housed under the same roof as Food Bazaar, has 65 outlets. Mr. Biyani also has expanded into other businesses, including restaurants, bars, property, mall management, media, a private-equity fund and a bowling alley. All his businesses are loosely gathered under an umbrella company called the Future Group, based in Mumbai.
The Big Bazaar and Food Bazaar stores make up more than 60% of the annual sales of Pantaloon, the main listed company in the group.
Public Market
Both Big Bazaar and Food Bazaar stores seek to invoke the atmosphere of a public market, Mr. Biyani says -- albeit in the air-conditioned malls that are springing up around India. The outlets have floors of gray granite tiling, common in markets and train stations, so newcomers who have never been in a large, modern store feel at home.
Instead of long aisles and tall shelves, the stores cluster products in bins and on low shelves. With long aisles, he says, "the customers never stopped. They kept on walking on and on so we had to create blockages."
The bins let customers handle products from different sides. Decades of shopping from stalls also means that most customers feel more comfortable looking down when they shop, he says. Narrow, winding aisles create small traffic jams that make people stop and look at products. Last month, one of his first stores in Mumbai changed from long, straight aisles to the haphazard cluster design. "Sales are up 30% since the change," Mr. Biyani said, as he struggled to walk through the knots of shoppers at the store.
Indian consumers arenât used to processed and packaged goods, so the stores sell wheat, rice, lentils and other products out of large buckets. Housewives want to grab handfuls, checking them out for pebbles, quality and smell, he says. Mr. Biyani tells his staff not to tidy up, as he noticed that customers are less likely to check out a product if it is in neat stacks. He scoops up a handful of plastic razors from a pile in a bin. "When it is like this," he says, "it feels like a good deal."
Because he says Indians like to talk and consult and bicker as they buy, the stores have up to three times the number of employees per square foot than a typical Wal-Mart. A few employees walk around the store using megaphones to announce promotions, adding to the din from constant music and commercials playing in the background. Mr. Biyani doesnât want his stores to be quiet or relaxing. Many of the stores arenât air-conditioned -- on purpose.
The announcements and ads are done in Indiaâs many local languages to make non-English speakers feel welcome. "We advertise in the language that people dream in," says Mr. Biyani, who is proud he isnât one of the many business leaders in India who has lived or studied abroad. Though he speaks the language, "I donât dream in English," he says.
Mr. Biyaniâs chaos theory of retailing extends only so far. When it comes to taking in money and making sure there are plenty of goods for customers to peruse, his stores strive to be as efficient as any in the world. They run software from German technology giant SAP AG to find out when a new brand of noodle isnât selling well in Bangalore or the supply of curds is running low in Kolkata. More than 50,000 items are delivered using just-in-time inventory. And the stores have large numbers of cashiers to ensure that the checkout process is fast.
Not all his efforts to replicate the feel of a market have worked. When thousands lined up in front of each of his Big Bazaar stores for an annual sale in 2005, he had to shut down stores early and call in the police to avoid rioting. In Bangalore, the police forced the management of one Big Bazaar to extend the sale by one day to calm the angry crowd. Now his annual sales run for three days and he uses ropes to control the long lines.
The approach also has its limits. Mr. Biyaniâs department stores, called Pantaloon, are aimed at wealthier Indians, who are likely to have either lived or traveled abroad and expect a different shopping experience. There, floors are scrubbed, the air is cool, and every item is carefully arranged on shelves.
As others now roll out their own supermarkets, Mr. Biyani says there is enough business for everyone, but that it will take years for newcomers to catch up with him. He also argues that India doesnât need foreign mass-market retailers yet and is part of retail-industry associations that support restrictions on foreign investment. He says foreigners might dump products on India to gain market share and ruin Indian retailers before they have a chance to grow. He has voiced concerns about foreign companies taking profits out of India.
In the meantime, he is taking his experiments into what Indian consumers want into a different domain.
Former Milking Shed
Across Mumbai, on the site of a former milking shed, is Orchid City Centre Mall. Mr. Biyaniâs Pantaloon Retail owns the mall and manages most of the 20-plus stores inside. It is a petri dish to test new retail formats and adapt them for Indian consumers. It has the Future Groupâs own bookstore, electronics, childrenâs clothing, plus-size clothing, home furnishing and drug stores as well as a video arcade, food court, gym, beauty salon and banquet hall.
While he expects brisk demand for the banquet hall from weddings, he has already figured out that his customers donât want $1.50 coffee. The gourmet coffee shop has shut down and stands empty while he thinks of something else to put in its place.
The biggest pull in the mall is still the chaotic Big Bazaar and Food Bazaar. He put them on the top floor, to force shoppers to see the rest of the mall when they come to buy rice. It seems to be working. The penthouse grocery store is packed and the mall is crawling with shoppers pushing grocery carts.
"Nobody knows," what will sell until they try, says Mr. Biyani. "We all have to discover by doing."
--Tariq Engineer contributed to this article.
Write to Eric Bellman at eric.bellman@awsj.com
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Click any message to view it in the reading pane. Attachments, pictures, and links from unknown senders are blocked to help protect your privacy and safety.
