*Is Kishore Biyani’s Decision To Dump ECommerce The Turning Point !
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Govindraj Ethiraj
Founder, Ping Digital Broadcast, IndiaSpend
Is Kishore Biyani’s Decision To Dump
ECommerce The Turning Point ?
It’s a very fundamental question to which few are willing to offer honest answers: Why do we shop online ?
Let me attempt this. If I were to confine my answer to India, it’s usually for two reasons. First, crazy discounts on standardised products, like cellphones. Second, the product itself is not easily available or accessible in stores where I live or not at all.
But if you were to take away the discounts, usually funded by casino-grade investors sitting 13,500 km away, then it is quite clear that the incentive to shop online will drop dramatically. At least now.
The question is not if it will happen but when and how fast ?
The process has already begun. Ecommerce and allied businesses are already starting to shrink as their investors realise India was the wrong country to create blind replicas of similar successes in the USA. Though to be fair, you can’t blame foolish investors for assuming this, such is the nature of capitalism and markets.
The second factor is an understanding of the consumer.
It is crystal clear that Indian consumers are loyal to one factor only and that is value or the deal. As long as you shower discounts they will buy or transact on your site.
Take the discounts away and they are gone.
Amazingly, billions of dollars have been poured in assuming this fundamental tenet of an Indian shopper can be changed or reversed.
It cannot.
Next, what is the size of the market ? There are mouth watering projections on the size and scope of India’s online consumer market. Most of them are patently false. Like the 250 million Indian middle class consumer fantasy that multi-nationals saw in the early 1990s, a figure that is still materialising in 2016.
According to this insightful report from Kotak Securities that came out last year, the size is roughly 40 million customers. A figure that all my friends in ecommerce tell me is either stable or shrinking.
It is in this context that Future Group’s decision to dump ecommerce is interesting. A report in the Business Standard of August 29 says Kishore Biyani’s Future Group is closing the chain’s ambitious online retail venture Big Bazaar Direct, finding the business unviable.
Significantly, Biyani says he want to focus on it’s core business of physical retailing where it plans to add 3.5 million square feet of space, the highest ever in a single year !
If you are one of those who are fed on four years of puff/PR pieces on India’s ecommerce industry and are thus unlikely to see a contrasting point of view, this is where you should get off.
If you are still with me, read on.
First, Kishore Biyani has been wrong in the past. He can be candid to the point of being blasé about it. “I thought making films were a good idea because the process of Bollywood provided insights into consumer behaviour,” he told me in an interview a few years ago.
He still believes in Bollywood’s ability to define consumer behaviour but is out of films now.
In the same report of August 29, he says he has entered and exited ecommerce four times. But he also acquired FabFurnish, a furniture retailing company but now has a different take on it. “With the acquisition of FabFurnish, we are learning what not to do in e-commerce,” he said.
He also says that customer acquisition costs, fulfilment costs and other expenses in ecommerce add upto 50% of overall business costs, making it unviable. The figure of 50% to anyone who runs a real business will actually appear understated but that’s a different story again.
The larger question to ponder is about timing.
Biyani’s announcement is, presumably, a reflection of four thoughts:
His ability to crystal gaze on how Indian consumers are likely to consume in the near future. He has been right on this in the past. And wrong, by his own admissions.
A sound understanding of past consumer behaviour and loyalty particularly in regard to discounts. Don’t forget Big Bazaar has run its own massive discount-led sales. He has been more right on this.
The flow of capital, notably that of reckless venture capital firms funding even more reckless customer acquisition. This is clear as day. The tap is closing and an increasing number of VC-fuelled investments are in their death throes.
Failure. The e-commerce experiment has gone wrong. He recognises he can’t crack it so best to cut losses now, as he has done in the past. Don’t forget, he has regular shareholders to answer to, not the wild-west venture capitalists who take Las Vegas-style bets on enterprises.
So if he has the timing wrong, then the party will continue for a little while longer. After all, as recently as last week, the major e-commerce companies were still taking out full pages in national newspapers offering heavy discounts.
But then ask yourself, if a brand or company has to use precisely the same approach for customer acquisition 3-4 years down the line, isn’t there something nightmarishly wrong with the proposition ?
So Biyani is surely right on some counts and partially timing too. The question is which of which and how much ? Biyani may nor may not matter in the `watch billions go down the sinkhole’ game but his statements could be a turning point.
Not for what they will do but for the baseline reality they potentially reflect.
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@Praveen Vishnu@
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Kishore Biyani made me tense with this statement as I see no offers (deep discounts) these days. 
@saymyname wrote:
Why Kishore Biyani is so much revered ?
Exactly. Don’t understand what big change big bazaar has made to Indian retail. He has lost many shareholders money too( p.s: I too is one of them). Also don’t see much discount or quality in bb. Had heard about dmart being very good but never went. Been going to dmart now for 3-4 years and boss I have become a fan of it. Really good discount and prices. Dmart is increasing its branches too.
@Ezio Auditore wrote:
@saymyname wrote:
Why Kishore Biyani is so much revered ?
Exactly. Don’t understand what big change big bazaar has made to Indian retail. He has lost many shareholders money too( p.s: I too is one of them). Also don’t see much discount or quality in bb. Had heard about dmart being very good but never went. Been going to dmart now for 3-4 years and boss I have become a fan of it. Really good discount and prices. Dmart is increasing its branches too.
Seriously D-mart is damn cheap, the best thing is you get 35 wala snickers at 30
@Ezio Auditore wrote:
@saymyname wrote:
Why Kishore Biyani is so much revered ?
Exactly. Don’t understand what big change big bazaar has made to Indian retail. He has lost many shareholders money too( p.s: I too is one of them). Also don’t see much discount or quality in bb. Had heard about dmart being very good but never went. Been going to dmart now for 3-4 years and boss I have become a fan of it. Really good discount and prices. Dmart is increasing its branches too.
Yes, as far as price concerns Smart is best.
But, Bb wants to add the Tadka of malls/hypermart. They have opened Bb gennext like hypercity. Folding options, extra space between shelves. Neat and clean display. Private labels in food etc. Dmart Dont have those things.
However, its dmart slowness who r not competing Mich with Bb at least in Maharashtra. Apna bazar, spensor, More, spinach struggled. Only hypercity and star bazar is successful. So, this needs huge money and jigar to loss. Dmart is dustry, cranky at many places. They give plush look outside but no so pleasant feeling inside. I have visited dmart 3 times in last 3/years.
Thanks to bigbasket
@Alpha.Barood wrote:
@Ezio Auditore wrote:
@saymyname wrote:
Why Kishore Biyani is so much revered ?
Exactly. Don’t understand what big change big bazaar has made to Indian retail. He has lost many shareholders money too( p.s: I too is one of them). Also don’t see much discount or quality in bb. Had heard about dmart being very good but never went. Been going to dmart now for 3-4 years and boss I have become a fan of it. Really good discount and prices. Dmart is increasing its branches too.
Yes, as far as price concerns Smart is best.
But, Bb wants to add the Tadka of malls/hypermart. They have opened Bb gennext like hypercity. Folding options, extra space between shelves. Neat and clean display. Private labels in food etc. Dmart Dont have those things.However, its dmart slowness who r not competing Mich with Bb at least in Maharashtra. Apna bazar, spensor, More, spinach struggled. Only hypercity and star bazar is successful. So, this needs huge money and jigar to loss. Dmart is dustry, cranky at many places. They give plush look outside but no so pleasant feeling inside. I have visited dmart 3 times in last 3/years.
Thanks to bigbasket
Agree they don’t keep it much spic n span. But the discounts are really good. Considering they are in profit now i hope they improve the interiors. Here in ahd new dmart has opened near RTO and it is good in interiors other than rest. Hope it remains clean and better.
All that glitters is not gold
Big bazaar still has one of the best delivery chains (sourcing) in terms of FMCG and horticultural products are concerned. Hindustan Unilever Limited totally outsource fruits and vegetables for production while Reliance Fresh has a City processing Centre (basically depending on the size of the consumer base) which is a large constraint in the delivery chain. ITC is one example of excellent management for the initiative e-choupal. They actually runs a layered private government over the panchayats in the regions they work.
See, Kishore biyani is not a master in business administration but it seems he has better judgement skills in terms of not getting swayed with the trend. Trends doesn’t last long, but you need to.
I am not against E-commerce but we are just in a dilemma to cope up with the race to west. Retail is one of the best way to capitalise profit and socialise loss for large corporations (that’s why big corporations have a retail chain under their seat).
E-commerce needs a lot of innovations, copying the ventures is just not the way to go. Flipkart is a classic example of race to death. E-commerce surely needs a long term view for India but that doesn’t mean you keep your unit economics at stake!
EID Mubarak.
https://yourstory.com/2016/10/kishore-biyani-te... | for more download our app on yourstory.com/apps
Extremely interesting & Must Read
POWER OF MONEY
By Adam Khoo ( Singapore ’s youngest millionaire at 26 yrs.)
Some of you may already know that I travel around the region pretty frequently, having to visit and conduct seminars at my offices in Malaysia , Indonesia , Thailand and Suzhou ( China ) . I am in the airport almost every other week so I get to bump into many people who have attended my seminars or have read my books.
Recently, someone came up to me on a plane to KL and looked rather shocked. He asked, ‘How come a millionaire like you is traveling economy?’ My reply was, ’That’s why I am a millionaire. ’ He still looked pretty confused.
This again confirms that greatest lie ever told about wealth (which I wrote about in my latest book ‘Secrets of Self-Made Millionaires’). Many people have been brainwashed to think that millionaires have to wear Gucci, Hugo Boss, Rolex, and sit on first class in air travel. This is why so many people never become rich because the moment they earn more money, they think that it is only natural that they spend more, putting them back to square one.
The truth is that most self-made millionaires are frugal and only spend on what is necessary and of value. That is why they are able to accumulate and multiply their wealth so much faster.
Over the last 7 years, I have saved about 80% of my income while today I save only about 60% (because I have my wife, mother in law, 2 maids, 2 kids, etc. to support). Still, it is way above most people who save 10% of their income (if they are lucky).
I refuse to buy a first class ticket or to buy a $300 shirt because I think that it is a complete waste of money. However, I happily pay $1,300 to send my 2-year old daughter to Julia Gabriel Speech and Drama without thinking twice.
When I joined the YEO (Young Entrepreneur’s Orgn) a few years back (YEO is an exclusive club open to those who are under 40 and make over $1m a year in their own business), I discovered that those who were self-made thought like me. Many of them with net worth well over $5 m, travelled economy class and some even drove Toyotas and Nissans, not Audis, Mercs, BMWs..
I noticed that it was only those who never had to work hard to build their own wealth (there were also a few ministers’ and tycoons’ sons in the club) who spent like there was no tomorrow. Somehow, when you did not have to build everything from scratch, you do not really value money. This is precisely the reason why a family’s wealth (no matter how much) rarely lasts past the third generation
Thank God my rich dad foresaw this terrible possibility and refused to give me a cent to start my business.
Then some people ask me, ‘What is the point in making so much money if you don’t enjoy it?’ The thing is that I don’t really find happiness in buying branded clothes, jewellery or sitting first class. Even if buying something makes me happy it is only for a while, it does not last.
^Material happiness never lasts, it just gives you a quick fix*. After a while you feel lousy again and have to buy the next thing which you think will make you happy. I always think that if you need material things to make you happy, then you live a pretty sad and unfulfilled life..
Instead, what makes me happy is
when I see my children laughing and playing and learning so fast.
What makes me happy is when I see my companies and trainers reaching more and more people every year in so many more countries.
What makes me really happy is when I read all the emails about how my books and seminars have touched and inspired someone’s life.
What makes me really happy is reading all your wonderful posts about how this blog is inspiring you. This happiness makes me feel really good for a long time, much much more than what a Rolex would do for me.
I think the point I want to put across is that* happiness must come from doing your life’s work (be it teaching, building homes, designing, trading, winning tournaments etc.)*and the money that comes is only a by-product.
Save this message to read it from time to time
THE POWER OF MONEY
VERY DOWN TO EARTH
VERY PRACTICAL
@Alpha.Barood wrote:
Extremely interesting & Must Read
POWER OF MONEY
By Adam Khoo ( Singapore ’s youngest millionaire at 26 yrs.)
Some of you may already know that I travel around the region pretty frequently, having to visit and conduct seminars at my offices in Malaysia , Indonesia , Thailand and Suzhou ( China ) . I am in the airport almost every other week so I get to bump into many people who have attended my seminars or have read my books.
Recently, someone came up to me on a plane to KL and looked rather shocked. He asked, ‘How come a millionaire like you is traveling economy?’ My reply was, ’That’s why I am a millionaire. ’ He still looked pretty confused.
This again confirms that greatest lie ever told about wealth (which I wrote about in my latest book ‘Secrets of Self-Made Millionaires’). Many people have been brainwashed to think that millionaires have to wear Gucci, Hugo Boss, Rolex, and sit on first class in air travel. This is why so many people never become rich because the moment they earn more money, they think that it is only natural that they spend more, putting them back to square one.
The truth is that most self-made millionaires are frugal and only spend on what is necessary and of value. That is why they are able to accumulate and multiply their wealth so much faster.
Over the last 7 years, I have saved about 80% of my income while today I save only about 60% (because I have my wife, mother in law, 2 maids, 2 kids, etc. to support). Still, it is way above most people who save 10% of their income (if they are lucky).
I refuse to buy a first class ticket or to buy a $300 shirt because I think that it is a complete waste of money. However, I happily pay $1,300 to send my 2-year old daughter to Julia Gabriel Speech and Drama without thinking twice.
When I joined the YEO (Young Entrepreneur’s Orgn) a few years back (YEO is an exclusive club open to those who are under 40 and make over $1m a year in their own business), I discovered that those who were self-made thought like me. Many of them with net worth well over $5 m, travelled economy class and some even drove Toyotas and Nissans, not Audis, Mercs, BMWs..
I noticed that it was only those who never had to work hard to build their own wealth (there were also a few ministers’ and tycoons’ sons in the club) who spent like there was no tomorrow. Somehow, when you did not have to build everything from scratch, you do not really value money. This is precisely the reason why a family’s wealth (no matter how much) rarely lasts past the third generation
Thank God my rich dad foresaw this terrible possibility and refused to give me a cent to start my business.
Then some people ask me, ‘What is the point in making so much money if you don’t enjoy it?’ The thing is that I don’t really find happiness in buying branded clothes, jewellery or sitting first class. Even if buying something makes me happy it is only for a while, it does not last.
^Material happiness never lasts, it just gives you a quick fix*. After a while you feel lousy again and have to buy the next thing which you think will make you happy. I always think that if you need material things to make you happy, then you live a pretty sad and unfulfilled life..
Instead, what makes me happy is
when I see my children laughing and playing and learning so fast.
What makes me happy is when I see my companies and trainers reaching more and more people every year in so many more countries.
What makes me really happy is when I read all the emails about how my books and seminars have touched and inspired someone’s life.
What makes me really happy is reading all your wonderful posts about how this blog is inspiring you. This happiness makes me feel really good for a long time, much much more than what a Rolex would do for me.
I think the point I want to put across is that* happiness must come from doing your life’s work (be it teaching, building homes, designing, trading, winning tournaments etc.)*and the money that comes is only a by-product.
Save this message to read it from time to time
THE POWER OF MONEY
VERY DOWN TO EARTH
VERY PRACTICAL
A must read post! Thanks a lot for sharing this 
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Why Kishore Biyani is so much revered ?