Retailers like Future Group bet big on small products to beat slowdown

Written by Vaishnavi Bala | Mumbai | Updated: Sep 2 2013, 21:22pm hrs
With a changing consumption pattern, retailers such as the Future Group are adding products that are smaller and cheaper into their catalogue.

Quote: Future Retail Ltd

Kishore Biyani's Future Group has added smaller products like linen sheet and bed cover in its home furnishing products. This marks a shift from bulky furniture.

We are increasing the number of smaller items in our products as people are spending more on these products, said CP Toshniwal, chief financial officer.

We have rebuilt our assortment strategy and that has seen a better traction from consumers. We are also increasing the share of fashion products at Big Bazaar to drive margins, said Rakesh Biyani, joint managing director of Future Group.

As stores become smaller, bulky items like a refrigerator that costs around Rs 15,000 are unlikely to give higher margins, whereas a smartphone worth Rs 25,000 has a higher margin, explained Toshniwal.

Apart from HomeTown and Big Bazaar, the company is also increasing share of smaller items like mobile phones and tablets at its electronics chain of stores eZone.

As discretionary spending tapers due to negative consumer sentiment, people are also delaying big-ticket purchases, said Shoppers Stop's managing director Govind Shrikhande. As consumers put off expensive purchases, they compensate by buying cheaper products, he added. Due to continued slowdown, we are seeing consumers spending more on items like apparel, accessories and make-up, he said.

Quote: Shoppers Stop Ltd

Shoppers Stop has also been changing the product mix at its loss-making subsidiary HyperCity, where food currently makes up 62% of total products.

Our fashion business had a share of only 5% two years back, but now that has risen to 11%. We are increasing the share of fashion in the product mix as we are seeing good traction in this category, said Shoppers Stop's Shrikhande.

As consumers tighten their purse, some FMCG companies are now witnessing downtrading in the industry. They see a lower growth in high-priced brands while low-priced brands are posting double-digit growth.

In a highly price-sensitive food industry, quick service restaurants (QSRs) are also leaving the prices of the low-end of the product-range unchanged and sometimes even reducing them, even as they fight inflationary pressures.

Companies want to retain their entry-point prices and promotional offers, which they believe are their best-sellers.Toshniwal said due to rupee depreciation, the company is also cutting down on furniture imports from Malaysia. Due to a steep fall in rupee, we are now manufacturing some furniture at our local factories in Nagpur and Jodhpur, he added. Only about 5% of the company's revenue comes from imported products.

Mohit Kampani, Spencer's chief-merchandising and operations, told FE recently that non-food sales have soared. We want to give more space in our stores to general merchandise and apparels. Currently, the company has 25% exposure to non-food items.