Firstly, the company is looking at streamlining its supply-chain management by internalising the operations. Future Retail is trying to reduce the dependency on third parties, especially in supply-chain management and after-sales services.
HomeTown has already consolidated its back-end to a single distribution centre. But a higher number of third parties in the back-end operations has led to lower efficiency and higher cost of operations, a senior executive at Future Group said.
“Along with lower efficiency, customer satisfaction is low when a third-party is involved in after-sales services,” he said.
“We are re-looking at the entire HomeTown business where multiple changes are taking place. The format will take another year to become profitable at the Ebitda level,” Future Group president (retail strategy) Rajan Malhotra said, adding that in the next three to six months, the company will have made some concrete changes.
It is also taking steps to cut down the per square feet cost, by opening smaller stores of 25,000 square feet on an average, instead of the 1 lakh square feet stores that it had earlier. Furniture retailers incur a 35% of total costs as rent due to the higher store sizes, analysts said.
The furnishing business has an average revenue per square feet of R7,000 square feet. At present, the company has 33 stores.
Future Retail, which comprises eZone and HomeTown, posted a total income from operations at R362 crore and Ebitda of R38 crore, and a net loss of R10 crore. The company’s eZone format turned Ebitda positive in the April-June 2013 quarter.
Godrej Interio, the furniture arm of Godrej and Boyce, is the largest organised furniture player in the country. The company, which has about 180 stores, raked in sales of R1,500 crore during FY13. Primarily growing through the franchisee route, the company gets about 30% of its revenue from smaller cities.
Online furniture player Urban Ladder said it has been able to tide over issues like high third-party involvement and increasing rentals. When it was launched one-and-half years ago, many of its operations were handled by third parties, except in Bangalore. “We changed to handling most of the operations ourselves after realising customer satisfaction levels were way lower when we had third-party vendors,” Urban Ladder co-founder Rajiv Srivatsa said.
The company, which dispatches about 100 orders a day, currently delivers in Mumbai, Delhi, Bangalore, Chennai and Pune. The average ticket size at the online retailer is R15,000.
Meanwhile, at Future Group, changes are being made based in the product offering, with the company bringing in more variety in the form of small items like linen, bed-sheets etc, along with bigger furniture.
Future Group will seek partners for Hometown and eZone after the turnaround. “We are looking for partners. After all, we are in the business of buying and selling. But we will be doing it once we have made the brand profitable,” Future Group CFO CP Toshniwal said.
Earlier this year, the company was planning to merge eZone and Hometown under one umbrella. But now the merger will depend on the buyer, according to Toshniwal. “It depends on who the interested party is and if they want just the electronic business or the home furnishing one too. We will merge it only if the buyer wants it.”