Future Retail has built its Brand Factory sale around the demonetisation move and the new Rs 2000 note. The sales have done 50 percent better than what was expected, said Kishore Biyani, CEO of Future Group.
Since demonetisation, sales have picked up with the addition of new customers. Modern retail did not face much issue as they were already using cards and wallets for payment. However, the Group’s cash transactions have reduced to 17-18 percent from 65 percent.
Some glitches do happen while making credit and debit card payments over weekends, but these are not much.
Biyani said that the worry is the additional cost that will come with the digital payment system. However, he is confident that the government will extend some subventions on charges beyond this year-end.
The group is confident of achieving its FY16 revenue target of Rs 25,000 crore.
Below is the verbatim transcript of Kishore Biyani's interview to Priya Sheth on CNBC-TV18.
Q: You have the Free Shopping Weekend at Brand Factory. Do you see demand picking up post demonetisation?
A: We are quite there in urban centres and 99 percent of our customers have bank account or they use the debit or credit card or other wallets. However, we saw the slowdown for the first two-three days and then it gradually picked up but as a group we respond to whatever events have happened around us. We believe that there is an opportunity in everything which comes.
Therefore, an event like Free Shopping has brought in crowd in huge number. We were always about targets even after demonetisation and this will take us to another level. We are doing 50 percent better than what we were expecting of the preview sale that we did yesterday. There are queues outside most of our store today.
Brand Factory as a concept was always on discount, but we thought there is huge insight which will pick up because everybody has Rs 2,000 note, so we build a scheme - pay Rs 2,000 and shop for Rs 5,000 and plus. I think this has caught on very well and the response has been unbelievably good.
Q: In terms of recovery, across the formats that you operate in, what has been the recovery there? Can you give us some estimate or some numbers to point towards some sort of recovery?
A: Modern retail has no issues as such because we as a group accept debit, credit cards and other wallets. Therefore, it has never been a challenge for us. We launched our own wallet called Future Pay also which has been rightly timed. We saw a lot of new customers coming into our store, shopping pattern has changed but there has been a pent-up demand because there is a season of festivities right now, December is on, the wedding season is going on. So demand would always be there. However, goods are not there everywhere; luckily we have our own supply chain, so it has been working well for us.
Q: In terms of tier II and tier III cities, how do you assess, how do you gauge the demand there?
A: We can say for our format that since we run our own supply chain, our availability of stock is at the best. We accept all credit cards except on Saturdays and Sundays because we face peak rush; there are issues on credit and debit card transactions because the servers do not take the capacity of the banks or service providers. There are glitches to the digitisation move which is happening but at the moment we are enjoying it.
Q: Can you give us a breakup of how much cash and cashless transactions are happening at this point in time and also I do understand that with cashless transactions the cost that you bear, as a retailer, are slightly more.
A: We have always believed in the cost of doing digital transaction because we have been accepting it always but the cost of digital transactions are high and we believe that the government is going to give some subvention on the charges which they have given at the moment, till December 30, and expect that we get some more subvention on credit card charges. Wallets are very expensive. So ultimately there is a cost of doing digital transaction and everything moves digital. So there is an incremental cost on us but we expect that the government will definitely work on this and give us some subvention on that.
Q: As far as the breakup is concerned, how much is cash versus cashless transaction at this point?
A: In Big Bazaar, prior to demonetisation we were at 65 percent cash which has come down to 17-18 percent now.
Q: You have been working with a target of about Rs 1 lakh crore by 2021. Are we still on that target and in terms of short-term, as far as FY17 is concerned, what kind of revenues, at the group level, can we expect at this point?
A: We are well on track with what we have set for ourselves. This year as a group we targeted Rs 25,000 crore revenue which we think we are absolutely on track and as we move forward in the next five years we have a target of Rs 100,000 crore for which we have laid the building blocks and the foundation and once everything comes into place, we should be able to get that number soon.
Q: In terms of growth you are looking at 30 percent plus compound annual growth rate (CAGR). Do you stick by that growth or would you look at perhaps revising it in terms of the current domestic factors that have come into play?
A: There is no better time than this for formal trade because goods and services tax (GST) coming, latest by September and demonetisation. I think it has been a boon for organised players.