It’s stupid to sell online, says one of India’s biggest retailers

In the store we trust.
In the store we trust.
Image: Reuters/Krishnendu Halder
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Retail majors, both Indian and global, are undoubtedly kicked about the Indian e-commerce space. Jeff Bezos of Amazon on June 25 assured prime minister Narendra Modi of his continued investments. The Tata Group is ramping up its online presence. And Flipkart’s latest $1.4 billion funding round is another sign.

Strangely, one of the country’s largest organised retailer, which popularised supermarkets among Indians, is shutting out all that buzz. The Future Group, which runs the popular Big Bazaar chain of department and grocery stores, is in wait and watch mode.

“It’s stupid to be in the online space. In lifestyle, the e-commerce industry revenue in India will be around Rs2,500 crore ($375.7 million), and losses too will be of an equivalent amount. Mobile and electronics, too, do not make money online. Having burnt our fingers, we have decided to take a break of at least two years before even thinking anything remotely about online,” Future Group CEO Kishore Biyani toldThe Economic Times on June 26.

Once bitten, twice shy?

Biyani has for long been dismissive of online retail. He has often questioned the discounting model followed by Indian e-retailers and called these businesses unsustainable. However, this disdain could also stem from the fact that he has burnt his fingers in the past.

In all, Biyani has spent over Rs350 crore ($52 million) in launching and shuttering various e-commerce businesses over the last decade. This includes the acquisition of online furniture retailer Fab Furnish. Now, he is even doing away with the much touted “omnichannel” model—letting customers shop both online and off-line—making it clear that he just isn’t ready for e-commerce yet.

To be sure, the sector witnessed sluggish growth in 2016 amid rising investor concerns over profitability. The industry is also witnessing consolidation. But long-term growth prospects remain intact. After all, India has a huge population of internet users—it crossed 450 million in the first half of 2017—and online retail has only begun its journey in Asia’s third-largest economy.

Biyani, however, will let the biggies fight it out and wait till companies evolve a sustainable model. Till then, Future Group will focus on what it does best—building more stores. In the past two years, Biyani has restructured his business, reduced debt, and shed non-core assets.

Clearly, can wait.