rAGE32 PRACTICE
from world-renowned
RETAIL
PRACTICE
PROVIDING
AN INDIAN Pantaloon Retail (India)
SHOPPING Limited, is India's
leading retailer operating
EXPERIENCE: multiple retail formats
in both the value and
INTERVIEW lifestyle segment of the
Indian consumer market.
WITH VINAY Headquartered in Mumbai,
the company operates over
BHATIA, CHIEF seven million square feet
of retail space, has over
MARKETING 1,000 stores across 53
cities in India and employs
OFFICER OF more than 25,000 people.
The company recorded
PANTALOON a GBP 133 million
increase in turnover in
RETAIL 2007, a year when the
retail business discovered
new geographies and
INTERVIEWED BY MALOBI established its presence In
KAR, RESEARCHER, 42 cities and towns across
OXFORD INSTITUTE OF the country. Pantaloon
RETAIL MANAGEMENT, Retail was recently
SAID BUSINESS SCHOOL, awarded the International
UNIVERSITY OF OXFORD Retailer of the Year
2007 by the US-based
National Retail Federation
(NRF) and the inaugural
Emerging Market Retailer
of the Year 2007 at the
World Retail Congress held
in Barcelona.
Pantaloon is a part of
the Futures Group, which
operates a large business
in retail together with
businesses in hospitality,
leisure, logistics and
services. The board
of directors comprises
professionals with
management degrees
at the Master's level
management institutes
in India and abroad
(including Harvard
Business School).
Needless to say therefore,
Ihe Futures Group is an
organisation managed
by knowledgeable
professionals who have
not only had a great deal
of exposure to the west
but are able to pick and
choose from the western
ways of doing business
and apply them In an
Indian context.
The company's leading
formats include Pantaloons
(a chain of fashion outlets).
Big Bazaar (a uniquely
Indian hypermarket chain),
Food Bazaar {a supermarket
chain) and Central (a chain
of seamless destination
malls). The Future Group's
vision is to "deliver
everything, everywhere,
every time to every Indian
consumer in the most
profitable manner". The
group considers 'Indian-
ness' as a core value and its
corporate credo is "rewrite
rules, retain values",
In this interview, the
discussion focuses on
the 'value for money'
business. Furthermore,
the 'value for money'
business represents a
retail format that retains
the nuances of Indian
bazaars with aspects
of modern retail such
as convenience and
quality stores offering a
shopping experience that
is becoming increasingly
popular at home and
gaining recognition in
the international
retail arena. •
 THE RETAIL DIGEST PAGE 3

CHANGING CONSUMER they represent future hotels in the middle-

TRENDS IN INDIA consumers of goods "In urban
New figures released by the National
Sample Survey Organisation's (NSSO)
and services. With India, the
a growing economy
expenditure survey indicate a drop in and increasing high growth
the proportion of the Indian population
belovi/ the poverty line. The figure has
incomes, the under of the tertiary
20s are likely to keep
dipped from 26.2 percent in 1999-2000 growth rates buoyant service sector
to 24.4 percent in 2000-2001. The
figure indicates that about 20 million
for packaged food, has been
telecommunication
people have moved above the poverty products and good news
line. Interestingly, the improvement
has come mainly from rural India, vi/ith
entertainment for the female
electronics in
poverty actually showing an increase particular. Young workforce."
in urban areas. Rural households have adults are finding
benefited from lower inflation levels, a business process outsourcing (BPO)
fact reflected in the fall in the Consumer jobs an early introduction to earning
Price Index for Agricultural Labourers. money. They continue to live with
More spending power in the hands of their parents, and therefore have
rural Indians bodes well for the Indian high disposable incomes. Much of
economy as a whole and consumer goods the money is spent on eating out,
sales in particular. shopping and other living expenses.
Close to 460 million Indians are below In urban India, the high growth of the
the age of 20, more than 40 percent tertiary service sector has been good
of the population. This is viewed as news for the female workforce. They
a huge attraction for marketers of are finding more employment in call
consumer goods and food products, as centres, travel agencies, airlines and
income range, and
as housemaids or
building labour among
the uneducated lower
income groups. Single
urban Indian women
are changing the
face of traditional
family structures by
adopting children,
primarily female,
from local agencies.
Many of these women
are choosing not to
marry in order to concentrate on their
careers, and women that are more
financially secure are looking
at adoption as an alternative route
to motherhood. Since affluent
women are the ones adopting, day
care and nanny services will probably
increase in order to take care of
children while their mothers are
working. In the long-term, this also
represents an opportunity for growth
in ready-made baby products, toys
and baby clothes. •

CORE STRATEGY from the Socio-economic and food comprise 65

AND CUSTOMER
BASE
"For Pantaloon, the formats
that are based on value for
the consumer are Big Bazaar
and Food Bazaar. Big Bazaar
is an Indian hypermarket
and the word 'Indian' needs
to be specifically mentioned
in this context because
everything about the way
it has been conceived and
developed in very Indian.
These hypermarkets cater to
the mass Indian market and
everything from the store
layout and product offerings
are designed to suit the
Indian way of shopping, as
I will elaborate later. About
80 percent of the business
for these formats comes
Classification (SEC) A and
SEC B customers, which
primarily refers to the
urban upper- and middle-
class, although inroads are
gradually being made into
the SEC C and SEC D middle
classes living in the semi
urban areas.
PRODUCT
OFFERINGS AND
BRANDING
"The big ticket category
for the company is apparel,
which is also the high
margin category. Another
important category is
food, and this includes
staple foods, processed
food, ready-to-eat and
ready-to-serve. Apparel
percent of the business.
The third category consists
of more durable product
offerings such as furniture
and electronics. The
company also operates in
smaller categories such
as jewellery, gold and
diamonds.
"The brand is positioned
around two fundamental
propositions - 'Isse sastaa
aur aecha kahi nahin' (You
will not get it cheaper or
better anywhere else). In
communicating their brand
value to the customers,
the emphasis is that the
offerings are good quality,
value for money products
that can be bought in a >
r'AGE34 PRACTICE
store where the shopping
experience is 'Indian'.
DEMOCRATISING
STORES THROUGH
LAYOUT
"A key part of the company's
strategy is to encourage
people from all walks of life
to visit the stores. The stores
are designed in a way that
ensures that people feel
'at home' and comfortable
when they come to shop.
For example, the floors have
a stone finish (unlike other
Indian retail stores where the
fancy flooring is very often
alienating).
"I must stress that the
stores are deliberately not
structured around rows
and aisles like Téseos
and Targets. A slightly
differently integrated pattern
is followed in these stores
- typically, one would find a
lot of bins and many turns,
similar to the pattern that
customers are used to in the
traditional open markets.
"In terms of product
display, customers have
the opportunity to pick up,
touch, feel and bite into
products such as rice, which
are all within their reach as
they are usually found lying
open in large urns within the
store.
"This shopping experience
is very similar to 'old world'
Indian shopping, where
the customers bend over
the fruit vendor and pick
the pieces of their choice.
Indian consumers prefer
to be involved in selecting
products when they go
grocery shopping rather than
picking up pre-packaged
items. Accordingly, store
layouts across the various
formats have been tweaked
to match the shopping
preference of the value-
seeking Indian. It is also
pertinent to point out that
the product offering within
the stores is entirely driven
by the preferences of the
customers - which is not
unheard of in retail, but
the difference here is that
these food stores stock only
vegetarian food items as
most of the customers are
vegetarian.
"Factors involved in
vegetarianism in India today
are twofold - Religious or
ethical beliefs and income
considerations or poverty.
The history of vegetarianism
in India begins not with the
Aryans, as is commonly
believed by Hindus, but
in the aftermath of the
introduction of Buddhism
and Jainism in the sixth
century BCE both of which
preached 'ahimsa' or non-
violence. Rural Indian food
is often vegetarian. Food
items such as roots, cereals,
pulses, wheat, rice, form the
main portion of the diets.
Many Indians, being farmers,
find it cost-economical to
stick to a vegetarian diet.
It is no exaggeration to
say that for some Indians,
their vegetarianism is Itself
their 'dharma' (religion).
Doubtless, there are many
communities where the
consumption of meat or fish
is very common. This is true,
for instance, of people living
in the coastal states, such
as Kerala and West Bengal,
and the entire west coast of
India, as well as Bengal, are
renowned for their seafood
dishes. Nonetheless, the
perception of India as a
paradise for vegetarian food
is not entirely mistaken.
This partly explains why
research amongst Pantaloon
customers suggested that
even if non-vegetarian food
was to be stocked in an
entirely separate section
within the stores, it would
be a deterrent to shopping
in the store for a majority.
Consequently, a conscious
decision was taken not to
sell non-vegetarian food in
the stores.
CSR INITIATIVES:
INTEGRATING THE
BUSINESS WITH THE
LOCAL COMMUNITY
"Recently, controversy
surrounding the setup of
Reliance Fresh grocery
stores has resulted in bad
publicity for the emergent
organised retail sector in
India. This problem is more
pertinent in the grocery
sector with the allegation
that the local 'mom &
pop' stores or '/(/Vanas'will
be unable to withstand
competition from these
stores, thereby snatching the
livelihood of the families who
run these stores.
"The Big Bazaars and Food
Bazaars have remained
unscathed by these
controversies and this
is primarily because the
stores are well-integrated
with the community where
the stores are located. A
number of the employees
are recruited from the
local catchment area, and
employment opportunities
are also created for
individuals with limited
educational background.
Communication with
customers takes place in
the local language {as the
ennployees are local) and
this strengthens integration
with the local community
as well.
"We are also involved
in significant corporate
social responsibility related
activities, which increases
goodwill amongst the
community. These activities
include initiatives such as
'senior citizens Thursday'
where extra discounts are
given to people over the
age of 60 every Thursday
on all their purchases.
Additional services such
as blood pressure checks,
gluco-meter checks and
yoga camps are also
run for senior citizens.
A more recent initiative
that has been undertaken
by the organisation gives
customers an opportunity
to donate an extra rupee
with their purchases and
the proceedings are then
given to a public charity
for undernourished and
impoverished children.
"CSR initiatives like these
and integration with the
local community have
therefore enabled the
organisation to defray much
of the controversy around
the emergent organised
retail sector in India.
INTEGRATING THE
SUPPLY CHAIN
"In terms of procuring
products, the entire supply
chain is integrated into
the social fabric and social
culture of the country.
Food products are usually
procured directly from large
farms. In a number of cases
there is also reliance on
smaller farmers. This chain
is a social fabric because the

farmers are invariably linked
to a wider supply chain that
includes bigger farmers and
the local money lenders
and the small and large
brokers, all of whom are in a
symbiotic relationship - the
smaller farmer interacts
with the larger farmer who
in turn borrows money from
the local money lender
who invariably relies on the
small and big brokers for
their funds. By procuring
products from the farmers,
the organisation therefore
indirectly makes effective
use of the value being
provided by the participants
in the entire symbiotic
supply chain.
LOYALTY
PROGRAMMES
"We have a fragmented
loyalty programme in place
for customers and the
emphasis is on collecting
information on customer
purchase patterns to provide
fresh customer value every
time. Unlike Tesco or
Sainsbury, where customers
accumulate points on every
purchase, the emphasis on
attracting customers back
into the store by offering
them newer products
and creating an Indian
experience for them.
"We are developing a group
level loyalty programme,
vi/hich is designed to take
advantage of the overlap
between customers who
visit the lifestyle stores and
those that visit the grocery
stores, and given that the
numbers add up to almost
two million customers every
week, we have taken a
strategic decision to lock-in
customers through loyalty
programmes at the group
level. The group loyalty
programme will be designed
to deliver economic
benefits in the form of
discounts to customers.
PENETRATING SEMI-
URBAN AREAS
"Currently, we are making
rapid inroads into the semi-
urban areas within the
country. These are the Tier
111 cities with populations
of between 300,000 and
400,000 people that are
surrounded by many rural
catchments. The target
group for the company
consists of the inhabitants
of the semi-urban areas as
well as the creamy layers
of the rural area who are
essentially the individuals
with a relatively higher
disposable income. To target
these groups of individuals
effectively, the store formats
have been tailored further
(in comparison to the
already adapted versions in
the big cities).
"Individuals living in the
semi-urban and rural areas
very often feel intimidated
by the sheer size and
grandeur of some of the
stores. Keeping this in mind,
the stores in these areas
are kept much smaller in
size and are not even air-
conditioned. I recall an
incident where customers
were taking their shoes
off before entering an air-
conditioned store as it is a
common norm in India to
do so before entering any
air-conditioned place. Over
and above adapting the store
format, provisions are also
being made to provide value
for money entertainment to
the customers when they
visit these malls. This seems
THE RETAIL DIGEST PAGE 3
to be very appropriate within
these store formats because
it not only enhances the
shopping experience for the
customers who consider
going to these malls as a
complete outing, but in
small towns with a paucity
of good entertainment, it
addresses a social need for
the inhabitants as well.
CHALLENGES AHEAD
"One of the key challenges
for the retail sector in the
coming years is real-estate.
The rising costs in real-
estate as well as the rising
developmental costs will
have an indirect impact
on customer value. Mall
owners will become more
"Individuals preoccupied with lease
living in the rental issues and this could
dilute the customer focus
semi-urban and Indian experience of the
and rural areas malls. At a more macro level,
the urban areas will see
very often feel lesser incremental growth
intimidated by as the market matures and
therefore retailers will seek
the sheer size to penetrate the smaller
and grandeur semi-urban areas (and
Pantaloons have already
of some of the begun to make inroads
into that sector). With the
stores." challenges, the retailers can
also expect opportunities
in terms of constantly
changing demands and
aspirations of an increasingly
well-informed and 'in sync'
customer base, This is
especially true of customers
in the urban areas who are
increasingly keeping pace
with the western countries in
their consumption patterns
and requirements." •