In India, a Retailer Finds Key to Success Is Clutter - WSJ.com 11/28/09 9:56 AM Dow Jones Reprints: This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit www.djreprints.com See a sample reprint in PDF format. Order a reprint of this article now LEADER (U.S.) AUGUST 8, 2007 CHAOS THEORY In India, a Retailer Finds Key to Success Is Clutter Consumers Like Noise, Bins, Mr. Biyani Says; Narrowing the Aisles By ERIC BELLMAN MUMBAI -- On a tour of one of his supermarkets, Kishore Biyani notes that shopping carts are getting stuck in the narrow aisles, wheat and lentils have spilled onto the floor, black spots cover the onions and it's difficult to hear above the constant in-store announcements. He grins and congratulates the store manager. Mr. Biyani, 45 years old, has built a large business and a family fortune on the simple premise that, in India, chaos sells. Americans and Europeans might like to shop in pristine and quiet stores where products are carefully arranged. But when Mr. Biyani tried that in Western- style supermarkets he opened in India six years ago, too many customers walked down the wide aisles, past neatly stocked shelves and out the door without buying. Mr. Biyani says he soon figured out what he was doing wrong. Shopping in such a sterile environment Eric Bellman didn't appeal to the lower middle-class shoppers he Kishore Biyani's businesses have built their success was targeting. They were more comfortable in the by mimicking the chaos and grime of traditional tiny, cramped stores -- often filled with haggling Indian markets. customers -- that typify Indian shopping. Most Indians buy their fresh produce from vendors who keep vegetables under burlap sacks. So Mr. Biyani redesigned his stores to make them messier, noisier and more cramped. "The shouting, the untidiness, the chaos is part of the design," he says, as he surveys his Mumbai store where he just spent around $50,000 to replace long, wide aisles with narrow, crooked ones: "Making it chaotic is not easy." Even the dirty, black-spotted onions serve a function. For the average Indian, dusty and dirty produce means fresh from the farm, he says. Indian shoppers also love to bargain. Mr. Biyani doesn't allow haggling, but having damaged as well as good quality produce in the same box gives customers http://online.wsj.com/article/SB118651168871890705.html#printMode Page 1 of 5 In India, a Retailer Finds Key to Success Is Clutter - WSJ.com 11/28/09 9:56 AM allow haggling, but having damaged as well as good quality produce in the same box gives customers a chance to choose and think they are getting a better deal. "They should get a sense of victory," he says. The approach has made Mr. Biyani rich. His company, Pantaloon Retail (India) Ltd., is now India's largest retailer; it expects to report sales of more than $875 million for the fiscal year ended in June. He and his family own a 42% stake in Pantaloon, valued at about $630 million. Mr. Biyani is proving that modern retailing, with a bit of spice, can work in a country where traditional markets dominate. On the back of his success -- and rushing to close his head start -- are some of the world's largest retailers. While few may subscribe to Mr. Biyani's chaos theory of retail, all will be struggling to find ways to attract the millions of Indian consumers who are shopping at branded chain stores for the first time. Wal-Mart Joint Venture Wal-Mart Stores Inc. agreed this week to set up a joint venture with Bharti Enterprises Ltd. -- which runs India's largest cellular company -- that will open wholesale stores to sell goods to small retailers, manufacturers and farmers in India. Bharti plans to spend $2.5 billion to build a nationwide network of supermarkets and small stores. Wal-Mart has to use this route into India because Indian regulations don't allow multiple-brand retailers to sell directly to consumers -- but they can run wholesale operations and provide support to Indian retailers. Tesco PLC of the United Kingdom and Carrefour SA of France, are also eyeing India. Petroleum refiner Reliance Industries Ltd., one of India's largest companies by market value, plans to spend more than $6 billion in the next five years to open thousands of supermarkets. All are hoping to tap into the rampant consumer spending sweeping India amid fast economic growth. India's total retail market is about $370 billion a year and will expand more than 55% in the next four years, estimates Technopak Advisors, a New Delhi-based retail consulting firm. It says sales of branded chain stores now represent less than 5% of total retail sales -- but are expected to grow more than five- fold by 2011, accounting for 17% of retail sales. Many more Indian women are working today and don't have the time to visit several mom-and-pop stores. "I can't go to 10 different stores Food Bazaar store in Mumbai, to get 20 different things. I'm a working mother," says Candice recently redesigned to create D'Souza, a 28-year-old public-relations firm manager, who recently shopper traffic jams became a convert to Mr. Biyani's Big Bazaar stores. Wealthy Indians often employ servants who do most of the shopping. Many of Mr. Biyani's unique touches are designed to make the household help, rather than their employers, feel comfortable shopping. Indeed, he says that the greatest potential pool of customers for retail chains in India comes not from the wealthy but from those who work for them. Mr. Biyani divides India's 1.1 billion people into three types of consumers. "India One," as he calls them, are those with good educations, good jobs, and much disposable income. They also are the target audience for many foreign companies seeking to sell their wares here. Mr. Biyani estimates that such customers comprise about 14% of the total population. Where he sees the greatest sales potential is among consumers he calls India Two: the drivers, maids, cooks, http://online.wsj.com/article/SB118651168871890705.html#printMode Page 2 of 5 In India, a Retailer Finds Key to Success Is Clutter - WSJ.com 11/28/09 9:56 AM consumers he calls India Two: the drivers, maids, cooks, nannies, farmers and others who serve India One. He estimates that 55% of Indians -- roughly 550 million people -- fall into this category. They are seeing their wages rise and their children frequently pursue further education and careers that will vault them up the social ladder. India Three, he says, is the rest of the nation -- those at, or slightly above, subsistence level, who don't represent much of a market for modern retailers. He thinks any retailer that tries to re-create a Western store in India will miss most potential customers. "People like to do what they think works in the West," but India is different, he says. Mr. Biyani has been studying Indian consumers for more than 20 years. Though many of his innovations are distinctly Indian, he credits icons of U.S. retailing as his inspiration. His copy of Wal-Mart founder Sam Walton's book "Sam Walton: Made in America" is battered from constant use. From Mr. Walton, Mr. Biyani says he learned how to "rewrite the rules" in retailing. Mr. Walton's photo hangs on his office wall below Mother Teresa's. He also has written his own autobiography called, "It Happened in India." In the 1980s, Mr. Biyani left his family textile business to launch a business selling "stone washed" denim. He started his own line of shirts and trousers at a time when few Indians bought ready-made garments, and later opened clothing stores because he couldn't get others to carry his products. When he decided to enter the supermarket business in 2001, his friends and executives told him India wasn't ready. He thought otherwise. Food Bazaar, Mr. Biyani's Western-style supermarket, now has 93 outlets in the country. Big Bazaar, which sells household goods and clothes and frequently is housed under the same roof as Food Bazaar, has 65 outlets. Mr. Biyani also has expanded into other businesses, including restaurants, bars, property, mall management, media, a private-equity fund and a bowling alley. All his businesses are loosely gathered under an umbrella company called the Future Group, based in Mumbai. The Big Bazaar and Food Bazaar stores make up more than 60% of the annual sales of Pantaloon, the main listed company in the group. Public Market Both Big Bazaar and Food Bazaar stores seek to invoke the atmosphere of a public market, Mr. Biyani says -- albeit in the air-conditioned malls that are springing up around India. The outlets have floors of gray granite tiling, common in markets and train stations, so newcomers who have never been in a large, modern store feel at home. Instead of long aisles and tall shelves, the stores cluster products in bins and on low shelves. With long aisles, he says, "the customers never stopped. They kept on walking on and on so we had to create blockages." The bins let customers handle products from different sides. Decades of shopping from stalls also means that most customers feel more comfortable looking down when they shop, he says. Narrow, winding http://online.wsj.com/article/SB118651168871890705.html#printMode Page 3 of 5 In India, a Retailer Finds Key to Success Is Clutter - WSJ.com 11/28/09 9:56 AM comfortable looking down when they shop, he says.