Future Group chief Kishore Biyani, who runs a string of retail chains in different formats and whose group is the second-largest retailer in the country behind Reliance Retail, has come out strongly against the strategy of e-com firms, accusing them of predatory pricing backed with foreign funding.
Biyani told FirstBiz, “Laws in this country do not allow sales below cost price. This is anti-competitive. We (at Big Bazaar and other retail brands) never sell below cost price.”
His comments comes after Flipkart said it clocked a record sales of $100 million (Rs 610 crore) in just 10 hours of its Big Billion Day sale on October 6. Rival Snapdeal claimed to have matched it with its chief saying the portal saw sales of over Rs 1 crore per minute (which translates into over Rs 600 crore in a 10-hour period; he didn’t clarify if he meant it for a part of the day).
Biyani, however, refrained from saying if he plans to approach the competition authority with a formal complaint.
Indeed, Biyani, whose firm Future Retail runs Big Bazaar hypermarket, also has its own e-com portal FutureBazaar, which is seen as another sales channel for the group. It is a bit player in the fast growing e-com space.
The group recently also launched the business-to-consumer (B2C) portal for Big Bazaar Direct. With it, the company aims to create an e-commerce enabled direct selling business for its flagship hypermarket Big Bazaar.
The online store is basically a direct selling platform that enables customers to place orders with the company’s franchisees (retail stores or kiraana outlets), post which they will receive their orders in three-seven days. Earlier this year, the group had launched its franchisee model retail format under the branding of Big Bazaar Direct, and is targeting 50,000 franchisees by the end of 2014.
Meanwhile, some electronics firms have also been at loggerheads with e-com firms for selling their branded products at deep discounts. However, they do not have direct control of pricing. Most of the products on offer in e-com portals are put by third party vendors who in turn get their supplies from distributors of the companies.
Last week Biyani had told news agency PTI: “These days, the media only looks at e-commerce. However, you must also ask if gross margins of any such company are positive or not. There is hope of survival for them when their gross margins are positive. I’m not saying it is sustainable or it is not sustainable.”
He had also questioned the rationale behind investors committing billions of dollars to India’s e-commerce sector in the recent past. “They’re getting private equity money in the hope that one day they’ll have their own products and brands,” he added while expressing concerns that eventually e-com firms will buy into brick & mortar companies.
(Edited by Joby Puthuparampil Johnson)