Future Bazaar Turnover At Rs. 62 Crores; Needs To Get Real On Savings, Reduce Delivery Time

Future Bazaar CEO Sankarson Banerjee tells Business Standard that the company is expecting turnover to treble from Rs. 62 crores to Rs. 182 crores - they’ll redesign, add regional brands and new products, and go offline. Going offline shouldn’t be an issue for the KPCB and Sherpalo backed company, which is owned by Kishore Biyani’s Future Group.

If you take a close look at the site, it mentions the statistics we’ve put up on the right - Page Views, (average) Savings per item, and average shipout time. So from the time an order is placed, it takes Future Bazaar 4.8 days to ship-out an item, i.e. to leave their warehouse and not the time it takes to deliver. Which means that if you ordered tomatoes*, the only thing you can use them for, is to take aim at the delivery guy.

While I’m not saying that 4-10 days is bad, remember that in urban India, you’re competing with retail stores that aren’t too far away from home/work, and some even deliver. Also, I have to question this notion of “savings”. Maybe this is a one-off example, but I bought a 500GB Seagate External HDD a month ago for around Rs. 5200 (with bill and warranty). Future Bazaar has a 160 GB Seagate HDD for Rs. 4999, a 250 GB HDD for Rs. 5750. So not really a saving, though they are comparing with the list price, which is considerably higher, and are offering a 56-58% discount. So I got a discount of around 75%, and can even have the product delivered to me within a few hours. Not much of a competition, eh? Anyway - a more realistic price here, though you can still get it cheaper offline.

Please note that I’m not trying to discredit Future Bazaar - only saying that if the status remains the same, online retail stores will be limited to customers who either don’t know better, or are not in the main cities. Or for some obscure book that the Oxford Bookstore doesn’t stock. Not really for daily purchases, is it?

There is a tendency to underestimate the importance of retail in the online business - the ease of purchasing goods online, the quality of the goods delivered and the time taken for delivery and the ease of dispute resolution will make consumers more comfortable with spending money online. This in turn will help other businesses make money - the online travel business deserves credit for converting viewers into buyers; Retail has its own part to play.

*- Thankfully for the delivery guy, Future Bazaar doesn’t retail tomatoes and other perishables.

Related: Indiatimes Picks Up 50 Percent Stake In Online Books Marketplace A1Books; A Private Treaties Deal

“There Are Two Currencies For Advertising - Cash And Treaties; We’re Not Buying To Sell” - S. Sivakumar, CEO Designate, Times Private Treaties

Updated Below

Bennett & Coleman & Co Ltd (BCCL), the largest media group in India, is considered a pioneer of the Private Treaties model, taking equity in ventures in exchange for advertising inventory. The Times Private Treaties Portfolio has between 175-200 companies, some of them listed on the bourses. The apparent success of this model has led other media companies, including HT Media, Network18, NDTV, Dainik Bhaskar and Dainik Jagran to set up their own Private Treaties division.

However, some questions have been raised about whether editorial content is a part of the Treaties deal; Sucheta Dalal had quoted an email from Economic Times editor Rahul Joshi, which mentions editorial “support” to treaties clients. There is also the issue of BCCL bloating valuations of companies, and investing in several companies in the same segment. In a candid interview with Medianama.com, S. Sivakumar, Principal Secretary and CEO Designate of Times Private Treaties, spoke about these issues, and outlined the investment philosophy behind the Private Treaties model.

Read the entire transcript here.

Excerpts from the 34 minute long interview:

On Valuation Of Deals
We don’t have to value the deal, because…there’s a rate card for each of our media vehicles, and he (the entrepreneur) makes a plan - over the next 3-5 years - because brand building is a long term initiative. We have media planners and advertising and branding promotions as value-add - who support by defining target group, SEC, make an assessment and make out a plan. That determines the deal size. A cash client pays in the space of 60 days. In case of a treaty client, I hope to get the payment when the company gets listed. It’s an event that has at least a 3 year time-span. This (Treaties) actually helps an entrepreneur leverage the strength of BCCL without straining his balance sheet from a cash-flow point of view.

On Bloated Valuations
Essentially it is the company that expects the next round to come at a similar view on valuation. The onus is clearly on the entrepreneur.

On Value, Competitive Advantage (And Lack Of)
Q. Let me take the example of Travel space, where you have invested in TravelMasti, TravelChacha, Ezeego1, TravelGuru and HolidayIQ. Where is the competitive advantage established by you since they’re competing with each other?
Very good point. Actually it’s very simple: the whole purpose of advertising is to bring out differentiation. For each of them there is a clear differentiation. For TravelGuru, his whole USP is the strength in the hotel space. Each one has a differentiation. To a layman, everything appears the same. That USP is brought out through the use of a powerful medium as ours.
Q. So you’re giving them space, and how they use the space is their problem?
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