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FutureGroup In Talks To Acquire Digital Services Co; Plans Mobile, Kiosk Initiatives

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Kishore Biyani, Chairman of the Future Group, has told the Economic Times that the group isn’t satisfied with their digital presence, and has big expansion plans. Towards that end, the group is in talks to acquire a company which works on website development and content, and has around 150 employees. Also in works are marketing initiatives via SMS short codes, teleshopping, proximity marketing (bluetooth, location based SMS), as well as virtual shopping through kiosks. The Future Group owns the online retail store FutureBazaar.com.

It’s important for a big retailer to go and jumpstart e-commerce in India, which has been limited to ticketing and standardized products like books. Beyond this, there are either issues of quality or pricing. Many online retail stores function as marketplaces, connecting vendors and buyers: poor vendor checks and accountability mean that often what you order isn’t delivered. Not many have invested in warehousing and instituted sufficient quality checks and customer care initiatives.

What’s also interesting about the Future Group’s strategy is that they intend to sell products cheaper online, by around 5-20 percent. From what I’ve seen, products tend usually to be priced on par with store prices, or sometimes more expensive, offering no real incentive to purchase online. The Future Group, with its Big Bazaar retail stores, Pantaloon outlets, has the warehousing capacity across the country.

I’m rather bearish on two things here:
— Firstly, the Future Group’s plans to set up kiosks for purchases – where is the return on that investment? How many people are comfortable buying from kiosks. It’s better to first focus on targeting those consumers already online and able to purchase online, instead of investing in a kiosk business
— Secondly, it is extremely difficult to make credit card payments in India, after the double confirmation that the Reserve Bank of India instituted. It sometimes takes two-three attempts (10-30 minutes) for a transaction to go through, and unless the banks either make it easier for consumers to buy by fixing their payment gateway issues or the RBI reverses this inhibiting rule, e-commerce in India will struggle. I’d much rather walk into a shop and pay cash, or call up a travel agent, than keep trying to pay using ‘Verified by Visa’ or ‘Mastercard Secure’.

The Future Group’s e-commerce business FutureBazaar.com hasn’t done particularly well either: For the financial year ending 31st March 2009, it reported a net loss of Rs. 1.4 million compared to a profit of Rs. 39.5 million in 2007-08, although its income from operations rose 4.6 times YoY from Rs. 156.2 million to Rs. 718.8 million.

The ET story also states that KPCB and Sherpalo Ventures hold 15% stake in Future Ecommerce. MediaNama readers should note that the investment has been made in Future Ecommerce Infrastructure Limited, a technology solutions provider that powers the platform for FutureBazaar. This is, from what we’ve understood, due to restrictions on Foreign Direct Investment in multi-brand retail businesses in India.

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MediaNama’s detailed interview with FutureBazaar CEO Pankaj Tibrewal is here.

Written By

Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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