Future Group, India’s largest retailer, has come up with a new plan to make its loss-making home furnishings and home improvement business HomeTown profitable.
The plan includes smaller stores and a change in product portfolio at these stores.
C P Toshniwal, chief financial officer of Future Retail, said the company is looking at smaller stores that will be called HomeTown Express.
“Earlier, HomeTown stores used to be spread over up to one lakh square feet, but now we have started looking at smaller stores of about only 25,000 square feet.”
Future Group will not be the first one to cut the store size.
Earlier, Shoppers Stop had almost halved the size of its Hypercity stores, from one lakh square feet to 30,000-50,000 sq ft.
Toshniwal said not just the store size, changes are also being made in products.
“Instead of focusing on bigger items such as furnitures where additional delivery and service charges to be incurred, we are now focusing more on smaller items such as linen, bed covers, etc. Instead of giving importance to furnishings, we want to make the store a one-stop solution for a house.”
The company will also look at having a designated space for small HomeTown stores in the larger Big Bazaar stores, to ensure space optimisation.
He said the company is looking at a similar strategy for its electronic store chain, eZone.
Again here, the focus is going to be on smaller but big-ticket items.
“For instance, a big, bulky fridge costs Rs15,000, but a small smartphone can cost up to Rs30,000. Therefore, instead of focusing on white goods we are going to focus on other items such as phones.” he Toshniwal.
The company had also cut the size of eZone stores and closed 22 unviable ones in 2011-12.
Abneesh Roy, analyst with Edelweiss Securities, said the same-store sales growth for Future in home retail was 3.7% in the April-June ended quarter, positive after seven quarters.
But he believes that going ahead it may not be easy.
“HomeTown is known for furnishings and therefore the change in product offerings will not be an easy move. Plus, overall the company has a very high debt burden of Rs4,800 crore, and going ahead that will be a huge concern,” he said.
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