Big Bazaar founder Biyani opens up on FDI in retail

Kishore Biyani, the visionary businessman who founded Big Bazaar, India’s biggest supermarket chain, came out openly in support of foreign investment (FDI) in retail for the first time since it was permitted by the government a few days ago.

Making his stand clear, Biyani said Indian companies would struggle to find the money required to meet the demand for new stores.

Cost of capital is nearly 13 percent in India as compared to 1 to 1.5 percent elsewhere in the world which was a distinct disadvantage to Indian retailers according to Biyani and hence the need for FDI in retail for the competitive edge, he said, talking at the Indian Merchants’ Chamber in Mumbai.

Kishore Biyani strongly felt that consumption was constantly on the increase and there was a clear void in supply to meet this rapidly increasing consumption. “We had only one refrigerator in our house in the good old days, now we have at least two and we tend to stock a lot more” stated Biyani. He further added that increased consumption (approximately 350 billion dollars in the next 7 years).

“For every 100 sq ft of space that we add up, we will create atleast 2 direct and 3 indirect jobs” Biyani said.

Modern retailing accounts for nearly 6% of the total retail in India or about $25 billion, against $400 billion for traditional retailing (2011). In China modern retailing accounts for nearly 20% of the total retail in comparison to 85% in the US.

While China permitted multi brand retailing in 6 cities in 1992, India has granted permission in 53 cities with over 1 million population and further extended it to areas within 10 kms of these cities.

Biyani said the average neighbourhood shop stocked only about 300 items in comparison to nearly 60,000 items sold by a modern retail super store; and the presumed competition was purely over a very small number of items which again were of limited interest to big stores. “And nearly 60 percent of the populace simply cannot afford modern retail experience and hence would continue to visit the local kirana store” he added.