Kishore Biyani's Future Group has decided to close Big Bazar Direct, the retail chain's online retail venture, as soaring costs had rendered the business unviable.
Big Bazar Direct, set up in 2013, as an assisted e-commerce venture with 1,000 franchisees, had plans to enroll 50,000 franchisees.
Future Group now looks to focus on its core business of physical retailing, where it plans to add 3.5 million sq ft of space, its biggest expansion in a single year.
''I have attempted e-commerce four times in my life. We opened and shut Future Bazaar (the group's first e-commerce venture). We will close Big Bazaar Direct within a week,'' said Biyani, at an event organised by realty consultants JLL and UBM India over the weekend.
Franchisees sell products from Big Bazaar Direct to customers using a tab, without holding any stock. They, however, need to keep a Rs3 lakh deposit with the group. Big Bazaar Direct has tied up with payment solutions company, Oxigen, to expand its distribution.
However, the arrangement was found to be unviable and became a drain on resources. Future Group said it is not against online business, but wants a viable model.
Biyani said the customer acquisition costs, fulfilment costs and other expenses in e-commerce add up to 50 per cent of overall business costs, making it unviable.
''We are trying to figure out a viable online model. With the acquisition of FabFurnish, we are learning what not to do in e-commerce,'' Biyani said.
Earlier this year, Future Group had bought home products site FabFurnish (See: Future Group completes all-cash buyout of FabFurnish). Biyani said for a single customer acquired in most of the transactions in e-commerce, Facebook and Google get Rs800-1,400. He did not elaborate, but added that this sort of businesses were not sustainable.
''We are happy with old-fashioned retail business. There is profit in it. Our business model has arrived. Theirs is yet to arrive,'' he said.
Future Group, however, is increasingly entrenching itself in the online business through tie-ups with prominent players such as Paytm and Snapdeal.
It had earlier partnered with Amazon. And, more recently, the group's hypermarket chain, Big Bazaar, had tied up with online marketplace Snapdeal for its flagship Big Bazaar's five-day ''Maha Bachat'' sale.
Future Group recently tied up with Paytm, on which Big Bazaar became an anchor store. This allows Paytm users to make online purchases at Big Bazaar.
''We are not against e-commerce firms. We are only against heavy subsidising of products to gain market share. It is a great medium to reach a new set of customers and new geographies,'' Rajan Malhotra, president, retail strategy & convergence, Future Group had told Business Standard recently.
''Many aspects of our omni-channel strategy are operational and some are yet to be operational,'' Malhotra said, adding, ''How we execute the plan is internal to the group.''