A subsidiary of India’s most valuable company, Reliance Industries, Wednesday launched what it says is the nation’s largest superstore, as it attempts to make inroads into a retail market dominated by small stores.
The store, in the western city of Ahmedabad, sprawls over 1,750,000 square feet and retails goods ranging from groceries to automotive accessories. Reliance Retail, which opened its first store in November in Hyderabad, is spending $6 billion to set up hypermarkets and food and grocery stores across India.
Reliance plans to set up 500 hypermarket stores as it attempts to gain an edge over local rivals like the Tata family and Pantaloon and overseas giants like Wal-Mart (nyse: WMT – news – people ), which last week announced a tie-up with Bharti Enterprises for a wholesale venture. Reliance is shooting for sales of nearly $25 billion by 2011.
India’s retail market is estimated at $350 billion, but small mom-and-pop stores account for about 97% of it. The government doesn’t allow multibrand foreign retailers (those that sell products beyond their own) to set up their own stores here.
News of Wal-Mart’s entry has precipitated opposition from small-scale retailers, who say millions will lose their livelihoods if large chains come in. (See: “ Wal-Mart Faces Protests Over Entry To India”) The protesters have the support of the government’s communist allies and opposition parties.
But in a country where a third of the agricultural produce goes waste because of a lack of storage and logistics facilities, supporters of organized retail say large companies with deep pockets will help reduce losses as they invest in infrastructure. They will also benefit farmers since big stores will approach them directly instead of going through middlemen who pocket a chunk of the profits.
At the media launch of Reliance Retail’s Ahmedabad store, company CEO Raghu Pillai said: “Some people will be out of business. But they will be people in the distribution chain who do not add any value to the product. They play a significant role in inflating the cost of these products.” Reliance retails its fresh produce at rates competitive with, often even cheaper than, street vegetable vendors.
The opening of the Ahmedabad store created around 1,000 jobs, Pillai told reporters, adding that stores like these were generating employment in places where earlier there were no opportunities.
Reliance Retail’s corporate officers said the company doesn’t have any plans at this stage to ally with foreign chains to expand in the market. Chains like Carrefour (other-otc: CRERF – news – people ) and Tesco (other-otc: TSCDY – news – people ) have also expressed interest in venturing into India.