Retail Sales Good For People and Companies


The entry of business houses into the retail sector is perhaps not a bad thing at all. Ask any housewife or career woman who plays a dual role: as homemaker and also has an office to go to.

The entry of business houses into the retail sector is perhaps not a bad thing at all. Ask any housewife or career woman who plays a dual role: as homemaker and also has an office to go to. We found a lady drooling over a tray of dressed vegetable that could go straight away into a pot of tur dal,
on its way to become sambar. The venue: a retail shop in NOIDA near Delhi, where Reliance Fresh made its debut in the last week of January.

Reliance Fresh is the name given to food and grocery stores retail outlets a subsidiary of Reliance Industries Limited, now coming up in National Capital Region targeting the consumer of household goods-fresh vegetables, edible items, grocery items, dairy products and fresh fruits, available at less than the regular market price.

Reliance Industries, which has opened nine retail outlets in the NCR is aiming to open 6000 outlets in 784 cities and towns by 2010-11. To quote CEO of Retail Mr. Raghu Pillai, by 2010-11 the company's revenue would reach Rs.1 lakh crores.

This hopefully will be achieved by enlisting small stores and push carts vendors in a business war pitted against the likes of Kishaore Biyani's Pantaloons and Sunil Bharti Mittal's Bharti Retail.

Significantly, the company has plans to turn itself into the preferred supplier of goods to neighbourhood push cart vendors and kirana stores. Effectively it means that the company aims to blend direct sales to customers with a wholesale price model that offers to rope in as partners worried shopkeepers who may see giants like a Reliance as a threat to their traditional livelihood. The convenience stores would also offer free home delivery services within a radius of three kilometers.

According to Mr. Pillai a pilot project of supplying goods to neighbourhood private enterprise "mom and pop" stores in Hyderabad had proved successful and had enthused the company into replicating the experience in other cities as well.

Larger format stores such as hypermarkets, supermarkets and speciality stores offering products such as apparel, consumer durable goods, drugs and pharmaceuticals are likely to be opened in the April-June quarter. Reliance group at present has 49 stores including the nine opened in National Capital Region spread across Rajasthan, Andhra Pradesh, Tamil Nadu and NCR.

Company officials say they plan to open up 100 such stores in the next four months in Delhi and NCR and the company expects to earn Rs. 1,00,000 crores in revenue in the next five years. Reliance Retail plans to open as many as 3000 food and grocery stores in the next four years and an officer admitted the grocery business is turning out to be bigger than we actually thought.

Reliance Retail's roll out plan, which had begun with the Hyderabad experiment in November last year, involves a total investment of Rs. 25,000 crores over a three year period. RIL has recently acquired about 5 lakh square feet of commercial space spread over seven locations in Delhi in a highly competitive auction of properties belonging to Delhi Development Authority (DDA) for more than Rs. 1,100 crores.

India has emerged as the most attractive destination for mass merchants and food retailing. A T Kearney's Global Retail Development Index (GRDI), which ranks 30 emerging nations based on a set of 25 variable including economic and political risk, retail market attractiveness and retail saturation levels, has retained India's position at the top for the second successive year.

Almost all top Indian business conglomerations have firmed up retail plans. Global giants Walmart has entered into a strategic alliance with the Bharti group and is expected to unveil its roadmap shortly. There is a temporary setback to this proposal because of political interventions. Mrs. Sonia Gandhi Congress president has written to Prime Minister Dr. Manmohan Singh asking him to go into the details of foreign companies entering India in the retail sector and ensure that the current employment scenario is not upset in the bargain. This was done following repeated complaints of UPA -supporting political parties like the Left about the loss of job and self employment opportunities if foreign direct investments are allowed in the country.

However, the ban or temporary stoppage of foreign companies from our country could mean wider opportunity for the large Indian companies to put their footprints on this area of immense scope. The enthusiasm, bordering on aggressiveness of RIL to acquire land in the NCR and elsewhere in towns and cities is not without basis.

It is explained that the concept of selling to the customer directly without the involvement of middlemen is going to make things easier and more profitable for the farmer or the actual grower and at the same time cut down on prices that the consumer will have to pay at the retail counter.

In the absence of a link between what farmers produce and what the consumer or the market demands, the former almost always ends up getting a bad deal. The chain of retail outlets as planned under the Reliance Fresh banner are expected to fill in this gap of feedback information.

It will also help the farmers from whom the produce is sourced, to be provided know-how for improved produce, financial credit, seeds and other inputs like fertilizers. If the experiment works, as it is likely to in the coming years, it would give fillip to the cooperative model of farming and agriculture. Till date not many cooperative models have been successful in the rural or agri-sector except AMUL – the milk experiment.


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Dipayan Mazumdar and Associates

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Stuti Roy
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