Reliance FResh:
RefReshing Business
Strategy
Submitted by-
Erum Khan
Sahil Gupta
Mayank Badkul
Executive Summary
The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of
the country’s GDP and around 8 per cent of the employment. The Retail Industry in India has come
forth as one of the most dynamic and fast paced industries with several players entering the market.
But all of them have not yet tasted success because of the heavy initial investments that are required
to break even with other companies and compete with them. The India Retail Industry is gradually
inching its way towards becoming the next boom industry. The total concept and idea of shopping
has undergone an attention drawing change in terms of format and consumer buying behaviour,
ushering in a revolution in shopping in India.
Foreign direct investment (FDI) inflows between April 2000 and December 2010, in single-brand
retail trading, stood at US$ 66.69 million, according to the Department of Industrial Policy and
Promotion (DIPP
With a vision to generate inclusive growth and prosperity for farmers, vendor partners, small
shopkeepers and consumers, Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead
Reliance Group’s foray into organized retail.Since its inception in 2006, Reliance Retail Limited
(RRL) has grown into an organisation that caters to millions of customers, thousands of farmers and
vendors. Based on its core growth strategy of backward integration, RRL has made rapid progress
towards building an entire value chain starting from the farmers to the end consumers.
The following paper first give the general overview of the retail industry in India, different type of
retail format present in India, major players present in the industry, growth opportunity, difficulties
the sector is currently facing.
Then it talks about Reliance Fresh the chain we have chosen to analyse and to revamp its current
strategies. So to revamp the existing model it is obvious that paper talks about how the chain started,
what all strategies are being followed by them,and most importantly the difficulties it has faced in the
past and currently it is facing
So by studying all these factors we suggest our own strategies related to different management
functions which company could adopt and will result them into being a profitable company
INDUSTRY EVOLUTION: RETAIL INDUSTRY
Traditionally retailing in India can be traced to :
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The emergence of the neighbourhood Kirana stores catering to the convenience of the
consumers.
Era of government support for rural retail: Indigenous franchise model of store chains run by
Khadi & Village Industries Commission.
1980s experienced slow change as India began to open up economy.
Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw
the emergence of retail chains.
Later Titan successfully created an organized retailing concept and established a series of
showrooms for its premium watches.
The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure
Retailers.
For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in
music; Crossword and Fountainhead in books.
Post 1995 onwards saw an emergence of shopping centers.
Mainly in urban areas, with facilities like car parking.
Targeted to provide a complete destination experience for all segments of society.
Emergence of hyper and super markets trying to provide customer with 3 V’s - Value, Variety
and Volume
Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom
of the pyramid.
At year end of 2000 the size of the Indian organized retail industry is estimated at Rs. 13,000
crore
RETAILING FORMAT IN INDIA
Malls:
It is the largest form of organized retailing today. They are located mainly in metro cities, in
proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an
ideal shopping experience with an amalgamation of product, service and entertainment, all under a
common roof. Examples include Shoppers Stop, Piramyd, and Pantaloons.
Specialty Stores:
Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music
World and the Times Group's music chain Planet M, are focusing on specific market segments and
have established themselves strongly in their sectors.
Discount Stores:
As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling
in bulk reaching economies of scale or excess stock left over at the season. The product category can
range from a variety of perishable/ non-perishable goods.
Department Stores:
Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. They are
further classified into localized departments such as clothing, toys, home, groceries, etc.
Departmental Stores are expected to take over the apparel business from exclusive brand
showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in
Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its
own in store brand for clothes called Stop.
Hyper marts/Supermarkets:
Large self-service outlets, catering to varied shopper needs are termed as Supermarkets. These are
located in or near residential high streets. These stores today contribute to 30% of all food &
grocery organized retail sales.
Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft
and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food &
grocery and personal sales.
Convenience Stores:
These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a
limited range of high-turnover convenience products and are usually open for extended periods
during the day, seven days a week. Prices are slightly higher due to the convenience premium
MBO’s:
Multi Brand outlets, also known as Category Killers, offer several brands across a single product
category. These usually do well in busy market places and Metros.
INDIA’S NUMBER OF DOMESTIC GROCERY CHAINS AND EARLY FOREIGN
ENTRANTS
INDIAN RETAIL INDUSTRY: AN OVERVIEW
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The India Retail Industry is the largest among all the industries, accounting for over 10 per
cent of the country’s GDP and around 8 per cent of the employment.
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The Retail Industry in India has come forth as one of the most dynamic and fast paced
industries with several players entering the market. But all of them have not yet tasted success
because of the heavy initial investments that are required to break even with other companies and
compete with them.
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The India Retail Industry is gradually inching its way towards becoming the next boom
industry.
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The total concept and idea of shopping has undergone an attention drawing change in terms
of format and consumer buying behaviour, ushering in a revolution in shopping in India.
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Modern retailing has entered into the Retail market in India as is observed in the form of
bustling shopping centres, multi-storied malls and the huge complexes that offer shopping,
entertainment and food all under one roof.
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A large young working population with median age of 24 years, nuclear families in urban
areas, along with increasing workingwomen population and emerging opportunities in the services
sector are going to be the key factors in the growth of the organized Retail sector in India.
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The growth pattern in organized retailing and in the consumption made by the Indian
population will follow a rising graph helping the newer businessmen to enter the India Retail
Industry.
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In India the vast middle class and its almost untapped retail industry are the key attractive
forces for global retail giants wanting to enter into newer markets, which in turn will help the India
Retail Industry to grow faster.
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Indian retail is expected to grow 25 per cent annually.
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Modern retail in India could be worth US$ 175-200 billion by 2016. The Food Retail Industry
in India dominates the shopping basket.
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The Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at
over 20 per cent per year.
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The future of the India Retail Industry looks promising with the growing of the market, with
the government policies becoming more favorable and the emerging technologies facilitating
operations.
THE INDIAN RETAIL SCENE
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India is the country having the most unorganized retail market. Traditionally it is a family’s
livelihood, with their shop in the front and house at the back, while they run the retail business.
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More than 99% retailer’s function in less than 500 square feet of shopping space. Global
retail consultants KSA Technopak have estimated that organized retailing in India is expected to
touch Rs 35,000 crore in the year 2005-06.
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The Indian retail sector is estimated at around Rs 900,000 crore, of which the organized
sector accounts for a mere 2 per cent indicating a huge potential market opportunity that is lying in
the waiting for the consumer-savvy organized retailer.
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Purchasing power of Indian urban consumer is growing and branded merchandise in
categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery, are
slowly becoming lifestyle products that are widely accepted by the urban Indian consumer.
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Indian retailers need to advantage of this growth and aiming to grow, diversify and
introduce new formats have to pay more attention to the brand building process. The emphasis here
is on retail as a brand rather than retailers selling brands.
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The focus should be on branding the retail business itself. In their preparation to face fierce
competitive pressure, Indian retailers must come to recognize the value of building their own stores
as brands to reinforce their marketing positioning, to communicate quality as well as value for
money.
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Sustainable competitive advantage will be dependent on translating core values combining
products, image and reputation into a coherent retail brand strategy.
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There is no doubt that the Indian retail scene is booming. A number of large corporate
houses Tata’s, Raheja’s, Piramal’s, Goenkas have already made their foray into this arena, with
beauty and health stores, supermarkets, self-service music stores, newage book stores, every-daylow-price stores, computers and peripherals stores, office equipment stores and home/building
construction stores. Today the organized players have attacked every retail category.
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The Indian retail scene has witnessed too many players in too short a time, crowding several
categories without looking at their core competencies, or having a well thought out branding
strategy.
The Indian retail sector is highly fragmented with more than 90 per cent of its business being carried
out by traditional family run small stores. This provides immense opportunity for large scale retailers
to set-up their operations – a slew of organized retail formats like departmental stores, hypermarkets,
supermarkets and specialty stores are swiftly replacing the traditional formats dramatically altering
the retailing landscape in India.
India is the third-most attractive retail market for global retailers among the 30 largest emerging
markets, according to US consulting group AT Kearney’s report published in June 2010.
Retail – Market Size
The total retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by
2015, according to the BMI India Retail report for the third quarter of 2011. Robust economic
growth, high disposable income with the end-consumer and the rapid construction of organised retail
infrastructure are key factors behind the forecast growth. Along with the expansion in middle and
upper class consumer base, the report identifies potential in India’s tier-II and tier-III cities as well.
The greater availability of personal credit and a growing vehicle population providing improved
mobility also contribute to a trend towards annual retail sales growth of 12.2 per cent.
Indian retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and
contributes to 8 per cent of the total employment.
Rural Retailing on a High
Rural retailing enjoys an intense focus from big brands.
Future Group and Godrej Agrovet's joint venture (JV) in rural retailing, 'Aadhar', is all set for a
revamp. The group promoter Kishore Biyani has revealed that the JV is planning to come up with
wholesale distribution centers across different districts and franchisees would be rolled out to local
entrepreneurs who would have a better understanding of the concerned area. They would be able to
source the products from these wholesale centers and then sell it in their villages. The alliance
operates stores in Gujarat, Maharashtra, Haryana and Punjab and mainly sells wheat and paddy apart
from daily need products. The company also provides farmers with solutions to problems regarding
their agricultural output, which includes what kind of crop can they plant and when, along with
techno-commercial suggestions to help them give a better output.
Meanwhile, Rajkot based Champion Agro Ltd is planning to come up with single window shopping
facility for farmers. The company already has 35 agri-retailing outlets in the Saurashtra region, and is
expected to open around 400 outlets at a taluka level across Gujarat by 2016. It will open 50 new
outlets by the end of 2011with an investment of US$ 3.3 million. The overall investment planned is
between US$ 66.7 – US$ 88.94 million.
On similar lines, Vadodara based ACIL Cotton Industries is all set to come up with around 40 outlets
of 'ACIL Krishi Store' in Gujarat. Of these, four outlets got operational in April - May 2011. As for
2011, ACIL has decided to focus on the Gujarat market. ACIL stores will sell all types of seeds,
fungicides, fertilisers, micronutrients.
Also, FMCG and retail giants are making good use of technology to reach out to rural India. From
low-cost handsets to tablet PCs, the Indian FMCG and retail sector is latching on to technology and
applications to reach out to rural India.
For instance, Marico is using mobile technology innovatively to arm its field representatives in their
procurement process. The IT team at Marico developed a mobile-based application for Nokia 5235
series handsets. The company gave these GPS-enabled phones to 120 of its field representatives, with
mapped routes. This helped the agri-representative to get the exact route and also saved on time. The
mobile application can also get real-time data from farmers. Pictures of crop and soil taken from the
camera are used for monitoring progress of contract farming, seed information and weather
condition. Since the data is available online, this also helps the company analyse and take decisions
quickly.
Meanwhile Hindustan Unilever Ltd (HUL) is experimenting with tablet PCs in its attempt to increase
its rural reach. It has been able to reach to 500,000 outlets in a year’s time. According to Nitin
Paranjape, managing director, HUL, “We put all the villages on an IT map. The name of the village,
its total strength, nearest distributors available, whether it has a school, a hospital, a primary health
centre, all of this was mapped. We used this information to determine the opportunity the village
presented to us.
Organised vs Unorganised Retailing
The Indian retail market, over the last decade, has been increasingly leaning towards organised
retailing formats. The pattern in domestic retailing is altering in the favour of organised modern
retailing, a big change from the traditional plethora of unorganised family-owned businesses. Rapid
urbanisation, changes in shopping pattern, demographic dividend and pro-active measures by the
Government are abetting the growth of the retail sector in India.
Organised retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 - 18
per cent of the total retail market and reach US$ 450 billion by 2015, according to a McKinsey &
Company report titled 'The Great Indian Bazaar: Organised Retail Comes of Age in India'.
Furthermore, according to a report titled 'India Organised Retail Market 2010', published by Knight
Frank India, during 2010-12 around 55 million square feet (sq ft) of retail space will be ready in
Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Besides,
between 2010 and 2012, the organised retail real estate stock will grow from the existing 41 million
sq ft to 95 million sq ft.
Driven by the growth of organised retail coupled with changing consumer habits, food retail sector in
India is set to be more than double to US$ 150 billion by 2025, according to a report by KPMG.
Retail – Investment Trends
Foreign direct investment (FDI) inflows between April 2000 and December 2010, in single-brand
retail trading, stood at US$ 66.69 million, according to the Department of Industrial Policy and
Promotion (DIPP).
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Singapore-based CapitaMalls Asia, which develops, owns and manages malls across Asia,
has pledged US$ 400 million to its growth in India up till 2014. Mr Kevin Chee, CEO and
Country Head of CapitaMalls Asia, has said that apart from funding the two malls that are
operational now, this money would be used to develop seven more malls in India.
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Reliance Retail will enter the cash and carry market with "Reliance Market" in Ahmedabad;
the first one to be opened by August 2011.
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Ujala fabric whitener maker Jyothy Laboratories has bought Henkel AG's 50. 97 per cent
stake in its Indian subsidiary for US$ 137.02 million, including debt and preference shares,
the two companies revealed. The deal includes Henkel's entire portfolio that includes Henko
and Chek detergents, Pril dish cleaners and Fa deodorant, and rights to the multinational's
future launches.
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With the launch of its first 'Arvind Experience Store' in Gujarat at Vadodara, denim major
Arvind Ltd. is looking at 100 stores by the end of the financial year 2011-12. The store in
Vadodara is the company's eighth in the country after seven stores in Andhra Pradesh.
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Quick food service restaurant chain Subway will set up 45 outlets across the country by 201112 entailing an investment of around US$ 9 million. The company has now 205 outlets in
India and plans to take its count to 250 by the end of 2011-12.
Max Hypermarkets, the food retailing chain of the Dubai-based Landmark Group is investing
US$ 122.14 million for its store expansion business across 30 cities in India.
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Retail - Government Initiatives
India will announce new rules for foreign investment in retail by April 2012, paving the way for
companies such as Wal-Mart Stores and Carrefour to open stores, according to Junior Trade Minister
Jyotiraditya Scindia. A government panel has issued a report that recommends easing a law that
prohibits non-Indian companies from operating multi-brand outlets. Allowing foreign investment in
multi-brand retail may help moderate food prices, said Kaushik Basu, chief economic adviser in the
finance ministry, who sits on the panel.
India currently allows 51 per cent FDI in single-brand retail and 100 per cent in wholesale cash-andcarry operations.
In a landmark decision, the government has eased norms for investments by foreign companies that
are present in India through a joint venture (JV) or a technical collaboration. Now, the foreign
company will not have to seek a no-objection certificate (NOC) from the Indian partner for investing
in the sector where the joint venture operates.
The government has also relaxed norms for downstream investments and convertible instruments,
giving foreign companies more powers. The changes are part of the third revision of the
Consolidated FDI Policy.
Retail – Road Ahead
There is a huge untapped opportunity in the retail sector, thus having immense scope for new
entrants, driving large investments into the country. A good talent pool, huge markets and
availability of raw materials at comparatively cheaper costs are expected to make India lead one of
the world’s best retail economies by 2042. The industry is also slated to be a major employment
generator in future.
Quick Facts on Indian Retail Sector
Indian Retail sector is the fifth largest global retail destination.
India retail market is dominated by the unorganized sector.
The top five companies in retail hold a combined market share of less than 2%.
The Indian retail market has been ranked by AT Kearney's eighth annual Global Retail
Development Index (GRDI), in 2009 as the most attractive emerging market for investment in the
retail sector.
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Currently the share of retail trade in India's GDP is around 12 per cent, and is estimated to
reach 22 per cent by 2010.
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According to Government of India estimate the retail sector is likely to grow to a value
of ` 2,00,000 crore (US$45 billion) and could yield 10 to 15 million retail jobs in the coming five
years; currently this industry employs 8% of the working population.
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India continues to be among the most attractive countries for global retailers. According to
the Department of Industrial Policy and Promotion, approximately US$ 47.43 million was the
amount of Foreign Direct Investment (FDI) inflow as on September 2009, in single-brand retail
trading.
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More than 80% of the retail sector in the country is concentrated in the large cities. A study reveals
that among the more than 20 locations, for organized retail in India, Mumbai was found to be the
most preferred location followed closely by Bengaluru in the second position.
Key Players in Indian Retail Sector
 AV Birla Group has a strong presence in apparel retail and owns renowned brands like Allen
Solly, Louis Phillipe, Trouser Town, Van Heusen and Peter England. The company has
investment plans to the tune of ` 8000 – 9000 crores till 2010.
 Trent is a subsidiary of the Tata group; it operates lifestyle retail chain, book and music retail
chain, consumer electronic chain etc. Westside, the lifestyle retail chain registered a turnover
of ` 3.58 mn in 2006.
 Landmark Group invested ` 300 crores to expand Max chain, and ` 100 crores on Citymax 3 star
hotel chain. Lifestyle International is their international brand business.
 K Raheja Corp Group has a turnover of ` 6.75 billion which is expected to cross US$100 million
mark by 2010. Segments include books, music and gifts, apparel, entertainment etc.
 Reliance has more than 300 Reliance Fresh stores; they have multiple formats and their sale is
expected to be ` 90,000 crores ($20 billion) by 2009-10.
 Pantaloon Retail has 450 stores across the country and revenue of over ` 20 billion and is expected
to touch 30 million by 2010. Segments include Food & grocery, e-tailing, home solutions,
consumer electronics, entertainment, shoes, books, music & gifts, health & beauty care services.
Retail and recession
The global economic slump has had its impact on the India retail sector. One of the earliest players in
the Indian retail scenario Subhiksha's operations came to a near standstill and required liquidity
injection. Vishal Retail secured corporate debt restructuring (CDR) plan from its lenders while other
players like the Reliance Retail run by Mukesh Ambani and Pantaloon led Kishore Biyani by went
slow on expansion plans and even scaled down operations. However, during the last quarter a bit of
confidence was restored as the economy showed signs of growth.
Future Trends
 Lifestyle International, a division of Landmark Group, plans to have more than 50 stores across
India by 2012–13.
 Shoppers Stop has plans to invest ` 250 crore to open 15 new supermarkets in the coming three
years.
 Pantaloon Retail India (PRIL) plans to invest US$ 77.88 million this fiscal to add up to existing 2.4
million sq ft retail space. PRIL intends to set up 155 Big Bazaar stores by 2014, raising its total
network to 275 stores.
 Timex India will open another 52 stores by March 2011 at an investment of US$ 1.3 million taking
its total store count to 120. In the first six months of the current fiscal ending September 30,
2009, the company has recorded a net profit of US$ 1.2 million.
 Australia's Retail Food Group is planning to enter the Indian market in 2010. It has plans to clock
US$ 87 million revenue in five years. In 20 years they expect the India operations to be larger
than the Australia operations.
The Road Ahead
Industry experts predict that the next phase of growth in the retail sector will emerge from the rural
markets. By 2012 the rural retail market is projected to have a total of more than 50 per cent market
share. The total number of shopping malls is expected to expand at a compound annual growth rate
of over 18.9 per cent by 2015. According to market research report by RNCOS the Indian organized
retail market is estimated to reach US$ 50 billion by 2011.
GROWTH OF RETAIL SECTOR IN INDIA
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Retail and real estate are the two booming sectors of India in the present times. And if
industry experts are to be believed, the prospects of both the sectors are mutually dependent on each
other.
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As the contemporary retail sector in India is reflected in sprawling shopping centers,
multiplex- malls and huge complexes offer shopping, entertainment and food all under one roof, the
concept of shopping has altered in terms of format and consumer buying behavior, ushering in a
revolution in shopping in India. This has also contributed to large-scale investments in the real
estate sector with major national and global players investing in developing the infrastructure and
construction of the retailing business.
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The trends that are driving the growth of the retail sector in India are
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Low share of organized retailing
Falling real estate prices
Increase in disposable income and customer aspiration
Increase in expenditure for luxury items (CHART)
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Another credible factor in the prospects of the retail sector in India is the increase in the
young working population. In India, hefty pay packets, nuclear families in urban areas, along
with increasing working-women population and emerging opportunities in the services sector.
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These key factors have been the growth drivers of the organized retail sector in India which
now boast of retailing almost all the preferences of life - Apparel & Accessories, Appliances,
Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and
many more. With this the retail sector in India is witnessing rejuvenation as traditional
markets make way for new formats such as departmental stores, hypermarkets, supermarkets
and specialty stores.
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The retailing configuration in India is fast developing as shopping malls are increasingly
becoming familiar in large cities. When it comes to development of retail space specially the
malls, the Tier II cities are no longer behind in the race.
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If development plans till 2007 is studied it shows the projection of 220 shopping malls, with
139 malls in metros and the remaining 81 in the Tier II cities. The government of states like
Delhi and National Capital Region (NCR) are very upbeat about permitting the use of land
for commercial development thus increasing the availability of land for retail space; thus
making NCR render to 50% of the malls in India.
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Retail, one of India’s largest industries, has presently emerged as one of the most dynamic
and fast paced industries of our times with several players entering the market.
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Accounting for over 10 per cent of the country’s GDP and around eight per cent of the
employment retailing in India is gradually inching its way toward becoming the next boom
industry.
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India is being seen as a potential goldmine for retail investors from over the world and latest
research has rated India as the top destination for retailers for an attractive emerging retail market.
India’s vast middle class and its almost untapped retail industry are key attractions for global retail
giants wanting to enter newer markets.
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Even though India has well over 5 million retail outlets, the country sorely lacks anything
that can resemble a retailing industry in the modern sense of the term. This presents international
retailing specialists with a great opportunity. The organized retail sector is expected to grow
stronger than GDP growth in the next five years driven by changing lifestyles, burgeoning income
and favorable demographic outline.
TRENDS OVER PAST FEW YEARS
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Retailing in India is witnessing a huge revamping exercise as can be seen in the graph .
India is rated the fifth most attractive emerging retail market: a potential goldmine.
Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3
percent or US$ 6.4 billion .
As per a report by KPMG the annual growth of department stores is estimated at 24%
Ranked second in a Global Retail Development Index of 30 developing countries drawn up
by AT Kearney.
Multiple drivers leading to a consumption boom:
o Favorable demographics
o Growth in income
o Increasing population of women
o Raising aspirations: Value added goods sales
Food and apparel retailing key drivers of growth
Organized retailing in India has been largely an urban phenomenon with affluent classes and
growing number of double-income households.
More successful in cities in the south and west of India. Reasons range from differences in
consumer buying behavior to cost of real estate and taxation laws.
Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural
market across most categories of consumption .
o ITC is experimenting with retailing through its e-Choupal and Choupal Sagar rural
hypermarkets.
o HLL is using its Project Shakti initiative leveraging women self-help groups to
explore the rural market.
o Mahamaza is leveraging technology and network marketing concepts to act as an
aggregator and serve the rural markets.
IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically
change buying behavior across the globe.
slowly making its presence felt.
RETAIL SALES IN INDIA
MAJOR ISSUES CONCERNING THE INDIAN RETAIL INDUSTRY
Overambitious expansion, squeezed profit margins, and unsustainable operational costs have
adversely affected India’s organized retail sector
Till recently, the government and the industry alike were betting big on the country’s organized retail
sector, touting it as the growth engine for job creation and economy.
However, the faltering of Subhiksha, which had 1,600 stores till December 2008, seems to have
shattered the hopes. Before Subhiksha’s debacle came into public glare, it was the shining example
of a successful retail venture. Its founder R Subramanian was the blue-eyed boy of the industry. So
what went wrong? Does it mean that the business model that supports discounted small-stores format
is flawed or is Subhiksha only an exception?
The retail scene
The Indian retail sector is largely dominated by nearly 12 million unorganized players, who
constitute nearly 90 to 95% of the sector, which is the highest in any country.
On the other hand, the organized retail sector accounted for only 5 to 7% in 2008. Of these, nearly
80% of such outlets are small family-owned businesses. In 2008, the size of the retail industry was
pegged at US$ 353 billion in an ASSOCHAM-KPMG joint study.
The retail sector can broadly classified into four major categories—food and groceries, consumer
durables, apparel, and pharmaceuticals.
These together account for almost 60 to 70% of the total retail market. Of these four categories, food
and groceries account for the largest share of 74%, according to India Brand Equity Foundation
(IBEF). The food and groceries segment is estimated at $152 billion.
However, organized retail in this sector is just about 1% of the total share, which also indicates the
lowest penetration level amongst other major categories.
This had prompted many big and small players to grab a pie in the organized retail sector. The major
players are Subhiksha, Spencer’s, Reliance Fresh, More etc.
Retail Facts
Total Indian retail market is estimated to grow from $353 billion in 2008
to $416 billion by 2010
Share of organized retail sector is ~7% and is expected to be 12% by
2010
Size of organized retail sector is estimated to reach $51 billion by 2010
The Indian retail industry can be broadly classified into food and grocery,
pharmaceuticals, consumer durables, apparel
Some major players in food and grocery sector—Reliance Fresh,
Spencer’s, Big Bazaar, More etc.
Source: ASSOCHAM-KPMG study
The big question
Let us consider two points at this stage.
One, a typical Indian household of two spends nearly 10% of its budget on purchasing grocery,
vegetables and fruits.
Two, products such as rice, wheat and pulses are utility items that are non-elastic.
Several consumers whom DARE spoke to said the slowdown had not affected their spending on
grocery, fruits and vegetables. A customer, Rekha Sharma said, “The recession has not made a big
difference to my household budget on grocery, fruits and vegetables.”
According to Piyush Sinha, Professor of Marketing and Chairperson, Centre for Retail at Indian
Institute of Management, Ahmedabad, “Even during a recession, basic utility items like grocery and
medicines will be bought and most retailers look at this segment. The Subhiksha story is not an
exception but just a reflection of things to come.”
If such is the case, then what is ailing India’s organized retail and is causing the closure of such
outlets?
Unorganized Retail Vs Organized Retail
Unorganized Stores
Discounted Small-stores
Small store, household Comparatively large, shelving
business generally
branded products,
Characteristics
employing family
approximately 15 employees
members
per 2,000 sq ft
Unplanned purchases,
round the corner
location, consumers
Planned purchase, availability
purchase perishable
of several brands of a
goods like milk and
Driving factors
particular product, discounts,
curd, home-delivery,
deals, ambience, visual
monthly accounts,
merchandising
discounts to regular
customers, familiarity
with the store for years
Availability of in-house
brands is not always good
Not all brands are
because consumers may not
available, price
Challenges
associate with them, parking,
comparison always not
freshness, distantly located
possible, small
compared to mom-and-pop
stores
A flawed model?
When the era of organized retail started in India, a lot of players entered this segment. In the food
and groceries section itself, players like Subhiksha, Reliance Retail, Big Apple, Sabka Bazaar,
Spencer’s, More etc started opening outlets and most of them adopted the discounted small-store
format. An industry insider says the model that these companies adopted was flawed because their
expenses far outstripped profit margins. Thus, more money was seeping out in the form of discounts
and operational costs, while less was coming back into the kitty. Their expenses, which included
rentals, employee salaries, inventory, cost of monitoring etc, were higher than their margins. These
stores were making money but were not profitable, he says.
Brands Vs In-house Brands
Brands
In-house brands
Brand name
Consumers associate
them with quality
Advertisements, hence
better visibility
Prestige associated with
owing the brand
From the point of view
consumers: ~30-40%
cheaper than brands
From the point of view of
retailers: Only production
cost involved and no
advertisement or distribution
charges involved
Expensive
Must live up to
expectations
Consumers may not
associate with it, especially
when placed with a branded
item
Less visibility
Available only at the retail
store
Tea
Red Label, Lipton, Taj
Mahal
Reliance Value (Reliance
Fresh)
Handwash
Dettol, Lifebuoy
Caremate (Big Bazaar)
Jam
Kissan, Tops
Smart Choice (Spencer’s)
Noodles
Maggi, Top Ramen
Reliance Select (Reliance
Fresh)
Advantages
Disadvantages
Some Examples
The situation worsened with the expansion spree. Another reason is that they thought customers
would be attracted by discounts, for which they eliminated the middlemen and started dealing
directly with big fast-moving consumer good (FMCG) players.
The FMCG players have their own vested interest and in the long run they would like to be in a
commanding position than in a negotiating position, which would have been the case with organized
retail players.
Sinha substantiates the point and says, “If you give more discounts, your margins will further shrink
and therefore you need more customers. A bigger store may not necessarily mean more footfalls.
And if you do not have more consumers, your inventories will suffer because you will have the
burden of more stocks to clear.”
Unmindful expansion strategy
This one seems to be the biggest demon of all. “This is a factor that has impacted all retailers. It is
just that some have been impacted more and some less. The fact is that almost everybody has grown
far too soon too quickly. The growth is far much more than they could have managed,” says Sinha.
Till recently discount store Subhiksha, which is currently neck-deep in debt of more than Rs 750
crore, was reportedly planning to add two million sq ft by the end of the fourth quarter of 2009. On
the contrary, the company has closed its 1,600 stores across 110 cities, with R Subramanian
reportedly saying that his company owes Rs 45 crore to suppliers, Rs 20 crore to employees and Rs
24 crore as rentals for various stores! Subhiksha’s troubles started when it began expanding at a rate
of 800 stores a year on debt capital. The situation is not very different with Reliance Retail, with
rumors afloat that a number of stores have been shut and several employees have been sacked.
Large Retail Format
Retailers sell their in-house brands at a price that is significantly less than
branded products
They keep on adding and deleting in-house brands so that even if the
customer finds a product wanting in quality after purchase, the negativity
is limited to the brand, not the outlet
A visit to a prominent, large-format retail store, in Delhi was an eyeopener of sorts. The store was located in a mall, which hardly boasted any
big brands being newly built, but in contrast, the retail store was very
crowded! Here is what DARE found:
Customers: Belonged to the middle class or upper middle class, unlike
customers visiting small organized retail outlets, it was a family visit or
they were accompanied by friends
A Pen Picture:
One-stop shopping experience; the store stocked everything from apparels
to consumer goods to grocery; had different floors for each category
A lot of variety in terms of products; a lot of deals and discounts were
available
Had various brands both in-house and other labels; in-house brands were
mixed with other known brands to an extent that it was not identifiable
Had many staff members who were helpful
The store was clean and organized
Had parking space as the store was located in a mall
Sinha says, “Everybody is trying to give a good value to customers. However, the cost that is
incurred in the process takes time to be re-couped. The market may not grow at that rate. What has
happened is in the wake of growth is that players have focused on opening more stores than
consolidating the older ones.” The process of expansion has to be supported with adequate funds,
inventory, and service, which was clearly lacking in the case of Subhiksha. Does this mean that other
retailers are also following the footsteps of Subhiksha in unmindful expansion?
Customers unprepared?
Vijaylakshmi Menon, a housewife who prefers to purchase grocery from the kirana store says, “I do
go to organized retail outlets, but not that frequently. I am aware that these stores do provide some
discounts, but I do not mind spending one or two rupees extra at the nearby kirana store where I have
been a regular for almost the last three years.”
One of the reasons behind the attractiveness of kirana stores over organized retail outlet is the
nearness of these stores and this supports unplanned and sudden purchases. Also, the rapport that
customers develop with mom-and-pop stores also plays an important role in affecting consumer
behavior.
“The customers take time to migrate from these stores. Retail does not merely mean distribution.
A lot of work has to happen before customers start patronizing the stores. And it takes time for
customers to understand a lot of things like whether they are getting the right deal or not.
You cannot ask customers to shift by giving them the lure of better environment. It is the value that
one delivers overtime that drives consumers. That ensures whether the customer will stick to you or
not,” says Sinha.
No localized approach
The business of retail (food and grocery) is very localized.
The consumer behavior in a particular area, for example Delhi, may not be the same as those of
consumers in another city such as Chennai. Thus, the consumer needs differ widely across the
country. Therefore, distinct strategies should have been adopted for different regions. “What one
must keep in mind is that if you are opening a store such as a grocery store then you have a
catchment area. It is a very localized business that has to be built bottom up. It is not a business that
can be pushed from top to down. So, macro strategies may not work all the time. You need
customized strategies,” says Sinha.
Freshness: A concern
For most of the customers DARE spoke to, freshness of the commodity was a major concern. Unlike
the West, Indian consumers lay huge importance to the freshness of food especially milk, vegetables
and fruits. Even loyal customers of organized retail stores purchased these items from traditional
stores, street hawkers and mandis. Their recent purchase pattern indicated that even though they
bought pre-processed food, pulses, spices etc from the organized retail stores, perishable items such
as milk, curd, vegetables and fruits were bought from the local stores.
Says Vijaylakshmi, “I buy fruits and vegetables from the local market. This is because they are fresh
and I can negotiate prices.” Moreover, these items are bought in small quantities and therefore for
many consumers, traditional stores, street hawkers and mandis make more sense because of
convenience.
Home deliveries
There are some services that are provided exclusively by kirana stores that drive consumers to these
stores, such as home-delivery. In India, groceries are purchased in bulk mostly at the beginning of
the month and home delivery facilitates this. Also, selling on credit has long been the forte of the
kirana stores. This ensures that customers stick to with them for long.
In-house brands vs private brands
For customers like Monica Chawla, who prefers retail chains over the nearby mom-and-pop store, it
is the availability of branded goods that matters the most. Unlike the kirana stores, the organized
stores stock up a number of brands of a single product. However, these stores also have a generous
supply of in-house brands.
On an average, in-house brands come at a discount of up to 30 to 40%, which is due to the absence of
advertising and distribution costs. However, this also means that these private labels lag behind the
branded products in terms of visibility and hence, sale.
Moreover, when such products are placed vis-à-vis branded items, consumers may opt for a branded
product than a private label. The discounts caused a major hit at profit margins
STRATEGIES, TRENDS AND OPPORTUNITIES

Retailing in India is gradually inching its way toward becoming the next boom industry. The
whole concept of shopping has altered in terms of format and consumer buying behavior, ushering
in a revolution in shopping in India.

Modern retail has entered India as seen in sprawling shopping centres, multi-storied malls
and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing
sector is at an inflexion point where the growth of organized retailing and growth in the
consumption by the Indian population is going to take a higher growth trajectory.

The Indian population is witnessing a significant change in its demographics. A large young
working population with median age of 24 years, nuclear families in urban areas, along with
increasing workingwomen population and emerging opportunities in the services sector are going to
be the key growth drivers of the organized retail sector in India.
CHALLENGES & OPPORTUNITIES
Retailing has seen such a transformation over the past decade that its very definition has
undergone a sea change. No longer can a manufacturer rely on sales to take place by ensuring
mere availability of his product.
Today, retailing is about so much more than mere merchandising. Its about casting customers in a
story, reflecting their desires and aspirations, and forging long-lasting relationships.
As the Indian consumer evolves they expects more and more at each and every time when they
steps into a store. Retail today has changed from selling a product or a service to selling a hope, an
aspiration and above all an experience that a consumer would like to repeat.
For manufacturers and service providers the emerging opportunities in urban markets seem to lie
in capturing and delivering better value to the customers through retail.
For instance, in Chennai CavinKare’s LimeLite, Marico’s Kaya Skin Clinic and Apollo Hospitals
Apollo Pharmacies are examples, to name a few, where manufacturers/service providers combine
their own manufactured products and services with those of others to generate value hitherto
unknown.
The last mile connect seems to be increasingly lively and experiential. Also, manufacturers and
service providers face an exploding rural market yet only marginally tapped due to difficulties in
rural retailing.
However, manufacturers and service providers will also increasingly face a host of specialist
retailers, who are characterized by use of modern management techniques, backed with seemingly
unlimited financial resources. Organized retail appears inevitable.
Retailing in India is currently estimated to be a US$ 200 billion industry, of which organized
retailing makes up a paltry 3 percent or US$ 6.4 billion. By 2010, organized retail is projected to
reach US$ 23 billion. For retail industry in India, things have never looked better and brighter.
Challenges to the manufacturers and service providers would abound when market power shifts to
organized retail.
CONCLUSION
The retail sector has played a phenomenal role throughout the world in increasing productivity of
consumer goods and services. It is also the second largest industry in US in terms of numbers of
employees and establishments.
There is no denying the fact that most of the developed economies are very much relying on their
retail sector as a locomotive of growth. The India Retail Industry is the largest among all the
industries, accounting for over 10 per cent of the country’s GDP and around 8 per cent of the
employment.
The Retail Industry in India has come forth as one of the most dynamic and fast paced industries
with several players entering the market.
But all of them have not yet tasted success because of the heavy initial investments that are
required to break even with other companies and compete with them.
The India Retail Industry is gradually inching its way towards becoming the next boom industry.
.
RELIANCE FRESH
History of Reliance Fresh





Post launch, in a dramatic shift in its positioning and mainly due to the circumstances
prevaling in UP, West Bengal and Orissa, it was mentioned recently in news dailies that,
Reliance Retail is moving out of stocking fruits and vegetables[. Reliance Retail has decided
to minimise its exposure in the fruit and vegetable business and position Reliance Fresh as a
pure play super market focusing on categories like food, FMCG, home, consumer durables,
IT and wellness , with food accounting for the bulk of the business.
The company may not stock fruit and vegetables in some states. Though Reliance Fresh is not
exiting the fruit and vegetable business altogether, it has decided not to compete with local
vendors partly due to political reasons, and partly due to its inability to create a robust supply
chain. This is quite different from what the firm had originally planned.
When the first Reliance Fresh store opened in Hyderabad last October, not only did the
company said the store’s main focus would be fresh produce like fruits and vegetables at a
much lower price, but also spoke at length about its “farm-to-fork’’ theory. The idea the
company spoke about was to source from farmers and sell directly to the consumer removing
middlemen out of the way.
Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint,
Reliance Wellness, Reliance Jewels, Reliance Timeout and Reliance Super are various
formats that Reliance has rolled out.
In addition, Reliance Retail has entered into an alliance with Apple for setting up a chain of
Apple Specialty Stores branded as iStore, starting with Bangalore

The Reliance Retail had to face various difficulties before the launch of Reliance fresh,
because of the various circumstances prevailing in Orissa, West Bengal and UP, along with
the news focusing on the dearth of vegetables and fruits stocks.

The retail business of Reliance then minimized its exposure in vegetable and fruit business,
as a result established Reliance fresh positioning a pure super market play focusing on
various categories like IT, consumer durables, home, FMCG and food.
The retail company of Reliance may not supply the vegetables and fruits in a few states, the Reliance
Fresh decided to not to race with local wholesalers partly because of the political reasons as well as
its incapability to maintain a healthy supply chain
VISION Of RELIANCE RETAIL
Growth through Value Creation
With a vision to generate inclusive growth and prosperity for farmers,
vendor partners, small shopkeepers and consumers, Reliance Retail
Limited (RRL), a subsidiary of RIL, was set up to lead Reliance Group’s
foray into organized retail.
Since its inception in 2006, Reliance Retail Limited (RRL) has grown into an organisation that caters
to millions of customers, thousands of farmers and vendors. Based on its core growth strategy of
backward integration, RRL has made rapid progress towards building an entire value chain starting
from the farmers to the end consumers.
Reliance Retail continued to expand presence of its value and specialty formats. During the year,
Reliance Retail opened 90 new stores spanning across 'value' and 'specialty' segments. In-store
initiatives, wider product choice and value merchandising enabled the business to achieve robust
growth during this period.
Its presence in the optics business is in partnership with Grand Vision. 51 new stores were added
during FY-11 taking the total presence to 100 stores across key markets in the country. The retail
chain offers single brand optical products including Vision Express frames, lenses, contact lenses,
sunglasses, solutions and accessories.
For the very first time, consumers in India got the opportunity to experience Hamleys, which is
considered to be the world's most wonderful toy shop. The brand was launched in India with opening
up of 2 stores during the year.
iStore by Reliance Digital is a one-stop-shop for all Apple products and services.
Reliance Brands also announced exclusive licensing arrangement with two leading international
brands:

Steve Madden, a leading designer, wholesaler and retailer of fashion-forward footwear and
accessories for women, men and children.

Quiksilver, a leading outdoor sports lifestyle company to launch their core brands 'Quiksilver'
and 'Roxy'.
Across India, Reliance Retail serves over 2.5 million customers every week. Its loyalty programme,
"Reliance One", has the patronage of more than 6.75 million customers.
A subsidiary of Reliance Industries of India that is headed by Mukesh Ambani, Reliance Fresh is
primarily a supermarket that strives to provide all the essential household commodities under one
roof.
In addition to fresh fruits and vegetables, the store also sells staple food items, diary products,
packaged food products, baby products, electrical goods, and the like.
The size of a typical Reliance Fresh store varies between 3,000 and 4,000 square feet, and it can
easily cater to an area of 2 to 3 Kms in its vicinity.
In the present day, there are 560 outlets of Reliance Fresh across the country, and in the next 4 to 5
years the company plans to invest Rs. 25,000 crores in this venture.
BACKGROUND

Reliance Fresh a convenient store format, is governed by the Mukesh Ambani and is the
most important part of Reliance Industries retail Business. Reliance Ltd. has planned to invest
more than Rs. 25000 crores in the retail division.

It also comprises more than 560 reliance fresh stores all over the country. The outlet sells
fresh fruits, staples, dairy products, fresh juice bars, groceries and vegetables.

A distinctive Reliance Fresh outlet is around 3000 to 4000 sq. feet and accommodates
catchment area of one to three Kilometers.

The super marts will sell fresh fruits and vegetables, staples, groceries, fresh juice bars
and dairy products and also will sport a separate enclosure and supply-chain for nonvegetarian products. Besides, the stores would provide direct employment to 5 lakh
young Indians and indirect job opportunities to a million people, according to the
company.

The company also has plans to train students and housewives in customer care
and quality services for part-time jobs.

The company is planning on opening new stores with store-size varying from 1,500 sq ft
to 3,000 sq ft, which will stock fresh fruits and vegetables, staples,FMCG products and
dairy products.

Each store is said to be within a radius of 1-2 km of each other, in relation
to the concept of a neighbour store.

However, this is only the entry roll-out that the
company has planned. Bangalore is said to have 40 stores in all by the end of the year.
In a dramatic change due circumstances prevaling in UP, West Bengal and Orissa, It was
mentioned recently in News Dailies that, Reliance Retail is moving out stocking.

Reliance Retail has decided to minimise its exposure in the fruit and vegetable business
and position Reliance Fresh as a pure play super market focusing on categories like
food,FMCG, home, consumer durables, IT, wellness and auto accessories, with food
accounting for the bulk of the business.

The company may not stock fruit and vegetables in some states, Orissa being one of
them.

Though Reliance Fresh is not exiting the fruit and vegetable business altogether, it
has decided not to compete with local vendors partly due to political reasons, and partly
due to its inability to create a robust supply chain.

This is quite different from what the firm had originally planned. When the first Reliance
Fresh store opened in Hyderabad last October, not only did the company said the store’s
main focus would be fresh produce like fruits and vegetables at a much lower price, but also
spoke at length about its “farm-to-fork’’ theory. The idea the company spoke about was to
source from farmers and sell directly to the consumer removing middlemen out of the way.
Reliance may exit some businesses if the business does not increase by March 2008.
OBJECTIVES
The chief objective of Reliance Fresh stores is :1) To provide customers first-rate household products at affordable rates.
2) At the same time, the company spares no effort to safeguard the interest of the farmers
and manufacturers.
3) The producers get a chance to sell their products directly to the merchandiser, and
that too at the best price.
Thus, it is a win-win situation for all, the merchandiser, producer and consumer.
CORPORATE SOCIAL RESPONSIBILITY
Today when most of the companies are busy in making profits by any means, there are
few ones who are focused to return this society, a part of what they have earned through
this society. Reliance retail is one of them. Following efforts of reliance retail are aimed
at benefiting the society making reliance socially responsible:
1)Reliance Retail aims at insociety. They are planning to train students from corporation schools
and schools run by NGOs and they consider this as a part of their corporate social responsibility
They will take students on an employment basis and pay them a stipend during the course period in
return they are planning to charge a "small fee" from those who want to join the course "as we want
to bring in some discipline and regularity among the students", and will reimburse that
once they are inducted into service.
2) Farming in India is highly fragmented and subject to harsh climatic conditions:
once harvested, it is very difficult to keep fruits and vegetables fresh.
To secure high quality, Reliance Retail is directly sourcing fresh agricultural produce from
thousands of farmers from villages through Collection Centers. With this concept, Reliance has built
a business model generating shared value that links the company supply chain more closely to poor
farmers in Indian villages. Reliance is providing a guaranteed market for the farmers’ produce,
reducing transaction costs and training the farmers in better and sustainable farming practices.
This initiative results in higher income and upgrading of skills for the farmers, and reduced spoilage
of produce (up to 35 percent) and better quality products for Reliance retail stores.
Growth of Reliance Fresh

The first ever a Reliance Fresh store was established in Hyderabad, wherein the company,
mainly focused on the fresh produced vegetables and fruits at comparatively low price along with an
introduction of farm to fork theory.

This was the idea, which was anticipated by the company was to take the supply direct from
the farmers and then sell straightaway to the consumers removing the middle-men off the beaten
track. Reliance introduced several formats in the marketplace to cater to needs of common people,
which includes Reliance Fresh, Reliance Super, Reliance Footprint, Reliance Timeout, Reliance
Jewels, Reliance wellness, Reliance Mart and Reliance Digital, to name a few.

In addition to this, the Reliance Retail also entered into a treaty with Apple, which is a
leading Information Technology company, to set up a series of Apple Specialty Outlets branded as
IStore, with its first ever store in Bangalore.

With an idea to produce inclusive prosperity and growth for farmers, consumers, small
shopkeepers and vendor partners, Reliance Retail was set up in order to lead the foray of Reliance
Group into an organized retail.
NEWS ARTICLES ON RELIANCE FRESH
WHEN RELIANCE FRESH OPENED
Monday, Nov 06, 2006 , Financial Express : Reliance Retail, the 100% subsidiary of Reliance
Industries, on October 28 unveiled Reliance Fresh, the first of its multi-format retail foray involving
an investment of Rs 25,000 crore. Reliance Fresh is the company’s brand for neighbourhood freshfood outlets. It will also sell kitchen equipment and other edibles. Besides, it has planned
hypermarkets, supermarkets, discount stores, department stores, convenience stores and specialty
stores, to be unveiled shortly. The next stop for Reliance Retail will be Ahmedabad, where the
company will launch an outlet on December 28, the birthday of RIL founder Dhirubai Ambani. After
that, it will move to West Bengal and Punjab, followed by simultaneous launches in Delhi and
Mumbai. “These stores, ranging from 2,000 to 5,000 sq feet, will provide customers with a variety of
fresh fruits, vegetables, staple foods and other products in a world-class ambience,” said Gunender
Kapur, president, foods business, at the unveiling ceremony.
The strategy is to open one Reliance Fresh store in a radius of three to four km to serve 1,000-2,000
families. This means about 30-40 stores in the major metros. The air-conditioned stores recorded
combined sales of Rs 22 lakh on the inaugural day itself. Reliance Fresh is selling vegetables and
fruits sourced from farmers through the company’s agri hubs.
AN HOUR AT RELIANCE FRESH
Reliance Fresh has opened up retail supermarkets selling fruits and vegetables in major cities of
India. A few days ago, we visited the local Reliance Fresh supermarket in New Friends Colony and
this is what we observed 1. Range of Products - Regular vegetables, fruits, Reliances' own brands of packed pulses, Maggi
products and Pepsi.
2. Prices - The price was marked in paisas just like at American stores. For example - Potatoes were
priced at 5.90 per kg while onions were 15.90 per kg. Yeah right, what difference does 10p make?
3. Comparable Cost - The rate of vegetables like onions and potatoes were 10p less than that of local
vegetable sellers. The rate of other products were however much higher than they should have been.
Seems like Reliance Fresh applied the same strategy that McDonalds uses to attract customers - ice
cream for Rs. 7 and Cola for Rs. 20.
4. Customer Service - The staff in red shirts were mainly checking to see if people were shoplifting
and did'nt seem to know much about the products or company. The guards kept yelling at everyone
to have their bags checked before leaving.
5. Checking Out - There was a long queue that moved very slowly. VAT or value added tax was
added to the bill which increased the cost of the vegetables just bought.
6. Parking - Absolutely zero parking. The guard was yelling at local rickshaw pullers to move away
from the entrance.
7. Customers - were middle class folk from my apartment block. They kept touching and turning
around each vegetable before selecting them just like they do at the regular vegetable sellers. This
looked really out of place and added to a huge crowd
Reliance eyes retail JV with Marks & Spencer
Reliance Industries chairman Mukesh Ambani’s deal-making spree to get the best
domain expertise in the retail sector is poised for the big one now. Reliance Retail (RRL), is locked
in ‘substantial’ discussions to float an equal joint venture with iconic UK fashion retailer Marks &
Spencer (M&S) for apparel, gourmet food and cafes, multiple sources said.
The deal, slated to be clinched in the next three weeks, would see the UK retailer
bringing in new formats like food and cafes into India. M&S’ core business — apparel and lingerie
— is already operational in the country. According to a source close to the deal, the gourmet food
format is likely to be integrated with Reliance Fresh “wherever possible,” (upmarket localities) as a
shop-in-shop format. This would help M&S get immediate scale in food business. There are 491
Reliance Fresh stores that sell food, FMCG and fruits and vegetables and this figure is likely to touch
1,400 by the end of next fiscal.
“The implications of this particular JV are much deeper. It’s much more holistic in
nature and therefore taking long to seal,” the source added. The $16-billion M&S, operating in the
country through a franchisee arrangement with Planet Retail since 2001, is in the midst of charting a
new India strategy aimed at accelerating expansion in the domestic market. It recently slashed prices
by 20% to attract more footfalls in the stores and taking prime space in malls to open more stores
Reliance Retail ties up with UK's Wincanton for back-end biz
NEW DELHI: After having signed up at least half-a-dozen partnerships for specialty formats,
Reliance Retail is now entering into a joint venture with leading European supply chain specialist
Wincanton for its food and grocery and hypermarket businesses.
The synergy would enable Reliance to efficiently run its critical back-end operations, which
essentially include warehousing of goods and transporting them to stores on time.
The latest move by India’s largest corporate house, which jumped on the retail bandwagon two years
ago by promising to do everything on its own, seems to suggest that it now needs a partner for almost
every retail initiative.
Industry observers believe that the company has expanded very fast and has managed to set up over
600 stores across various retail formats in less than two years, but its supply chain is in a mess. “How
to get the right merchandise to the stores on time has been its biggest problem. You’d often not find
the goods you want in Reliance’s food and grocery outlets,” said a source.
Porter 5 force model for the existing Reliance fresh Business model
Threat of New entrants
This threat is at maximum at this point as it is most likely that government would allow 100% FDI in
single brand retail outlets which is going to further make things difficult for Reliance Fresh
Bargaining power of buyers
This is the pressure a customer can place on a business. If there are few buyers then they are able to
dictate the terms with increasing access to technology, increase in number of choices and customers
are always connected to each other through various social networking sites more than ever before
which make bargaining power of buyers even stronger
Bargaining power of suppliers
A company to manufacture its products requires raw material, labour etc.This creates a buyersupplier relationship in an industry. If there are few suppliers providing material essential to make a
product then they can set the price high to capture more profit. Again due to increase in number of
players in organized retail sector bargaining power of suppliers is also on the rise as they have many
options where they can negotiate their prices
Competitive rivalry within the industry is also on the rise.This describes the competition between
the existing firms in an industry. Greater the competitive rivalry (companies providing equally good
products or services) lesser are the profit margin.With entry of foreign players it would make the
competition even more intense
Problems faced by Reliance Fresh
The following graphs are a clear indicator that Reliance Retail of which Reliance Fresh is a major
arm that Reliance Fresh is even at current state facing problems
As the winds of economic reform have swept across the Indian economic landscape since the 1990s,
the slow pace of retail liberalisation has become increasingly conspicuous. Most notably, foreign
direct investment—freely permitted in most sectors—continues to be banned in the retail sector, with
the exception of single-brand retailing. Now it was the turn of domestic corporate retailers to face the
heat.
The trouble began in late August 2008 , in Uttar Pradesh, India’s most populous state, when the state
government cited law-and-order problems to order the shutdown of all stand-alone corporate retail
outlets selling fruit, vegetables and groceries. This was in response to violent protests against new
“Reliance Fresh” stores set up in the cities of Lucknow and Varanasi by Reliance Industries, an
Indian corporate giant with ambitious retailing plans. As of mid-October, protestors against
organised retail had targeted Reliance and other corporate retailers in Uttar Pradesh, Kerala, West
Bengal, Mumbai and Orissa. Though counter-productive in terms of efficiency and modernisation,
this opposition to organised retail is easy to explain. Before India’s recently acquired image as an
economic powerhouse, it was sometimes disparagingly referred to as a nation of small shopkeepers.
Indeed, there are currently over 12 million retailers in India, and the sector provides a livelihood for a
huge number of people. Most of these shops are tiny family-run businesses operating with meagre
capital. There is also an enormous number of retailers selling fruit and vegetables from carts or on
the roadside. Meanwhile, Indian corporate giants such as Pantaloon Retail, Reliance Industries and
RPG Group, seeking to profit from the forces of consumerism unleashed by economic growth and
liberalisation, have been scrambling to expand their retailing operations. Not unreasonably, small
retailers feel threatened by the big companies’ plans.
EXPECTATION IN FUTURE
a) Small scale industries and existing brands will not be able to compete with these behemoth
international players with enormous amount of capital:
Most of the economies have developed their industry, agriculture and services in order to increase
their pace of development. In case of India, manufacturing has seen hardly any growth since our
economy has opened up. This has lead to unemployment at one end, and at the other end it has lead
to huge setback to the existing industries. Many of the national brands have been lost, decreasing the
number of employment in manufacturing sector. When the retail chain takes over, it will have access
to all the products of the world, and will sell the best at the cheapest, leading to further closure of
existing industries which in turn will lead to loss of economy and massive unemployment. Small
scale industries will suffer the most in this present context, where at one end, MNCs are allowed to
have 100% FDI in small scale industries in SEZ and on the other hand cheap goods could be
imported by the retail giants. Our SSI is not properly organized, and suffers the economies of scale,
thus will never be able to compete with the retail giants on the price aspect, which seems to be a
matter of serious concern for the existence of SSI in India. In a situation where the existing SSI is
already going through a very tough time, this would serve as a fatal blow.
b) Impact on farmers and consumers
Influence on farmers
After independence there was a general feeling that agricultural markets do not function in a
proficient manner. Apart from inefficiencies in distribution, including wastage of agricultural
produce, the farmers suffer due to exploitation by traders on different accounts. To overcome such
problems different state governments enacted their respective APMC Acts. These Acts made
stringent provisions to save the farmers from exploitation, promoted efficiency, etc. Structure of
Agricultural Produce Marketing Committee (APMC), the apex decision making body in respective
mandis was made such that farmers were in overwhelming majority and chairman of the Committee
would also be a farmer. It also ensures the transparency of trade and accountability of the trader and
mandis towards the society. Every day the rates of the products are fixed in the mandi depending
upon demand and supply and no trader can buy more than a certain limit( to avoid hoarding). There
is no question of monopoly here as there are a number of buyers and sellers; this in turn keeps the
prices of the commodities fair. Moreover there is a government check on all the trading that happens
through mandi, so that no unfair practices can take place.
The Model APMC Act leads to de-democratisation of agricultural markets and therefore limits the
rights of the farmers to control agricultural markets. The experience world over and even in the states
where private yards have been allowed to be established by the companies, heavy profits have been
made by these companies without giving any benefit to the farmers. For instance the average price of
Soya paid by ITC to the farmers in Madhya Pradesh was around Rs. 1150/- per quintal, it was sold
by the company at an average price of Rs. 1555/- per quintal. Even the rules of contract farming,
given by Model APMC Act and adopted by various state governments also favour multinational
agribusiness firms. Small and marginal farmers, which constitute 90% of the farming community,
have been left at the mercy of these firms. Not only this, even the definition of an agriculturist have
been changed to suit the best interests of these corporations. In earlier Acts agriculturist was defined
as one whose livelihood depends directly on farming. Now a change in the definition of agriculturist
is contemplated as - A person who is a resident of the notified area of the market and who is engaged
in production of agricultural produce himself or by hired labour or otherwise.
In the case of these huge retail chains, there is lesser possibility of transparency of prices paid and
the amount stocked. They are permitted to stock huge amounts of food supplies, as per their business
model, without having mechanisms for transparence. In such conditions it is not very difficult for
them to hoard and act unfair. For example let us see two commodities wheat and apple. Private
corporations had bought huge quantities of wheat from the farmers directly last year and we had to
import wheat from other countries and all of us know about the hike in the price of wheat this year.
Similar is the case of apple, in last season, these companies had bought around 30% of the apple
production straight from the local mandis of Himachal and Kashmir, and we can see the prices of
apple this year are very much higher compared to earlier years, even though there was good
production of apples last season.
ii) Consumer
In due course of time if these retail outlet completely overtakes the traditional system, we would see
a series of change. First if the traditional system is gone, we will have only one mega retail outlet in
the vicinity, and the choices given by the outlet, has to become choices of the consumer. In such a
case there is an expectation of formation of cartel amongst the chain and the prices of the
commodities will shoot up. But at that time we will have no other option but to procure our goods
from one of these outlets, at whatever prices they demand from us. We have seen this in the case of
UK, where the average spending on food and beverages as a percentage of the total income of an
average household has shot up since these giant corporations have come into retailing. Moreover the
choices the consumers are left also decrease with the coming up of these stores; every thing is
standardized the personal choices of the consumers are not taken care of. This is a system where the
consumer adjusts himself to the product and not the vice versa.
Public Perception and Movements
Protests and demonstrations by the local vegetable and fruit vendors since they would lose
their livelihood
The fear was basically due to the following advantages they think corporate players had at the same
time, corporate retailers have several advantages that are making it possible for them to attract
growing numbers of customers. For instance, there are many inefficiencies in the traditional supply
chain in India. Fruits and vegetables typically reach the Indian consumer only after passing through
various middlemen, few of whom possess adequate capital to invest in cold chains and other
infrastructure. Corporate retailers are hoping that their business model—which combines direct
sourcing from farmers (including contract farming), large volumes and substantial investments in
infrastructure—will enable them to offer fruit and vegetables at considerably lower prices.Modern
retail outlets also offer a pleasant and comfortable ambience for shopping, enable easy comparison of
a wide range of products, ensure the quality of products, and offer self-service. These benefits are
likely to woo many Indian customers, even though some products may be cheaper in traditional
stores.
Too much Hype and they seem to be aggressive
The best example they could learn from in this case could be their competitots though not existing
then is from Bharti-Walmart collobaration.Walmart we all know is the big daddy of retail business
all over the world and collaboration with them is a pride for any company, but Bharti on the other
side did not create a hype about it and are successfully running their cash and carry stores in Punjab
and will soon expand too.
Although many companies are now being targeted by protesters, the current uproar is based in
perceptions of a single company, Reliance Retail. One reason for this is that Reliance’s retail-sector
plans are perhaps the most ambitious among the corporate retailers. In June 2006, while informing
shareholders about the group’s retailing initiative, Reliance’s chairman, Mukesh Ambani, announced
plans for anenormous investment of Rs250bn(US$6.4bn) to setup a “retail network that is
unprecedented in scope”.The company’s objective is to establish a pan-Indian, multi-format presence
covering 1,500 cities and towns, and employing over 500,000 people.Reliance has been
implementing its plans aggressively.Between November 2006—when the company opened its first
store in Hyderabad—and September 2007, Reliance Retail set up over 300 stores in more than 30
cities and towns in 12 states.It has also established 108 collection centres in 16 states for sourcing,
processing and selling agricultural produce, while signing up around 1.5m customers
for its “RelianceOne” loyalty scheme. Until now, Reliance has also focused on the storeformat that is
most likely to compete with traditional retailers. While most Indian corporate retailers have set up
supermarkets that sell a wide range of groceries, household goods and personal items in addition to
fruit and vegetables, the “Reliance Fresh” chain consists of considerably smaller neighbourhood
convenience stores that focus mainly on food, including fruit and vegetables. Through its supplychain initiatives, Reliance Fresh has been able to sell its produce at significantly lower prices than
traditional retailers. As a result, many traditional retailers of groceries, fruit and vegetables have
found themselves competing directly with a nearby Reliance store.
Political Pitfalls
Protests by local fruit vendors and vegetable shop owners slowed the expansion of corporate
retailers planning to set up new stores in the states where opposition has surfaced. However, most of
the announcements made by these state governments were designed to appease the anger of small
retailers and their political supporters, rather than to express strong ideological opposition to
organised retailing. In Uttar Pradesh, for instance, the closure of retail outlets has been restricted to
those selling fruit, vegetables and groceries in stand-alone stores. Reliance Fresh and Spencer’s
borne the brunt of the closure. Moreover, the shutdown is temporary and the state government has set
up a committee to examine this issue. Given the huge number of small retailers in democratic India,
no political party can afford to ignore their views. Reports indicate a major softening of the
government’s stand on the nuclear deal to avoid a snap poll at that time and was hardly an
appropriate time to upset such a significant constituency, and relevant government agencies were
currently debating the introduction of various policies to protect small stores—such as licensing of
big retail outlets by local bodies in cities and towns. Nevertheless, there were enough supporters of
organised corporate retailing in India to ensure that no permanent roadblocks are created. Obvious
beneficiaries of organised-retail growth include the corporate sector, consumers and farmers, but
there is also widespread support among (non-leftist) politicians, policymakers and intellectuals, who
realise that a modern and efficient retail sector is an important part of economic development. As a
result, it is likely to be just a matter of time before the government actually relaxes its restrictive
policy on foreign investment in retailing by permitting foreign companies to invest freely in the
sector. Reliance Retail put on hold its expansion plans in the states where opposition to organised
retailing has surfaced. Reliance is known for the speed and aggression with which it enters new
businesses, as demonstrated by its blitzkrieg marketing campaign when it began mobile telecom
services in 2002, catalysing a sharp reduction in Indian mobile call tariffs. But now the company has
painfully realised that in politically sensitive sectors like retailing a much more cautious approach is
advisable.
Contrasting advantages that small players had
However, the fears that organised retailing will put small retailers out of business were vastly
exaggerated. Traditional small retailers in India have many strengths that will ensure their continued
survival and growth despite the emerging competition from corporate retail chains. For one, they
have the advantage of location, servicing the needs of families located in their vicinity. Indian
housewives typically do not possess personal transport; they prefer to walk to nearby stores for their
daily shopping, rather than to make longer trips to supermarkets located farther away. Adding to their
convenience, neighbourhood grocery stores in India often offer a number of additional services such
as credit and home delivery, and they typically keep very long hours. They are also able to run on
wafer-thin margins because they rely on family or cheap, untrained labour; incur low rental costs (or
operate from their own property); and spend very little on display and interiors. These practices
enable neighbourhood retailers to keep prices low and offer attractive discounts. Neighbourhood
retailers are also willing to sell tiny quantities of loose (unpacked) grocery items, which is a major
attraction for poor families. Given these factors, it’s not surprising that corporate retail continues to
account for only a tiny proportion (estimated at less than 4%) of retail sales in India—even though
they began operations many years ago
To sum up and what would support our business plan following is the reality

Given their respective strengths, however, corporate and traditional retailing can co-exist and
growin India for a long time to come. In fact, many customers already frequent both types of stores;
much of corporate retail’s growth may represent enhanced consumption as a result of rising incomes
and the growing variety of consumer goods, rather than the decline of traditional retailers. Until
recently, moreover, Indian corporate retailers have faced little popular opposition, which indicates
that most traditional retailers have not felt seriously threatened by them. In this light, the recent
upsurge in protests against corporate retailing has come as a bit of a surprise

The retail revolution that has ushered in modern retailing is yet to make significant in-roads
into almost 15 million kirana outlets (small mom-and-pop shops) throughout the length and breadth
of the country. The diversity of population in terms of demographics (income ranges included),
shopping patterns of different segments of consumers, the "every day" shopping mindset of a
majority of consumers, the dominance of groceries and food purchases of consumers in the total
retail purchases and the infeasibility of modern retail outlets in diffusing themselves to completely
replace kirana outlets are some of the reasons why retailing in India needs to be probed with
insightful consumer behaviour
Latest Policies followed by Reliance Fresh
FARM-TO-FORK MODEL ADOPTED BY RELIANCE FRESH
Traditional Model Of Retailing
Reliance “Farm to Fork”
Reliance is leaving no stone unturned and is poised to hit back aggressively and is taking following
steps and adopting policies to turn itself into a profitable venture and compete effectively with its
competitors
Reliance is trying cash and carry model again in retail
From grocery, Reliance Retail plans shift to supply :
Refereed as Farm to Folk model by Ambani
Reliance Retail was faced with massive opposition from the trading community. But like every great
visionary Reliance had a prepared back-up, and this time it was much more powerful than the earlier
one, throwing solutions to every previous dilemma . In a dramatic shift, it decided to turn into a
trader itself. It entered the food-trading business as part of a major restructuring of its food and
grocery initiative.
On 3 June 2011, at the 37th annual general meeting of RIL, chairman Mukesh Ambani announced
that Reliance Retail would launch its cash-and-carry stores this year. RIL’s past experience in the
retail business has not quite had the same success that its other businesses — oil exploration, refining
and petrochemicals
Reliance’s re-entry into the business assumes significance even as global retailers such as Walmart,
Tesco, Metro and Carrefour are expanding their presence in India, and amid anticipation that the
government is likely to ease foreign direct investment (FDI) norms in retail. Currently, FDI is
allowed only in the cash-and-carry business.
But I think Cash-and-carry is, as yet, at a nascent stage in India. Third Eyesight, a retail consulting
firm said “It’s a modernisation and organisation of the wholesale business, and an intermediate step
needed in modernising the fragmented retail business.” Something that Ambani has said he always
believed in, which he called ‘farm-to-fork’. Most cash and carry operations are targeted at hotels,
restaurants and cafeterias — the so-called Horeca market, which accounts for close to 60 per cent of
sales. Package sizes of goods are larger (meaning more per sq. ft sales and greater volume growth).
Reliance Retail officials say that the Horeca segment will not be the primary focus of their cash-andcarry business. Rather, their target audience — apart from their own chain of Reliance Fresh stores
— will be other retailers, or the kirana stores.
The cash-and-carry business is an integral part of a retail supply chain in a country like India, where
distribution and logistics are major problems and Reliance’s entry into the segment will help improve
its other retail formats. Typically, retailers attempt to own the supply chain to give them control and
better prices that benefits the end consume
It would thus be able to profit from commodity trading as well without worrying about the steep
overheads and discounts that tied its hands in its avatar as RelianceFresh..
Company has already signed up with Spencer retail chains to supply cut fruits and vegetables.
Establishing itself in Mandis
WHOLESALE TRADING (WST) : Reliance formalized its second supply chain
model to shift itself from grocery retailer to grocery supplier by focusing and establishing itself
in Mandi’s
STEPS IN WTS MODEL:
1) Reliance has owned farms on contract basis for production of specific crop which
Is decided after extensive research depending on :•SOIL CONDITIONS,
•CLIMATE CONDITIONS,
•RETURN OVER COSTS INCURRED.
So as to yield best possible results.
2) Different vegetables and fruits from such farms are collected through reliance own
logistics and brought to collection Processing centers where quality check and
otherrequired processing is done.In processing centers workers wearing balaclavas, woolen trousers
and bulky jackets work inside a room kept at a constant 30 degree Centigrade, peeling and chopping
vegetables,spinning them dry and then heaping them in small plastic packets before placing them in
plastic transport crates. At the other end of the 5,000-sq-m warehouse, men unload crates of fruits
from a truck pulled up to a spotless loading dock. A quality-control expert samples every tenth crate;
if the fruits are good a team will ready them for delivery within hours to Reliance fresh stores around
different places like U.P and as far away as Hyderabad and even Mumbai.If they are not, workers
will inspect the entire shipment and discard anything below standard.
3) Merchandise from these collection processing centres are collected and loaded for wholesale
mandi’s. As this merchandise is to be made available by 4 A.M in morning thus deliveries in trucks
are sent at time depending upon
4 ) From Mandis where the trucks have been unloaded ,roadside vendors and pull carters buy fruits
and vegetables to supply in households
Recruiting best of talent in retail from all around the world
Recently in August 2011 Mukesh Ambani did a 3rd rejig of his top management at Reliance Retail.
Rob Cissell of Walmart will be taking over as chief executive officer (CEO) of Reliance Retail.
Cissell has been with Walmart in China for several years and has recently resigned.
He will be accompanied by one of his former colleagues from Walmart China called Shwan Gray.
He will be taking over as chief operating officer (COO) of the Reliance Retail business. Their
mandate is to turn the business around and make it profitable within the next two years.Initial
contract has been signed for two years only. They will have to focus primarily on food, FMCG and
electronics business. Secondly, they will also have to focus on the big plans for the cash and carry
segment that Mukesh Ambani announced during his speech in the last AGM. These core focus areas
which are expected to turnaround the retail business for Reliance.
Early last year Gwyn Sundhagul who was with Tesco team in Thailand was hired to takeover
Reliance Retail business. He along with 20 senior managers moved in from Tesco Thailand to take
over the business. They restructured the entire value format and started focusing on the big format of
Reliance Retail. However, things did not match up to the expectations of the top management of
Reliance Industries. So lets see how much success the new management team could bring to the loss
suffering chains of Reliance Retail
Door to door selling by Reliance Fresh
Reliance Retail is the first national retailer to try direct selling
Basic motive is to increase the sales of its private labels which always had higher margins than
national brands as in previous years private labels of Reliance has not been such a success compared
to its competitors Future Group
Reliance Retail has begun door-to-door direct selling through housewives and housing societies to
boost sales of its private brands such as Sudz detergent, Amara soaps and Healthy Life food items.Its
subsidiary Reliance Home Products has launched a 'Home Club' initiative on a pilot basis to sell
products at consumers' doorsteps at 30% discounts through members-primarily housewives-who will
earn 10% of their sales amount as commission.This is an attempt to sell our products at wholesale
prices which could not only exhaust the inventory that has been piling up but also create a new sales
channel
Competitor’s Move:
The following are the reasons for changes in Reliance Fresh’s Strategy and some of the
highlighting news articles related to the competitor: Future Group’s Big Bazar
Pantaloon earmarks Rs900 crore for retail space news
Leading retailer Pantaloon Retail India Ltd (PRIL) has allocated Rs900 crore over the next three
years on 9 million square feet of retail space, which it had already booked for expansion across India
for expansion.
The move by the Kishore Biyani-promoted Future Group is being seen as a measure to ensure it had
enough expansion space in the event of multinational firms expanding their footprint into the Indian
retail sector with the entry of FDI in multi-brand, when it is allowed.
"Supply of fresh quality real estate space within large Indian metropolises is increasingly becoming
scarcer. The demand for this space is also expected to increase significantly in the near future as
more retail companies vie for this space," PRIL said in an investor document.
The group said, envisaging the future scenario, it launched an aggressive strategy of securing quality
real estate for its future expansion plans and had booked over 9 million square feet of retail space.
Sources say, the group had set aside Rs800-900 crore for the purpose.
Around 60 per cent of the total retail space that the group had booked would be used to set up Big
Bazaar stores.
Big Bazaar Assists Tata Motors Increase ‘Nano’ Sales
Kishore Biyani's discounted retail format Big Bazaar, which commenced the idea of 'Sabse Sasta Din' some
years back, is now selling Tata Motors produced world’s cheapest car ‘Nano.’
In a new move, Tata Motors has inked a deal with Future Group to sell the smallest car in Big Bazaar outlets.
Future group's Customer Strategy president Sandip Tarkas, who heads this initiative at Big Bazaar satted,
“There is a lot of commonality between Big Bazaar consumers and prospective Nano buyers. Big Bazaar as a
concept appeals to the masses and with over 150 million footfalls every year, we are trying to see how we
can sell Nano, which has a similar positioning.” This is the initial time Big Bazaar is selling a car in India. As per
industry functionaries, Big Bazaar has already sold over 450 Nanos since the trial started a month ago.
IDBI Securities research head Sonam Udasi said, “Tata Motors may have now realised that for a product like
Nano, conventional distribution system such as car showrooms can only help to an extent.” “Big Bazaar's
customers, mostly value conscious people, will directly fit in the profile of Nano buyers," Sonam added
Walmart in talks to pick up stake in Future Group's Big Bazaar
MUMBAI: At a time momentum is building to allow foreign players into front-end retail, senior
officials of the Future group and Walmart have met at least five times in the past four months, raising
the possibility of an alliance between India's largest retailer and the world's largest retailer. If the
alliance fructifies, it could reconfigure organised retail in India.
Four executives from the two camps with knowledge of the talks confirmed that Future Group owner
Kishore Biyani visited Walmart's headquarters in Bentonville, US, last December where he met
Doug McMillon, president and CEO of the American company. Biyani was accompanied by B
Anand, director of finance, and Damodar Mall, director of integrated food strategy at the Future
group. Since then, Hong Kong-based Leigh Hopkins, vice-president (M&A Asia) of Walmart, has
visited the Future group's office in South Mumbai at least thrice, the latest being last week, said three
of those officials. Biyani declined comment on the talks with Walmart saying, "There are too many
issues". "There is nothing there," he added. Walmart India President Raj Jain denied the talks. "At
the moment, we are not in any alliance talks with the Future group," he said after a long pause,
carefully measuring his words. Walmart US did not respond to an email sent last Friday.
The meetings between the two sides could have an impact on their respective partnerships in India —
an existing one for Walmart and a prospective one for the Future group, both of which have been
beset by issues. Walmart has had an equal joint venture with the Bharti group since 2006: Bharti
Walmart. However, this partnership is 'non-exclusive' in nature, which means Walmart can forge
other alliances in India. Bharti Walmart operates in the wholesale and back-end segments — the two
areas in retail where foreign players are currently allowed. Walmart, the world's largest company
with revenues of $408 billion in 2010, has reportedly been frustrated by the joint venture's slow pace
of expansion. So far, it has opened five wholesale stores under the brand name 'Best Price Modern
Wholesale'. In calendar 2009, according to data from the Registrar of Companies, the JV lost Rs 151
crore on revenues of Rs 198 crore.
"Maybe Bharti is not investing so much as Walmart would like it to do," said Harminder Sahni,
founder, Wazir Advisors, a boutique consultancy. "So, there is a possibility of Walmart bringing
another equity partner to ramp up."
Big Bazaar special offers for different events (Cricket World Cup)
VIJAYAWADA: With the aim of connecting cricket lovers to the ‘ICC Cricket World Cup 2011',
retail major Big Bazaar unveiled a range of merchandise at a fashion show held on Wednesday. Ranji
cricketer Swaroop unveiled the collection during the show.
Store manager K. Bhanuprakash said that lovers of cricket around the world were gearing up for the
ICC Cricket World Cup 2011 with just about 44 days to go for the start. “We are delighted to be
associated with the ICC as the authorised retailer for the World Cup merchandise. Through our range
of offerings in apparel, home and personal care, we attempt to cement a strong relationship with our
customers by enabling them to express their appreciation and cheer for cricket by sporting the fan
look,” he said.
Cricketer Swaroop said: “It has been a pleasure to be associated with this event at Big Bazaar. I
would like to invite all cricket lovers to show their spirit for their favourite team and the player by
wearing the authorized ICC CWC 2011 fan merchandise available at Big Bazaar stores.”
Mr. Bhanuprakash said Big Bazaar offers specially designed cricket merchandise for men, ladies and
kids. The range includes sports tees, active dry tees, track pants, shorts, sweatshirt, caps, head bands
and more.
Future Group To Open 30 Big Bazaar Outlets By 2012
Future Group promoted by Kishore Biyani , which runs India’s largest retail chain in both value
and lifestyle formats, on Thursday said it plans to open 25-30 Big Bazaar outlets by June 2012, and
will invest Rs 300-crore for the same.
“We are planning to add 25-30 stores on the Big Bazaar front. Our target for this year is 30 stores for
Fashion at Big Bazaar and we already have 13 stores, so real estate provided we should be able to
achieve our target,” Future Group Future Value Retail Joint CEO (East & South) Sadashiv Nayak
told PTI. The Future group currently owns 152 Big Bazaar stores in the country. “We will be
investing Rs 300 crore for Big Bazaar and for the stand-alone (Fashion) it should be another Rs 7080 crore,” he said on the sidelines of Amar Chitra Katha (ACK Media) scholarship event.
Revamping Reliance:: Our own Business Plan
In context of India we consider ourselves no less than people hired from Walmart ,no is sure whether
they would we able to turn Reliance Fresh into profits but we are confident about ourselves that our
plan would definitely make Reliance one of the top three players in organized Retail business
Though reliance is there on the top in terms of market capitalization in our stock market,and have a
very operates in different kind of businesses ranging from oil and gas to communications ,
retail,construction and many more.But from past one year it is also seen the share of Reliance
Industries Limited is on a decline though this point may not be directly related with our case but
somehow it is evident that people are loosing hope in Reliance as a brand
There we cannot be sure about the reasons for it as Reliance as a whole.in some businesses like
marketing operations in Petroleum was a complete failure.Now coming to retail it is already
discussed in the case the problems they faced.
But
According to me the only major problem Reliance Fresh had was the protests from local vendors and
vegetable sellers. Some how they failed to understand the political environment which plays an
important role in doing a business in India.But again that was much of an exaggeration and hype
created by Reliance about their future plans.But now the whole scenario has changed , now there are
many more players in organized retail and there is no protest from local sellers as the market is big
enough so that both the segments could flourish well successfully.
Once I was thinking that no retail chain work on certain factors which could make them successful in
business and have them to have a competitive edge .That certain factors have already been acted
upon by Reliance in recent past and that we have done in modern policies adopted by the chain ,If
you analyze them carefully you would see they are not leaving a single stone unturned and you name
a management function whether its supply chain, direct selling they are good in it and somewhere
better than their competitors too
But where as other chains such as Big Bazaar are much ahead of Reliance Fresh both in terms of
profits and revenue. So definitely the chain need to be revamped. So critically analyzing the case we
came out with our following plan on which they could work upon .
Reliance need to work upon a term known as Value which never reflect in any of their business.You
cannot be successfully just by hiring top people that Reliance Fresh itself knows from their past
experiences. Customer should get something more by coming to your store and just not the product
they are coming for. There should be a feel good factor as we are just selling hopes in the market and
not the product or services. So following things could be done by Reliance Fresh in order to revamp
itself.
An extensive Market Research
They could hire a firm who could research for them on following aspects:






Are people aware about Reliance Fresh?
Whether they have visited the store or not?
Were they satisfied or not?
If not satisfied why not?
What all improvements could Reliance Fresh do?
What is the most important factor that motivates you to go to a particular grocery and fruit
and vegetable chain?
As we know market research takes a time till then following actions could be taken by Reliance
Fresh in order to revamp itself
WAREHOUSES
A lot need to be done to create a brand image about the chain and as talked earlier also about the
value generation, so if Reliance fresh is successful in doing it by some value to the society it would
have a lasting effect and position our brand in customers mind
Though our plan for this value creation might seem aggressive but is absolutely feasible keeping in
mind the potential of Reliance group as a whole.
As we all are aware about the fact there is shortage of warehouses in India which every year result in
wastage of thousands of tonnes of wheat, rice etc and also somewhat a cause of food inflation in
India. So Reliance could collaborate with government that is a PPP model and set up warehouses in
various parts of the country where government would let the farmers and even other local retailers
store their grains in exchange of a minimal charge. In return the government would give the grains to
Reliance at subsidised rates which it would sell to people below poverty line people through their
special counters in front of Reliance Fresh stores and people above poverty line will also get grains at
discounted prices.
So this will create a wave in India about Reliance as a valuable brand and point of sales being
Reliance fresh will revamp the image of chain and customer will definitely some other products also
will they come to buy grains at discounted prices
So this single activity could benefit Reliance Fresh in following ways
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1.Positive word of mouth about Reliance Fresh
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2. Good contacts and positive relations with government agencies and local vendors , the
main cause of shutdown of its various stores in 2008
3. Definitely a noble cause for BPL people and could be termed as a greatest CSR activity by
any company in recent past
Venue to Launch Good/Service
As we could see majority of players are only playing on Pricing strategies, discounts and promotions
and none of them is focussing on the customer feel good factor. So here we have a strategy :
As you know there are beverages, biscuits or any ready to eat dishes which are being launched
everyday by various companies. So we would allow them to distribute free samples in our store to
the people shopping or they during initial month of the launch they could have a kiosk give the
product at discounted price to make customer try your product and it is always difficult to make the
customer buy your product first time, if your product is good then definitely he will buy it even
without discounts.
The company who is putting its stall have a benefit here that the customer is already in a mood to
shop which is not always when they display a new product at road side
They are getting air conditioned space for their stall or salesman giving samples free of cost
Reliance Fresh is benefiting as it would create a brand recall and some customers would come just to
get free samples and will land some other products from the chain also
Customers would feel happy obviously when they come tired from somewhere and on the entry they
get a energy drink as a free will obviously lift their motives to buy something and would make them
feel special which should be the ultimate goal of any business
You might be thinking that is not always that some brands would be there to give drinks and other
products as free samples then this strategy would not work but then also we have chalked a plan and
that is positioning your Private Labels whether it is biscuits, jam, butter , bread or drinks. As a
retailer everybody wants their private labels to be successful as it always had 15-20% more margin
than national brands, but as stated in the case private labels of Reliance Fresh have not been that
successful and people are still hesitant to buy them so it would be a great way to promote them
Never Experienced Comfort in Retail
This is a concept I guess never had been done by any retail chain the world
It is usually we Indians imitate the models of business run in western countries, but we know
consumer behaviour of Indian people is one of the most complex and not easy to understand
Take the case of Restaurants we still prefer the food to be served at our Table instead of self service ,
even in a buffet system people prefer some things like Tea or toasted breads to be served at table
rather than do it themselves and now take the case of our houses we have maids for washing clothes,
dishes and cleaning home something different from our western counterparts so we are somewhat
spoilt or we could say we could afford it due to cheap labour available in India
So why not introduce this concept in a retail store.
Suppose I just need bread and butter and that too of a size and brand I always tale so there is no other
brand I want to see and I am coming tired from our office and I don’t want to go to the other side of
the big retail store just for these 2 products
Here comes our plan to the rescue
Why not there could be some helpers standing near the cash counters or the main entrance of
the store and could take your order and bring you the necessary items and in the same time I
could be there in the cash counter line which also sometimes take time.
So it benefitted the customer in the following ways
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Saved from the physical labour
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Saved time
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A feel good factor
Now I would like to answer the possible questions which would come in your mind after reading this
point of ours
Everybody will order the goods to the helper standing there and will result in chaos?
But you should not forget that everybody have not decided exactly which product, brand ,size ,
quantity they have to buy so it is not meant for them , some people just come to these outlets for
these purposes only that the goods here are properly displayed and they properly compare the prices
and other features and then only buy
What type of customers are you targeting by this policy?
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Who usually are tired after coming from their businesses or jobs and does not want to roam in
the store
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Who are usually short on time
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Who have pre decided on the product, brand, size and quantity of product they want to buy
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Who are too old to learn and does not fit themselves in this concept of buying product,
I would like to give my example of my parents itself. I am from Roorkee and recently an Easy Day
store opened there and my parents was quite satisfied with the availability of goods there, that time I
was with them and searched all the items what my mother told me she wants, now when I came to
hostel my mother said she never went there again as she does not want to search the products there
and just don’t like the concept as she is used to her early habit of ordering the goods. So there is a
large class of people we are targeting here which is still left by almost every grocery and fruit retail
chains present in India
While I was writing this point an another concept came in my mind that is somewhat related to the
ordering thing only but its ordering pre ordering on the phone or through internet. It would again
save a lot of time and would be convenient for today’s tech savvy generation for sure.
Customer could just order the products we want on the phone or internet and the store would keep
them ready in a bag and the they can pay for it while collecting the goods from the store or could just
pay also through their net banking accounts or debit/credit cards
In addition to this mobile application could be developed for ordering and even payment delivery. As
we know with changing lifestyle and increase in smart phones it is the most convenient method for
many nowadays.
Even the concept of mobile wallet has come in which you could have pay your various bills or avail
other facilities without having a banking account and just having balance in your mobile wallet . So
possible collaborations could be done in this field too.
Wi fi Enabled Stores
Again we are leveraging on the technology and targeting youth generation and office goers by
this policy
Though it may sound a very small policy but I am sure it would be again a first in a food and grocery
retail chain. Though for you and me internet might not be so important that it might urge you to go to
a Reliance Fresh store to access it but for some it is definitely
For someone access to share market is an essential every minute , for some an e-mail might change
their fortunes and more some just to update a status on Facebook or to see what people have
commented on the picture I recently uploaded on their facebook accounts..
So its for sure today’s generation feel handicapped without Internet and we are their support or just a
motivating factor for a child to accompany his parents to a reliance fresh store
Now the reader have a question in mind that what if people would come to just access internet and
not buy anything??? Definitely it would happen but again on the positive side we sell hopes and even
if just 1 customer buys from 5 who just came to access internet it is a success for our chain and
definitely do not forget again the +ve word of mouth and brand value it would create
Special assistant for pregnant women and senior citizens
Just after reading this point it comes in your mind that usually pregnant women and senior citizens
do not go to shop alone but then you are not aware about the changing demographic patterns and
lifestyle in India. It is usually seen in metros the concept of joint families in almost coming to an end
and more and more nuclear families are coming into picture and even both husband and wife are
working.
So keeping this in mind there would be employees that too ladies employed to keep care of such
strata of people and would assist them in buying anything they needed and even bring goods from
them if it is located somewhere far in a store
A whole new re branding need to be done
Though it would be expensive on the companies part but still it is essential once and they could
leverage it benefits in long term. It could include
Sponsoring a sports event preferably a cricket series a first by a retail chain of its kind
They could also rope a brand ambassador
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Designing an ad which highlights the points discussed above like its
Ready to help
Have something for everyone whether you are student, working professionals, housewife,
senior citizens
Availability
Tie up with big stores in semi urban areasIt is essential for any chain to widen its reach and expand itself to more and more cities
But according to us retail is all about Space and People. So with ever increasing property prices it is
not feasible for any chain to keep buying land in which ever city they want to enter, even getting land
on lease at appropriate place is not always easy in a city /town
So they could have a tie up with the popular store of a town which should have following criteria’s
fulfilled
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Should be big enough
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Should be popular among local citizens
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Should be credible and reliable
So how did local store benefit from it?
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They get to use the name of Reliance Fresh which is a big brand in itself in return of a
margin they have to give to Reliance
Renovation of shop and new paint and boards free of cost
They would have a flexibility to use supply chain of Reliance Fresh or he could his own
suppliers
Management tips from Reliance on various aspects of business
He would be able to sell the goods at cheaper rates compared to other stores in the town
How did Reliance Fresh benefit from it?

Help them to extend their chain in semi urban cities
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Saves the cost of buying land and setting up a store
Access to the customer base which already trust their local shopkeeper
Feedback System
As said in service sector a dissatisfied customer never complaints but does not returns back
So a proper feedback system needs to be there to ask people
Whether they are satisfied with the services given by the chain or not ?
What all could be improved in our existing model?
What is the most important factor you consider in a while going to a particular grocery and vegetable
retail chain?
Transparency and surprise audits at regular intervals
There should be surprise inspections at various stores to keep in check
 Whether inventory is properly handled or not
 No goods should go out of the store without proper bills that is to stop leakage
 Employees are properly trained or not to handle various queries of customers and are
courteous to the customers
 No employee is leaving the store before time or taking leave without permission
Immediate action should be taken against an employee if he is found guilty
This fear of surprise checks will help Reliance Fresh to keep things in control
References
www.ril.com
www.economictimes.com
www.financialexpress.com
www.ibef.com
www.premium-papers.com/post/retail
www.ehow.com/pricing-strategy
www.businessknowhow.com/marketing
www.va-interactive.com/inbusiness/editorial/sales