Retailing Project on

Reliance Fresh

Submitted by:
Bandari Shravan Kumar
2015JULB01022

Executive Summary
The India Retail Industry is the largest among all the industries, accounting for over 10
per cent of the countrys 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 Groups 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:

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 centres.
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 Vs 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,
Pyramid, 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 MBOs:
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.
INDIAS NUMBER OF DOMESTIC GROCERY CHAINS AND EARLY
FOREIGN ENTRANTS

INDIAN RETAIL INDUSTRY: AN OVERVIEW

The India Retail Industry is the largest among all the industries, accounting for
over 10 per cent of the countrys 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.

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.

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.

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.

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.

Indian retail is expected to grow 25 per cent annually.

Modern retail in India could be worth US$ 175-200 billion by 2016. The Food
Retail Industry in India dominates the shopping basket.

The Mobile Phone Retail Industry in India is already a US$ 16.7 billion
business, growing at over 20 per cent per year.

The future of the India Retail Industry looks promising with the growing of the
market, with the government policies becoming more favourable and the
emerging technologies facilitating operations.

THE INDIAN RETAIL SCENE

India is the country having the most unorganized retail market. Traditionally it is a
familys livelihood, with their shop in the front and house at the back, while they run
the retail business.

More than 99% retailers 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.

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.

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.

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.

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.

Sustainable competitive advantage will be dependent on translating core values

combining products, image and reputation into a coherent retail brand strategy.

There is no doubt that the Indian retail scene is booming. A number of large
corporate houses Tatas, Rahejas, Piramals, Goenkas have already made their foray
into this arena, with beauty and health stores, supermarkets, self-service music
stores, new age book stores, every-day low-price stores, computers and peripherals
stores, office equipment stores and home/building construction stores. Today the
organized players have attacked every retail category.

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 Kearneys 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 Indias 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 centres 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 centres 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 mobilebased 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 agrirepresentative 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 years
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).

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.

Reliance Retail will enter the cash and carry market with "Reliance Market" in
Ahmedabad; the first one to be opened by August 2011.

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.

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.

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.

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 multibrand 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-and carry 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 worlds 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.

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.

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.

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.

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 Solley, 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.

Pantaloons 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 Pantaloons 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 201213.

Shoppers Stop has plans to invest ` 250 crore to open 15 new supermarkets in the
coming three years.

Pantaloons 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 revenues 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

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.
As the contemporary retail sector in India is reflected in sprawling shopping
centres, 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 behaviour, 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.
The trends that are driving the growth of the retail sector in India are

Low share of organized retailing

Falling real estate prices
Increase in disposable income and customer aspiration
Increase in expenditure for luxury items (CHART)

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.

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.

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.

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.

Retail, one of Indias largest industries, has presently emerged as one of the
most dynamic and fast paced industries of our times with several players
entering the market.

Accounting for over 10 per cent of the countrys GDP and around eight per
cent of the employment retailing in India is gradually inching its way toward
becoming the next boom industry.

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. Indias vast middle class and its almost
untapped retail industry are key attractions for global retail giants wanting to
enter newer markets.

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 favourable demographic outline.

TRENDS OVER PAST FEW YEARS

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 Favourable 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 behaviour 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 behaviour 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 Indias organized retail sector
Till recently, the government and the industry alike were betting big on the countrys
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 Subhikshas 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 have classified into four major categoriesfood 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, Spencers, 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 sectorReliance Fresh,
Spencers, 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 Indias organized retail and is causing the closure
of such outlets?
Unorganized Retail Vs Organized Retail
Unorganized Stores
Characteristics

Discounted Small-stores

Small store, household Comparatively large,

shelving business generally
branded
products, employing family approximately
15 employees members
per 2,000 sq. ft.
Unplanned
purchases, round the
corner
location,
consumers

Driving factors

Planned purchase, availability

purchase perishable of several brands of a
goods like milk and
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
associate with them, parking,
Challenges 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, Spencers, 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

Advantages

Disadvantages

In-house brands

From the point of

view consumers: ~30Brand name
40% cheaper than
Consumers associate
brands
them with quality
From the point of view of
Advertisements, hence retailers: Only production
better visibility
cost involved and no
Prestige associated with advertisement
or
owing the brand
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

Some Examples
Tea

Red Label, Lipton, Taj Reliance Value (Reliance

Mahal
Fresh)

Hand wash

Dettol, Lifebuoy

Care mate (Big Bazaar)

Jam

Kissan, Tops

Smart Choice (Spencers)

Noodles

Maggi, Top Ramen

Reliance Select (Reliance

Fresh)

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!
Subhikshas 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 rumours 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?
Vijay Lakshmi 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 behaviour.
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 behaviour 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 Vijay Lakshmi, 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-andpop 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--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
behaviour, 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 step 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 CavinKares LimeLite, Maricos 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 industries, 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 countrys 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 prevailing 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 stores main focus would be fresh produce like fruits
and vegetables at a much lower price, but also spoke at length about its farm-tofork 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
Groups 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 onestop-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.

Quicksilver, 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, dairy
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 Kilometres.

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 supplychain for nonvegetarian products. Besides, the stores would provide direct employment to 5 lakhs
young Indians and indirect job opportunities to a million people,
according to the
compan
y.

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 prevailing in West Bengal and Orissa, it
UP,
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
the
m.

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 stores main focus would be fresh produce like fruits and
vegetables at a much lower price, but also spoke at length about its farm-tofork 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 in society. 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 Centres. 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.
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 was 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 didnt 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

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
buyer supplier 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 investmentfreely 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, Indias 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 Indias 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 Pantaloons 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 led to unemployment at one end, and
at the other end it has led 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 has 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 transparency. 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 outlets completely overtake 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; everything 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 modelwhich combines direct sourcing from
farmers (including contract farming), large volumes and substantial investments in
infrastructurewill 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.

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

1.Positive word of mouth about Reliance Fresh

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 an 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 dont
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

Saved from the physical labour

Saved time

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?

Who usually are tired after coming from their businesses or jobs and does not
want to roam in the store

Who are usually short on time

Who have pre decided on the product, brand, size and quantity of product they
want to buy

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 dont 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 todays 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 todays 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 has 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 companys 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

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 criterias fulfilled

Should be big enough

Should be popular among local citizens

Should be credible and reliable

So how did local store benefit from it?

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

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