Over the coming fortnight, Raghu Pillai, President & CEO, Retail Operations & Strategy, Reliance Retail (RRL), will be on the road, and shuttling between Delhi, Bangalore and Hyderabad. It’s time for the Reliance Retail juggernaut to unleash three more specialty formats on unsuspecting masses.
That it still has ample empty spaces is another matter, but the quest for size and scale is typical of the Ambani strategy of creating capacities not based on today’s demand conditions but what will play out in future.
Pillai hasn’t had much time to breathe easy—the 30 minutes he spent with this writer at the Bombay Gymkhana may have been the only moments of respite in a long time, sandwiched as he is between meetings of the various teams (of the Footprint Stores, the Digital Stores, Wellness Stores…see below: The Reliance Rollout). Over the past five weeks, and the coming seven, Pillai has had, and will have, his hands full putting in place some more hypermarts.
The Reliance rollout
So far, it’s spread over 3.5 million square feet.
572 Reliance Fresh stores across 59 cities
3 Reliance Trends stores – Apparel & accessories
4 Reliance Footprint stores –Shoes
5 Reliance Digital stores – Consumer durables
2 Reliance TimeOut – Books, music, gift store
4 Reliance iStores – The Apple store
3 Reliance Mart – Hypermart
8 Reliance Super – Minimart
11 Reliance Wellness stores – Wellness products
2 Reliance Jewels stores – Jewellery
1 Reliance Autozone – Automotive specialty store
“In categories like garments and lifestyle, and to a certain extent consumer durables, (organised retail) has made significant progress. But in foods and grocery, the biggest market, the action has yet to play out,” says Pillai, who is also on the board of RRL.
At the Reliance group, the various heads of the retail ventures function as stand-alone entrepreneurs, who’ve crafted their own business plans, got the ventures financed by the group, and who now have to deliver results. The common thread running through these various forays is a burning desire to provide quality products and services at the best prices, and in the most convenient setting. For this purpose, Reliance is also attempting to create an efficient global supply chain in an effort to add more value.
“We have seen significant progress at the shop-keeping end of organised retail. But the competitive edge will lie with those who are successful in creating an efficient supply chain. The big lacuna today is in logistics and distribution, which also makes it a significant opportunity,” says Pillai.
One of the many significant shifts in strategy at Reliance over the past year has been the eagerness to strike joint ventures. And that’s best manifested in the retail thrust. RRL has joint ventures with Marks & Spencer (for clothing and home ware), Pearl Europe for the launch of a chain of optical stores, and with Office Depot for office products and services. More such JVs are expected, and officials don’t rule out such an arrangement for the flagship business of food & grocery (although no work has begun yet on this front). The rationale for the JVs, as Pillai points out, is two-fold: “There are two advantages of opting for alliances. One, it is the quickest way to scale up to a global standard.
And two, one gets a chance to plug the Indian production base into the global supply chain, which is worth $5-6 trillion today.” Analysts, however, point out that JVs are also a way to hedge one’s risks—and Reliance may be doing just that; if the gambit doesn’t pan out, the JVs could well turn out to be the perfect exit strategy.
Competitors, most of whom are watching RRL’s rollout with eager eyes, wonder whether the Rs 25,000 crore that Reliance has professed to spend on retail will ever be used up. They point out that the Reliance top brass could well be waiting for paybacks before they make fresh investments (investments made so far are estimated by industry observers at a few thousand crore; RRL officials could not offer a figure). What’s more, point out rivals, the various formats rolled out so far are still experiments, and the biggest rollout has been of the smaller-size Reliance Fresh outlets.
The huge hypermarts sound impressive but they don’t mean much if they can’t be filled up. Pillai points out that the 1.65 lakh sq. ft mart is one of its kind, and RRL is currently looking at how to optimise that space; some large specialty retailers are headed there, adds Pillai. Such huge spaces are a matter of concern, but RRL’s hypermarts will be in the 65,000-70,000 sq. ft range, which are eminently doable. Clearly it’s early days yet for RRL, but there’s little doubt: The RRL juggernaut has begun to rumble.
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