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The
mega
retail
story
February 01
2008SUBMITTED TO:
Dr. HIMANI SHARMA
SUBMITTED BY:
ADITYA RAVAL R.NO. 03
ASHISH SINGODIA R.NO. 12
CHAKRAVEER RATHORE R.NO. 15
PRIYANKA YADAV R.NO.38
RICHA MALHOTRA R.NO. 43
SIMRAN BEDI R.NO.50
SECTION C
Strategies
adopted by
reliance
retail
1
“The fundamental belief for us is that Growth is Life and we have to continue to grow at
all times."
-Mukesh D. Ambani
Chairman & Managing Director
Reliance Industries Ltd.
2
ACKNOWLEDGEMENT
WE express my sincere gratitude and deference to Mrs. HIMANI SHARMA
for her esteemed stimulation and support throughout the project work.
We would also like to express my veneration and thanks to Mr Sanjay
Awasthi GENERAL MANAGER Reliance Retail noida for his invaluable
guidance and incessant encouragement.
We are also thankful to the staff members of the reliance retail department
for providing necessary information and co-operation during the project.
3
RELIANCE INDUSTRIES LIMITED
INTRODUCTION
The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest
private sector enterprise, with businesses in the energy and materials value chain. Group's
annual revenues are in excess of US$ 25 billion. The flagship company, Reliance
Industries Limited, is a Fortune Global 500 company and is the largest private sector
company in India.
Backward vertical integration has been the cornerstone of the evolution and growth of
Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of
backward vertical integration - in polyester, fibre intermediates, plastics, petrochemicals,
petroleum refining and oil and gas exploration and production - to be fully integrated
along the materials and energy value chain.
The Group's activities span exploration and production of oil and gas, petroleum refining
and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals),
textiles and retail.
4
EXHIBIT 1
Source : www.ril.com
R]eliance enjoys global leadership in its businesses, being the largest polyester yarn and
fibre producer in the world and among the top five to ten producers in the world in major
petrochemical products.
The Group exports products in excess of US$ 15 billion to more than 100 countries in the
world. There are more than 25,000 employees on the rolls of Group Companies. Major
Group Companies are Reliance Industries Limited (including main subsidiaries Reliance
Petroleum Limited and Reliance Retail Limited), Indian Petrochemicals Corporation
Limited and Reliance Industrial Infrastructure Limited
5
6
EXHIBIT 2
RIL M os
Sos s
S sl
7
FINANCIAL STRENGTH
EXHIBIT 3
Source : www.ril.com
These graphs depict the financial status of ril. The financial strength of reliance industries
is growing every financial year.The scale of reliance enables the company to take up
multi-billion dollar projects on the strength of its own cash flows.The reliance stock has
shown great performance in the past year.It shows the financial stability of the stock.
Next we discuss about the structure of the company.the reliance industries have shown
their presence in petroleum, infocom, telecom,BSES, capital and retail.the figure below
depicts the same.
8
PRODUCTS AND BRANDS
The Company expanded into textiles in 1975. Since its initial public offering in 1977, the
Company has expanded rapidly and integrated backwards into other industry sectors,
most notably the production of petrochemicals and the refining of crude oil. The
Company now has operations that span from the exploration and production of oil and
gas to the manufacture of petroleum products, polyester products, polyester
intermediates, plastics, polymer intermediates, chemicals and synthetic textiles and
fabrics. The Company from time to time seeks to further diversify into other industries. In
January 2006, the Company approved a plan to establish a retail business through a
subsidiary Reliance Retail Limited that will operate, among other things, supermarkets,
convenience stores and specialty stores across India. The Company approved initial
expenditure of US$ 750 million to fund the initial stages of this plan. The Company’s
subsidiary Reliance Infrastructure Ltd. is currently establishing infrastructure facilities
such as roads and buildings for the proposed Special Economic Zone (SEZ) at Jamnagar,
Gujarat. The Company's major products and brands, from oil and gas to textiles are
tightly integrated and benefit from synergies across the Company. Central to the
Company's operations is its vertical backward integration strategy; raw materials such as
PTA, MEG, ethylene, propylene and normal paraffin that were previously imported at a
higher cost and subject to import duties are now sourced from within the Company. This
has had a positive effect on the Company's operating margins and interest costs and
decreased tjihe Company’s exposure to the cyclicality of markets and raw material prices.
The Company believes that this strategy is also important in maintaining a domestic
market leadership position in its major product lines and in providing a competitive
advantage. The Company's operations can be classified into three segmentsnamely:
• Petroleum Refining and Marketing business
9
• Petrochemicals business
• Others (including Crude Oil and Natural Gas Exploration &
dProduction business.
The Company’s refinery at Jamnagar is the third largest refinery at a
single location in the world. The Company is:
• The world's largest producer of Polyester Fiber and Yarn
• 4th largest producer of Paraxylene (PX)
• 5th largest producer of Purified Terepthalic Acid (PTA)
• 7th largest producer of Polypropylene (PP)
The living standards of the people in India are experiencing a paradigm shift. The
impetus behind it is the boom in the Indianeconomy, which is growing at a rate of nearly
8 percent. Moreover thefactors like income dynamics; favorable demographics and
growth inconsumption also provide propulsion for the same. As a result the
country is witnessing an unprecedented consumption boom.Although retailing in India is
not a new concept, the system oforganized retailing is still at a nascent stage. According
to the latest figures retailing in India is estimated to be US $ 200 billion. Out of this the
proportion of organized retailing is merely 3 percent or US $ 6.4 billion. Moreover it’s
going to bolster at 25-30 percent per annum, and the prognostication is that it will attain
US $ 23 billion by 2010. It means that organized retail would constitute up to 9 percent of
overall retail sales. To make the most of this opportunity the Indian retail players need to
be well prepared for quick sales up across dimension of people, processes and technology
in addition to identifying the right formats and propositions for the Indian customer.
The Indian consumer is changing rapidly. In the present days the average customer is
richer younger and ambitious. They have more purchasing power than ever before. The
10
consumer today can have an access to the latest news in terms of the most advanced
technology used in different products and the latest brands available in the market
for varied products. The consumer today aspires to buy the state of the art products to
make his life better. But in this aspiration he/she is not ready to compromise on quality
front. In fact they pay great emphasis to the value delivered by the product in terms of
psychic cost, time cost, energy cost etc. Customer segments, already diverse, have been
sub-divided with joint families giving way to nuclear families, and the increasing number
of working couples. So as far as the Indian context is concerned, to succeed in retail
marketing, diverse customer segments, including nuclear families, working women etc ve
to be enticed to come to the retail malls. A suitable method of attracting these customers
is to provide them a wide range of choice and the convenience of shopping under a
common roof. So the only way the retail industry can prosper is by being innovative and
taking cognizance of the need of the customers. Reliance industries’ entry into retail with
$ 5.6 billion investment has started a new chapter in the Indian Retail sector. Reliance
Industries Ltd Of these, franchisee partners will run 1,500 outlets, a stark departure from
RIL’s current policy. Entry of Reliance in this sector is a well thought decision. Driven
by changing life style, strong income growth, favorable demographic patterns and the
extent to which organized retailers succeed in reaching lower down the income scale to
reach potential customers towards the bottom of the customer pyramid, organized retail
growth in the coming five years is expected to be stronger than GDP growth. Growing
customer credit will also provide impetus in boosting customer demand.
One of the main subsidaries of reliance include Reliance Retail. Reliance Retail
opened its first store, a food and grocery format store, in Hyderabad on October 18, 2006.
The company plans to have 784 supermarkets in some of India’s smallest cities before
opening in the country’s 10 largest metro . In an encouraging spate of retail outlets
opening in the National Capital Region in the last six months, Reliance Fresh can claim
hands down that it is on top and rising. The sales have exceeded all estimates with
average sale by a store being of the order of Rs five lakhs, while the company had
estimated the same to be around Rs Two lakhs.The footfalls are also high being 4,000 per
day
11
Without wanting to be identified, sources within the Reliance group of companies say the
company has so far opened Reliance Retail. Reliance Retail opened its first store, a
food and grocery format store, in Hyderabad on October 18, 2006. The company plans to
have 784 supermarkets in some of India’s smallest cities before opening in the country’s
10 largest metro .Also, back end sourcing has been strengthened so that the demand is not
left unattended or not met. The effort also is to step up quality controls and checks. and
help the existing vendors by providing them quality products. Additionally, it is stated
that the mother company of Reliance Fresh, Reliance Industries Ltd is pitted to start in
the National Capital Region a hyper market that will sell electronics goods as part of
project.
The company is truly emerging as a well diversified conglomerate with global
competence in technology, management and financial capabilities to meet the needs of a
rapidly growing Indian market.
With domestic market shares ranging from 40-80 per cent, RIL is also ranked among the
top 10 producers globally, for all its major product segments. It is one of India's largest
business conglomerates with total revenues of Rs 1,00,650 crore (US$ 22.6 billion).
It is being speculated within the industry that the ROIs made by RIL in the retail space
will far out-shadow its existing core flagship businesses – and very soon retail will
become the core business for the Mukesh Ambani-controlled Reliance empire.
On the occasion of the 60th Independence anniversary of India, RRL launched its 3rdand
much awaited format of stores – the hypermarket format, under the brand name of
‘RelianceMart’ at the Iscon Mall in Ahmedabad.‘ RelianceMart’ is India’s largest
hypermarket spread across 165,000 square feet of shopping area.
The hypermarket has a range of over 95,000 products from a wide array of categories
from fresh produce, food & gross. Fully integrated business model to add tremendous
value to the Indian consumer in multiple formats on a pan-India basis
12
VISION 2010
Reliance plans to make it big by the year 2010. The strategy is to set up a chain of
hypermarkets, supermarkets, discount stores, specialty stores, and convenience store
formats in 800-odd cities and towns across the length and breadth of the country at an
investment of around Rs 30,000 Crore (US$ 8 billion).RIL has set a revenue target of Rs
90,000 (US$ 20 billion) from its retail operations by the year 2010, almost 10 percent the
size of the current organized retail business in the country. It dwarfs India’s current
numero uno in organized retail chain, Pantloon Retail, which currently has an annual
turnover of US$ 240 million from its 84 outlets spread over 30 cities and has projected
revenues of US$ 2 billion by 2009. The retail foray will have almost all the leading ndian
andinternational brands, and possibly a sizeable presence of private labels as well, and
ould clearly try and build a loyal customer base with tens of millions of consumers from
across the country. While the sheer scale of operations will ensure Reliance’s retail
business a 20 per cent return on investment over a span of five years, its rural low cost-
high return investment will ensure sufficient competitive edge vis-à-vis purely urban
retail operators.According to some reliable sources the retail business would start with
20 destination points in A-class cities in India. On an average these retail centers would
spread over 100 acres of land that would house leisure and entertainment facilities, small
hospital complex, eateries and a big mall.
GOALS
To lead the Retail Revolution by bringing to the Indian consumer a destination where he
gets a choice of products and services limited only by his imagination and create an
13
experience that is joyful and lasting. To be a trusted destination for the consumer, a place
where he finds his needs understood, requirements met and satisfaction guaranteed.
OBJECTIVES
Be the single largest organised retailer in the country. Range of products from durables to
perishables, basics to luxury, hearth and health, finance to fantasy. A procurement &
delivery system ensuring availability of the right product at the right time so the
consumer need is met – always Introducing new products either imported or own brand to
fulfill unfelt needs. Educate on products and services that bring value to the consumer Be
the ‘outlet of choice’ for the consumer. The best value to the consumer, quality at lowest
prices. Consumer connect initiatives
Industry analysis
GLOBAL TRENDS
With the rise in income, the consumers all over the globe sought both convenience and
new tastes and stimulations. As a result the supermarkets were able to expand their scope
of business. It led to the emergence of supermarkets as the dominant grocery retail form
in the latter half of the 20th century, in both Europe and North America.Much has
changed over the last decade on the Global Retail Stage.Apart from Wal-Mart’s
dominance, which has remained the top retailer in the world, there’s little about today’s
environment that looks like the mid-1990s. The global economy has changed,consumer
demand has shifted, and retailer’s operating systems today are infused with far more
technology than was the case six years ago. The opening up of the economies by the
various Governments in the mid 1990s has been a major boost for the retailers. Saturated
14
home markets, fierce competition and restrictive legislation have relentlessly pushed
major food retailers into the globalization mode. From an operational point of view,
active practitioners have voiced their opinion that retailer concerns in 2003 have turned to
deflation, lack of pricing power, global over-capacity, low interest rates, economic
stagnation, slump in world tourism and declining consumer confidence.But, even before
the global economic slowdown that forced the retailers into monitoring costs more
effectively, technological advances were a way of life in retail organizations. With all the
emphasis on The situation analysis here shows the position of retail business.It depicts
that the retail sector is booming aand the reliance contribution to the scenario. technology
and cost cutting, a major thrust of retailers continues to be demand based: finding new
markets through globalization efforts. Till year 2000; about 53 percent of the top 200
retailers operated in only one country. Today, only 44 percent remain single country
merchants. The benefits of increased sales and greater economies of scale are too large to
be ignored. Today the world wide retail sales is valued at $ 7 trillion. The top 200
retailers alone account for 30% of worldwide demand. The household consumption
worldwide increased 68% between 1980 and 2003. The leader has in-disputably been
USA where some two-thirds or $ 6.6 trillion out of the $ 10 trillion American economy is
consumer spending. Retail turnover in the EU is approximately Euros 2000 billion and
the sector average growth looks to be following an upward pattern. The Asian economies
(excluding Japan) have grown at 6% consistently till 2005-2006. Positive forces at work
in retail consumer markets today include high rates of personal expenditure, low interest
rates, low employment and very low inflation.
15
EXHIBIT4
Source: www.ril.com
Some quick facts on the Indian retail industry
India's retail sector is estimated to be worth $350 billion, of which organized retail
accounts for only $8 billion. This organized part of the retail industry is growing at 30%
annually.
MARKET DATA
• An estimated $412 billion is likely to be investing in the retail sector over the next
five years.
• Food, beverages and tobacco make up 40% of the retail sector.
• The organized food retail sector is estimated to be worth $666 million and likely
to reach $33.3 billion by 2015.
16
• Branded apparel segment is estimated to be worth $422 million and is growing
strongly at 20% annually.
• Major metro's such as Mumbai, Delhi, Chennai, Kolkata, Bangalore and
Hyderabad is where 68% of organized retail is located.
• There will be an estimated 220 malls by 2007, a significant rise from 30 in 2003.
Current lease rates in major cites vary from Rs. 88 - 120 per sq ft per month.
• India's retail industry is the 2nd largest employer, after the agriculture sector,
employing 21 million people, roughly 6% of the country's total workforce and contributes
13% of the GDP.
Foreign Investment:
• Foreign companies are permitted to hold only 51% of equity in a single brand
format only, whose products are sold under the same brand internationally.
PRODUCT PORTFOLIO
Categories will bhbe defined as 10 Segments
- Foods (Staples, F&V, Chilled, Frozen, Bakery, Processed Food)-Destination in
width, depth and Price
- FMCG (Non Food , HPC)- Destination/dominant- Range and Price
- Gen Merchandise (Plastics,Steels,etc) – Destination/dominant , full,wide and
new range
- Home ( Furnishings, Furniture)- Destination/dominant in the value segment.
- Apparel (including Leather Accessories)- Value/Design lead wide range.
17
- Life Style ( Jewellery, watches, etc) Value segment/ fast moving designs.
- CDIT ( Electrical and Electronics) – Destination in Appliances. Branded-offer
driven
- Footwear - Destination- Design lead, and Value Segment.
- Auto Accessories & Services (to cover 4 and 2 wheelers needs, car wash)
- SIS ( shop-in-shop- a means of increasing range- Food counters- chat/local
sweets,)
- Services ( ATM, Banks, Photo shops, Artisan Village, Laundry,
KFC/McDonalds, Others- electronic greeting cards, Internet etc etc)
- Private Label- Cuts across all Categories- As good or better at cheaper prices.
18
CATEGORY PRESENTATION
The BCG Growth-Share Matrix of RELIANCE RETAIL
We try to represent the different formats of retail stores if adopted by RELIANCE
RETAIL using the BCG Matrix. This analysis helps analyze the growth potential of
19
different formats of stores adopted by RELIANCE RETAIL and helps to allocate
necessary resources.
BCG Growth-Share Matrix
Source : www.netmba.com
/
20
The four categories are:
Dogs - Dogs have low market share and a low growth rate and thus neither generate nor
consume a large amount of cash. However, dogs are cash traps because of the money tied
up in a business that has little potential. In this category we will include RELIANCE
WELLNESS, RELIANCE TIMEOUT, RELIANCE I STORE as DOG category
because, as they have less market and low growth rate, but they little potential to grow in
the market.
Question marks - Question marks are growing rapidly and thus consume large
amounts of cash, but because they have low market shares they do not generate much
cash. The result is large net cash consumption. We can take RELIANCE TRENDZ,
RELIANCE FOOTPRINT, and RELIANCE DIGITAL in question mark category
because, as they newly in the market, they will take more cash & time to expand there
market. But have capacity to become STAR for RELIANCE RETAIL.
Stars - Stars generate large amounts of cash because of their strong relative market
share, but also consume large amounts of cash because of their high growth rate. In this
categories we can take RELIANCE MART, RELIANCE SUPER, RELIANCE
JEWELS as there are more than thousand of stores spreading all over country therefore
they generates large amount of cash & it have high growth rate.
21
Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that is
greater than the market growth rate, and thus generate more cash than they consume.
Such business units should be "milked", extracting the profits and investing as little cash
as possible. Here we can take RELIANCE FRESH as there are more than thousand of
stores of RELIANCE FRESH in this country therefore it generates large amount of cash
& it have high growth rate.
CORE COMPETENCIES
Largest in-house pool of intellectual capital
Attracting and retaining the best people, and nurturing the ‘intrapreneurial’ spirit
Unique financial engineering capabilities
Demonstrated ability to implement complex, multi-billion dollar projects in
record time frames
Ability to create world class assets at 30%+ capital cost advantage compared to
peer group
Absorption of diverse and complex technologies and optimal operation of plants
22
STRATEGIES ADOPTED BY RELIANCE RETAIL
At the type of inception the company used three strategies :
Farm to fork – a unique value proposition for the Indian farmer and consumer
1. Total investment of Rs 25,000 crore envisaged over the next few years
RIL could invest Rs 10,000 crore in the equity capital of Reliance Retail
in the next few years
2. 24 stores operational in Hyderabad and Jaipur
By using this strategy the company tried to benefit by establishing a relationship with the
farmers and benefit them as well make profits by capitalising on it. And reliance did
make profits from this innovative thinking. Reliance fresh came with this concept and it
worked for them. The Farmer-Corporate relationship has helped both the farmers and the
corporates in bringing the high quality low cost product to the retail shelf. To ease the
burden of the corporate in setting up farm management services, several leading NGO
bodies have taken up this activity essentially due to the fact that their operations are
mostly at the farm end. In future these farmer-corporate models would be replicated and
extended to all the farm end products. With the emergence of Private Label, they would
soon find even the retail chains to work with the farm community in developing an
efficient supply chain and to leverage on the cost advantage at both ends. The Farmer-
Corporate relationship has helped both the farmers and the corporates in bringing the
high quality low cost product to the retail shelf. To ease the burden of the corporate in
setting up farm management services, several leading NGO bodies have taken up this
activity essentially due to the fact that their operations are mostly at the farm end. In
23
future these farmer-corporate models would be replicated and extended to all the farm
end products. With the emergence of Private Label, they would soon find even the retail
chains to work with the farm community in developing an efficient supply chain and to
leverage on the cost advantage at both ends.
FUNCTIONAL STRATEGY
Superior supply chain to ensure rapid scalability
1. Successful execution of sourcing, processing and retailing of farm fresh in
less than 6 months
2. Tremendous response resulting in over 150,000 customers signing up for
the loyalty programme
3. Rapid scaling up of sourcing, logistics and locations for Reliance Fresh
stores
4. Senior management team in place with a total employee strength of 7500.
According to an estimate more than a quarter – over Rs 8,000 Crore –of Reliance
Retail’s planned investment of Rs 30,000 Crore would be spent on setting up of
the supply chain network. This unprecedented level of investment in building the
supply chain network will become a key differentiator for Reliance’s Retail
project.Reliance Retail is planning to purchase fresh vegetables and farm
produces from various states and transport the same to its warehouses, which will
subsequently transport the same to the interconnected Reliance Retail centers.
This will make sure that farmers and growers get a fair price for their produce and
the huge cost benefits of wholesale procurements gets passed on to the
endconsumer. It is believed that RIL will feed the whole retail chain through
seven large wholesale terminals. It includes plans for over 150 warehouse clubs or
distribution centers, catering to the supply and requirements of its speciality
stores, hypermarkets, supermarkets, department and discount stores. In the
24
consumer durable sector, Reliance Retail is reported to have entered into
agreements and contracts with the leading manufacturers to produce merchandise
directly from their factories.RIL’s huge warehousing facilities are to be dotted all
over the country and expected to be the nub, the nerve center for the supply base
that will feed the network of stores. Banglore, for instance, is likely to be the base
for Reliance Retail’s apparel operations
BUSINESS LEVEL STRATEGY
Cost leadership, Operational excellence
Reliance also adopted this cost leadership strategy to target more and more customers.
also adopted
The company showed good returns in the financial year 2006-07.the number of retail
1`stores increased.the following table shows the number of retail outlets started in this
fiscal year
EXHIBIT 5
25
SOURCE:www.ril.com
With time the strategies of the company has changed the folowing strategy are being used
by the company.
EXHIBIT 6
26
SOURCE:www.ril.com
k
DIFFERENTIATING STRATEGIES
27
SOURCE:www.ril.com
Reliance Retail’s differentiation strategy is built around:
World class quality of products
Widest range of product grades
Reliability of supplies at competitive prices
Extensive nation-wide distribution network
Just in time deliveries for even the smallest customer - significant savings in
inventory costs
Technology and product development support
28
ENVIRONMENTAL SCANNING
INTERNAL FACTORS
Talent acquisition and retention.
Merchandising mix
Sales promotion & Advertising.
Store layout.
Store Locations.
EXTERNAL FACTORS
Consumer choice of products
Competition
Economic condition
Socio cultural factors
Word of mouth
;
29
Competitor analysis
Group Brands Plan Products
Future Group Brand Factory 60K-100K sqft. Any
town with pop. of 1
mil
Apparels
3,300 stores by
2010
Big Bazaar 100 by 2007 end Hyper
Food Bazaar 1,000 by 2010
ITC Chaupal Fresh 54 by 2010
RPG Food World, Music
World, Books and
Beyond,
Plans 1,900 stores by
2010
Music
Tata – Infiniti
Retail
Croma & Tie up with
Woolworth's
15-20K sqft, 100
stores by 2011
Electronics
Tata – Trent Westside, Star India
Bazaar
22 Westside, 1 Star
India Bazaar
Apparel, Hyper
Wadhwan Food Spinach 1,500 o/l in next 3 - 5
years
Food
Birla Fabmall 230 stores Supermarket
Marico - Kaya Skin 55 Skin Clinics, 15
Skin zones by end
2007
Health
Ferns & Petals Ferns & Petals 70 stores Florist
Vishal Group Vishal Mega Mart 120 stores Hypermarket
ITC Wills 270 stores Apparel
Medicine Group Medicine Shoppe 700 by 2010 Pharma
30
Shoppers Stop Shoppers Stop 50 Department and 50
Hyper by 2011
Hyper
Subhiksha Subhiksha 1,000 stores by 2007
end
Supermarket
Carrefour Carrefour 200 stores Hyper
Walmart Walmart 100 Hyper & several
100 small stores by
2010
Hyper
SKNL S Kumar's 1,000 stores by 2010 Apparel
FUTURE GROUP:
Future Group is one of the country’s leading business groups present in retail, asset
management, consumer finance, insurance, retail media, retail spaces and logistics.
The group’s flagship company, Pantaloon Retail (India) Limited operates over 7
million square feet of retail space, has over 1000 stores across 53 cities in India and
employs over 25,000 people. Some of its leading retail formats include, Pantaloons,
Big Bazaar, Central, Food Bazaar, Home Town, eZone, Depot, Future Money and
online retail format, futurebazaar.com.
Future Group companies includes, Future Capital Holdings, Future Generali India
Indus League Clothing and Galaxy Entertainment that manages Sports Bar, Brew Bar
and Bowling Co. Future Capital Holdings, the group’s financial arm, focuses on asset
management and consumer credit. It manages assets worth over $1 billion that are
being invested in developing retail real estate and consumer-related brands and hotels.
The group’s joint venture partners include Italian insurance major, Generali, French
retailer ETAM group, US-based stationary products retailer, Staples Inc and UK-based
Lee Cooper and India-based Talwalkar’s, Blue Foods and Liberty Shoes.
31
Future Group’s vision is to, “deliver Everything, Everywhere, Everytime to Every
Indian Consumer in the most profitable manner.” The group considers ‘Indian-ness’ as
a core value and its corporate credo is - Rewrite rules, Retain values.
ITC
ITC is one of India's foremost private sector companies with a market capitalisation of
nearly US $ 18 billion and a turnover of over US $ 4.75 billion. ITC is rated among the
World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies
by Forbes magazine, among India's Most Respected Companies by BusinessWorld and
among India's Most Valuable Companies by Business Today. ITC also ranks among
India's top 10 `Most Valuable (Company) Brands', in a study conducted by Brand
Finance and published by the Economic Times.
ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,
Branded Apparel, Personal Care, Greeting Cards, Safety Matches and other FMCG
products. While ITC is an outstanding market leader in its traditional businesses of
Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market
share even in its nascent businesses of Packaged Foods & Confectionery, Branded
Apparel and Greeting Cards.
ITC is one of India's foremost private sector companies with a market capitalisation of
nearly US $ 18 billion and a turnover of over US $ 4.75 billion. ITC is rated among the
World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies
by Forbes magazine, among India's Most Respected Companies by BusinessWorld and
among India's Most Valuable Companies by Business Today. ITC also ranks among
India's top 10 `Most Valuable (Company) Brands', in a study conducted by Brand
Finance and published by the Economic Times.
32
TATA
Established in 1998 as part of the Tata Group, Trent Ltd. operates Westside, one of
India's largest and fastest growing chains of retail stores.
The Westside stores have numerous departments to meet the varied shopping needs of
customers. These include Menswear, Women’s wear, Kid’s wear, Footwear, Cosmetics,
Perfumes and Handbags, Household Accessories, lingerie, and Gifts. The company has
already established 29 Westside departmental stores (measuring 15,000 - 30,000 square
feet each) in Mumbai, Bangalore, Hyderabad, Jaipur, Chennai, Pune, Delhi, Noida,
Gaurgaon, Ghaziabad, Kolkata, Nagpur, Indore, Ahmedabad, Lucknow, Ludhiana, Surat
& Mysore. The company hopes to expand rapidly with similar format stores that offer a
fine balance between style and price retailing.
Trent ventured into the hypermarket business in 2004 with Star Bazaar, providing an
ample assortment of products made available at the lowest prices, aptly exemplifying its
‘Chota Budget, Lambi Shopping’ motto. Star Bazaar, presently has one 50,000 square
feet store in Ahmedabad and plans to extend its presence across all major metros. This
store offers customers an eclectic array of products that include staple foods, beverages,
health and beauty products, vegetables, fruits, dairy products, consumer electronics and
household items at the most affordable prices. Star Bazaar also includes a large range of
fashionable in-house garments for men, women and children, exclusively available at the
store.
In addition, Trent recently acquired a 76% stake in Landmark, one of the largest books &
music retail chains in the country. Landmark began operations in 1987 with its first store
in Chennai with a floor space of 5500 sq. ft. At present Landmark have 10 stores, varying
in size from 12,000 sq. ft. to 45,000 sq. ft, 3 in Chennai and 1 each in Bangalore,
Gurgaon, Mumbai, Vadodara, Gurgaon, Pune, Lucknow and Ahmedabad. Until 1996,
Landmark’s product portfolio comprised books, stationery, and greeting cards. It was
later that music was added to it. Landmark also sparked the trend of stocking curios, toys
and other gift items. What separates Landmark from other stores of its kind is the range
and depth of its stock.
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VISHAL
What started as a humble one store enterprise in 1986 in Kolkata(erstwhile, Calcutta) is
today a conglomerate encompassing 85 showrooms in 58 cities. India’s first hyper-
market has also been opened for the Indian consumer by Vishal. Situated in the national
capital Delhi this store boasts of the singe largest collection of goods and commodities
sold under one roof in India.
The group had a turnover of Rs. 1463.12 million for fiscal 2005, under the dynamic
leadership of Mr.Ram Chandra Aggarwal . The group had of turnover Rs 2884.43 million
for fiscal 2006 and Rs. 6026.53 million for fiscal 2007
The group’s prime focus is on retailing. The Vishal stores offer affordable family fashion
at prices to suit every pocket.
The group’s philosophy is integration and towards this end has initiated backward
integration in the field of high fashion by setting up a state of the art manufacturing
facility to support its retail endeavors.
Vishal is one of fastest growing retailing groups in India. Its outlets cater to almost all
price ranges. The showrooms have over 70,000 products range which fulfills all your
household needs, and can be catered to under one roof. It is covering about 18.6 lakh sq.
ft. in 18 state across India. Each store gives you international quality goods and prices
hard to match. The cost benefits that is derived from the large central purchase of goods
and services is passed on to the consumer
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PORTER FIVE FORCES MODEL
SUPPLIER POWER
Supplier concentration
Importance of volume to supplier
Switching costs of firms in the industry
Presence of substitute inputs
Cost relative to total purchases in industry
BARRIERS
TO ENTRY
Absolute cost advantages
Access to inputs
Government policy
Economies of scale
Capital requirements
Brand identity
Access to distribution
Expected retaliation
THREAT OF
SUBSTITUTES
-Switching costs
-Buyer inclination to
substitute
-Price-performance
trade-off of substitutes
BUYER POWER
Bargaining leverage
Buyer volume
Buyer information
Brand identity
Price sensitivity
Product differentiation
Buyer concentration vs. industry
Substitutes available
Buyers' incentives
DEGREE OF RIVALRY
-Exit barriers
-Industry concentration
-Fixed costs/Value added
-Industry growth
-Product differences
-Brand identity
-Diversity of rivals
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BARGAINING POWER OF SUPPLIERS: The bargaining power of suppliers is low.
There are many suppliers from which reliance can get its supply so suppliers don’t have
much say in making policies or setting prices.
BARGAINING POWER OF BUYERS: The bargaining power of buyers is high. As
there are many close substitutes buyers are always in a profitable position. They get
many incentives,
THREAT OF NEW ENTRANT: Bharti with Walmart is also entering the retail sector
and Birla group is also there to enter the retail market. Both these groups can give good
competition to reliance retail. Though Reliance can have an upperhand because by that it
would be an established name still the low pricing strategy of Walmart may pose a major
threat.
THREAT FROM SUBSITUTES: Reliance retail faces threat from its competitors who
have been into this retail sector for long. It faces major threat from future group, ITC etc.
as both of them are its major competitors.
DEGREE OF RIVALRY: The degree of rivalry is from medium to low.
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PEST Analysis
Environmental Scan
/ \
External Analysis Internal Analysis
/ \
Macroenvironment Microenvironment
|
P.E.S.T.
Political Factors
Political factors include government regulations and legal issues and define both formal
and informal rules under which the Reliance operates. Some examples include:
tax policy
employment laws
environmental regulations
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trade restrictions and tariffs
political stability
Economic Factors
Economic factors affect the purchasing power of potential customers and the cost of
capital of the firm. The following are examples of factors in the macro economy:
economic growth
interest rates
exchange rates
inflation rate
Social Factors
Social factors include the demographic and cultural aspects of the external macro
environment. These factors affect customer needs and the size of potential markets. Some
social factors include:
health consciousness
population growth rate
age distribution
emphasis on safety
Technological Factors
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Technological factors can lower barriers to entry, reduce minimum efficient production
levels, and influence outsourcing decisions. Some technological factors include:
R&D activity
automation
technology incentives
rate of technological change
SWOT ANALYSIS
Strength
• First mover advantage.
• Pan India Infrastructure.
• Financial Strength of the Reliance group.
• Ubiquitous presence of Reliance stores.
• The best talent taken form various
backgrounds.
• Proven Past.
• Own brands – created with the customer
in mind.
• Maximum width and depth of products –
one stop shop.
WEAKNESS
• Strength of the existing Channel lies in
having a long relationship with the
consumers.
• Relative inexperience in the retail
Industry.
• Speed of decision making – currently
centralised and may impede capturing
business opportunities.
• Supply Chain Management.
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OPPORTUNITIES
• Myopic perception of the existing channel
regarding consumer needs based on prior
sale experience.
• Growing disposable Incomes. A more
demanding consumer.
• Wastage and theft in the current SCM
system.
• Nascent organised sector – this is just a
rising sector.
• All products under one roof
THREATS
• Global players entering the market with
expertise in the field of retailing.
• Political Sensitivity – Large organisation
eats small organisations.
• Employee turnover rate.
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Retail Formats By Reliance
Reliance is gearing up to revolutionize the retailing industry in India. Towards this end,
they are aggressively working on introducing a pan-India network of retail outlets in
multiple formats. A world class shopping environment, state of art technology, a
seamless supply chain infrastructure, a host of unique value-added services and above all,
unmatched customer experience, is what this initiative is all about. Towards this end, they
are aggressively working on introducing a pan-India network of retail outlets in multiple
formats.
• Fresh
• Hyper Mart
• Lifestyle
• Specialty Stores.
Reliance Fresh
Reliance Fresh, Reliance Retail’s initiative, envisions a retail revolution in retailing of
fruits & vegetables and related products with pan India coverage. This footprint will
enable Reliance to provide the consumers an unmatched shopping experience and value
for money. These stores shall display an exciting retail format with consistent branding.
These stores will have a minimum area of 5000 sq.ft. and maximum area up to 8000 sq.ft.
The organization has planned to commence its operation through R-Fresh. Reliance Fresh
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would provide consumer with fresh products i.e. vegetables and fruits would be a step
taken further, along with fruits and vegetables it will also provide consumers with
household products.
Fresh Store Offerings
o Fruits & Vegetables.
o Dairy.
o Frozen –Vegetables & processed food
o Juice / Bakery
o Beverages & Basic Processed Food including RTC/RTE
o Top Up Grocery.
o General Merchandise Add-ons.
o Impulse-Merchandise Counters
ENVIRONMENTAL SCANNING
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SWOT ANALYSIS
STRENGTH
1. Standardized materials
2. Brand name & Trust Factor
3. No intermediaries
WEAKNESS
1. Difficulty in storage of perishable products
2. No prior experience
3. High cost incurred to maintain shelf life of
perishable products
4. Traditional thinking of people
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4. Capital potential
5. Quality & Satisfaction
6. Variety of foods under single roof
OPPORTUNITIES
1. Contribution of food and grocery in
organized retail is just 18 percent
2. Creating job opportunities
3. Future investments
4. Joint ventures
THREATS
1. Local market agitation
2. Shopping culture
3. Competition from Spencer's Daily, Subhiksha
etc.
MERCHANDISING MIX
Core Categories
• Fruits and Vegetables- Leafy, Non leafy, Hardy , Exotic fruits and Veggies
• Staples – Cereals, Pulses, Flours, Oils, Dry fruits, Spices and Masalas
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• Processed food- Ready to eat, Ready to cook, FMCG foods
• Chilled/frozen/bakery – Dairy, Veg frozen, Non Veg frozen , Baked products,
Live bakery
• Personal care – Health and Beauty, Baby care
• Cleaning aids- Fabric, Dish, Floor, Toilet, Cleaning Accessories
• Household needs – Disposables, Plastic, Utensils, Home care products, Bath &
kitchen towels
• Services – Bill payment, Credit card.
Additional categories*
• Mass merchandise garments – Inner wear, Outerwear like tracks, Tshirts,
Handkerchiefs, Socks
• Stationary - Notebooks, Notepads, Pens, pencil , other stationary needs
• Gifts and Toys- Stuffed toys, Knickknacks, Key chains, Holders, Sporting goods,
Board games etc
• Small electrical appliances-CDIT- Small home appliances and electricals,
Mobile accessories and Personal electronic items
• Books/magazines – Magazines, Best seller books
• Music/Movies – Audio CD’s,Cassettes,VCD,DVD, Fast moving titles
• Pharmacy
• Juice bar/Live Bakery
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Category Mix & space plan.
1500 2500 4000F & V 1030 1400 1600Dairy 40 50 100
Frozen Veg 40 40 40Non Veg - - -
Juice / Bakery - 100 160Bakery (Bread Rack / Baked Goods) 40 100 110
Top up Grocery - 150 460Beverages & Basic Processed Foods - 150 460
General Merchandise/Promo Area - - 50Promo block - - 70
Back of House 200 300 450Check out Area 150 210 250
CategoriesArea Required V/s Store
Area
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CONSUMER DURABLES AND IT
Consumer Durable to function as a Independent business across the
Reliance Retail initiative.
Format’s.
1. . Specialty Stores : Big Box of around 25-40K Sq Ft.
2. .Hyper Market’s .Since Hypermarket’s will be large format’s, CD will be
around 20~35KSq Ft .Which will still be larger than the largest
CD store in the country.
Geography : . Across Format’s the products will be sold in the length & breadth
of the country
1. . Hypermarket – will be available across 1000 cities
. Multiple stores in a ctiy
2. Specialty Stores – will be available across top 100 cities
. Multiple stores in a city .The reach may increase depending on the
opportunities presented Rural areas to be covered.
PRODUCT PROGRESSION FROM CLASSES TO MASSES
Flat TVs are growing at more than 90% contributing about 40% to the TV
Market.
Laptop sales in 05, saw a jump of 140%!
The Indian gaming market is expected to touch USD 50 Mn by 2006, and
expected to grow at +25% year for next many years
Handsets grew at more than 25% last year.
Fully Automatic Washing Machines grew at 25% last year
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Frost Free Refrigerators grew at 25% last year
… Indian CD Retailers still focusing on Basic Products
The consumer durable sector of reliance retail is divided into IT,
TELECOM,CONSUMER ELECTRONICS,APPLIANCES and SERVICES.
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PENETRATION AND GROWTH MATRIX ACCORDING TO AC NIELSON
… Indian CD Retailers still focusing on Basic Products!
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CONSUMER DURABLE SPECIALITY CONCEPT
“Retailing of Consumer Electronics, Home Appliances,
Gaming, Telecom & IT Products (Software , Accessories and Services) through large
format stores offering the consumers a comprehensive range of products in a pleasant ,
conducive and service oriented retail ambience at best value”
TARGET CUSTOMER
The target customer for the venture is
Across age groups
1 Men, Women & Kids
. 2. Technology savvy
. 3. Aspires for better technology
Across consumer segments…
. DINKS
. New House Owners
Couples with Young kids.
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PORTERS FIVE FORCES MODEL FOR SPECIALITY INDUSTRY
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REFERNCES
1. www.ril.com
2. Reuters
3. 1.http://scholar.google.com/
2.http://www.ril.com/rportal1/DownloadLibUploads/1149156679219_RI
L_Annual_Report_2006_Full.pdf
4. 3.http://ecophilo.blogspot.com/2005/07/annual-report-reliance-
industries.html
5. 4 http://imageretail.com/index
6. 5.http://finacialexpress.com/IBM
7. 6.http://links.jstor.org/
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