Showing posts with label Reliance Fresh. Show all posts
Showing posts with label Reliance Fresh. Show all posts

Sunday, February 3, 2013

Missing the Ambani touch?

The venture was flawed from the beginning in more ways than one

The Indian retail sector has grown at a stupendous rate and is touted to touch $450 billion by 2015 (as per McKinsey). At that rate, it is not surprising how major business houses have made inroads into the sector. But the chequered journey of Mukesh Ambani’s Reliance Retail in this sector merits analysis.

It was the winter of 2006 when Ambani announced the arrival of his Rs.250 billion retail gamble – Reliance Fresh convenience stores in India. Reliance Fresh had to face the wrath of all be it middlemen, small retailers or politicians. The company had to shut down shops across the country amidst vehement protests. Gibson Vedamani, ex-CEO, Retailers’ Association of India points, “Reliance Fresh failed because it was too aggressive with its strategies and wanted to capture the entire market without leaving any space for the middlemen and local retailers.” The company planned a number of formats viz. hypermarkets, supermarkets, convenience stores & specialty stores. This attracted unwanted media attention & got them into trouble.

With the looming spectre of economic slowdown, Reliance has had to cut down severely on its expansions. It merged the management of its hypermarkets, supermarkets and convenience stores last year to save on administrative, man-power and operational costs. However, the biggest blow came earlier this year, when Ambani, after deferring the launch of its wholesale market, finally scrapped its cash & carry (C&C) model and showed the door to the entire team of 36 professionals headed by Harsh Bahadur (erstwhile CEO of Metro AG’s C&C business in India).

And now, Reliance Retail is mulling over tying up with an international partner back-end support. Had Mukesh gone in for an international tie-up earlier, this situation would not have risen as outsourcing supply chain management is more cost effective and feasible, especially in India. Then came the news that Reliance is planning to shut down 40 of its non-performing stores and rationalising its total retail space of around 4.2 million sq. feet. Reliance Retail also axed almost 600 support jobs to manage costs.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Thursday, October 4, 2012

What’s with the Cowboy hat?

An obsession to follow the big ticket retailers of the West and a booming Indian middle class was suicidal for most Indian retailers in the initial years of organised retail. Overexpansion and poor inventory management, coupled with a slowdown, brought them to their knees faster than expected

If all the big ticket retailers in India have one thing in common, it’s surely the lack of knowledge about the rationalisation of capital expenditure. Before the slowdown, none of the retailers paid heed to the concept of store rationalisation, which includes working capital management and cost optimisation. In fact, from 2005 to 2007, retail was considered to be the most promising sector with a growth of 20% and 37% respectively for the year 2006 and 2007 (according to a KPMG Report).

Riding the crest of were senior Ambani’s titanic retail plans with Reliance Fresh. Having the huge financial base of Reliance Industries as back up, the retail top brass never realized the importance of store rationalization or reducing inventory costs. Where working capital crunch was not a problem, the political parties did the needful. Oppositions came from West Bengal, Tamil Nadu, Jharkhand and Uttar Pradesh with allegations that Reliance is trying to connect with the consumers directly and closing the business of other channel members. Reliance developed a Wal-Mart kind of image for itself, without factoring in the alienation it was causing the other players.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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