Reliance not seeking retail partner

Ahmedabad: Reliance Industries has no immediate plans to involve a foreign partner in its retail venture and sees no threat from Bharti group's wholesale tie-up with Wal-Mart, a top company official said.

"We are not scared of competition. We are ahead of them. Our great challenge is to satisfy our customers. And that is the only benchmark," Raghu Pillai, president and CEO of Reliance Retail told reporters on Tuesday at the launch of a hypermarket in western India.

Last week, Wal-Mart, the world's largest retailer, and Bharti Enterprises announced a much-delayed agreement to form an equal joint venture for wholesale and back-end supply chain management.

Pillai said Reliance was not pursuing a tie-up with a foreign firm at present.

"Either way, no foreign investment for the time being," he said when asked if Reliance was seeking a foreign partner, or if it had been approached by any firm for a stake.

India allows foreign single-brand retailers to take up to 51 per cent in a joint venture with a local firm, while multiple-brand retailers like Wal-Mart are limited to cash-and-carry, or wholesale, and franchise deals.

Opening up the fragmented industry, which is dominated by family-run shops, has triggered political concerns and protests by small shop owners who fear massive job losses.

Protests have largely been targeted against Wal-Mart, although Reliance Retail stores have been attacked.

Pillai said Reliance would go ahead with its plans to roll out retail stores across the country.

"We take the protests in our stride. Reliance is an Indian company, in India, paying Indian taxes, and we will open our shops everywhere," he said.

SOURCE:SIFY.COM

[/QUOTE]

Yes, Sir.
Just waiting for the store to open in the morning.

I am going there.

What exactly to look for more than general observations?

i am sure they may not reveal any figures like rent/ daily sell etc.

Hype over for hyper

In February 2004, at a crowded press conference in Inorbit Mall, Mumbai, RPG Retail was launching its second hypermarket - Giant. Raghu Pillai, then president, RPG Retail, was all smiles, as he told the assembled media about his plan to open 20 more Giant hypermarkets by the end of 2006 at a total investment of Rs 10 crore for every store. In all, he was willing to plonk an investment of Rs 200 crore to build the hypermarket chain.

Since then, things have not gone quite to plan. Giant, now renamed Spencer’s, has opened barely six stores in all in the three years since. Raghu Pillai subsequently quit to join first Pantaloon Retail and now heads Reliance Retail’s operations. Earlier this week, Mr Pillai opened the 1.65 lakh sq ft Reliance Mart, the country’s biggest hypermarket, on the Ahmedabad-Gandhinagar highway. During the launch ceremony, Mr Pillai spoke about his plan to launch 500 hypermarkets by the end of next year.

Will this plan materialise? Well, that remains to be seen. But meanwhile, the rest of the industry is still licking its chops after setting out to build a chain of big-box outlets. Consider the line-up: Besides Spencer’s, K Raheja’s Hypercity wasn’t able to open another store, after debuting its first one in Malad after three years of planning.

It is only now that concrete plans have been worked out for a second one in Jaipur. It’s the same story with Star India Bazaar, the hypermarket from Trent. It struggled with its first store in Ahmedabad for nearly three years since its launch in 2004.

It has now mustered up the confidence to look at its second store in Dahisar, on the outskirts of Mumbai. Magnet, another hypermarket floated by Ashok Maheshwari, a Mumbai-based entreprenuer, hasn’t done much either: it has opened two stores in nearly two years of existence.

That’s a strange denouement for what was seen as a killer retail concept. Around the world, eight of the 10 biggest retail chains revolve around different variants of hypermarkets. So Wal-Mart has its Sam’s Club, Carrefour its own signature hypermark, as does Tesco, Metro, Krogers, Sainbury’s and Aldi’s.

A typical Wal-Mart Supercenter covers 150,000 sq ft, a typical Carrefour, 210,000 square feet. If you haven’t stepped inside one, these stores stock everything from spinach to porridge, from furniture to mobile phones, all under one roof.

Back in 2004, when RPG was looking at rolling out Giant, the only other visible big-box format was Pantaloon’s Big Bazaar. It had notched up Rs 370 crore in its first three years of existence. It went from a three store operation in 2000 to a chain of 66 currently. It was widely expected that the hypermarket would emerge as the dominant model in the fledgling retail space, virtually snuffing out competition from neighbourhood grocery stores. The motto was quite simply: Think Big.

Yet today, the picture is quite the opposite. What is growing, and rapidly, are the smaller retail formats - convenience stores, food and grocery and discount stores. In a period of just under a year, Subhiksha, with its 1200 sq. ft. discounting format has become the largest domestic retail chain, on the verge of become the first 1000 store chain.

More interesting, the biggest entrants in the space are all thinking small - whether it’s Reliance Fresh, now close to 300 stores, Aditya Birla Retail’s More and ITC’s Choupal Fresh. The Bharti Wal-Mart joint venture will also look at opening smaller stores in tandem with their larger hypermarket and cash and carry operations.

Even the pioneers Pantaloon Retail is joining the bandwagon. Less than a month ago, India’s biggest retailer announced that it was setting up a chain called KB’s Fairprice Value, a neighbourhood convenience store that reach 1200 stores in another year. Hypercity CEO Andrew Levermore has picked up the same cues: last week he announced that they were setting up a neighbourhood convenience called Expresscity, each no larger than 4000 sq ft and driven largely by food and grocery and will grow to 250 stores in five years.

So why did the first wave of retailers struggle to scale up the hypermarket format? Will the current push into smaller neighbourhood stores prove to be any easier? Behind this important transition is the story of how, in their obsession for size, some of India’s biggest retailers forgot about the ground realities: the peculiar middle class customer, the complex real estate puzzle and of course, the inherent challenges of big-box retailing.

The real estate jigsaw

On Independence Day, when Reliance Retail finally launched its first hypermarket, a 165,000 sq ft monster retail outlet in Ahmedabad, a few executives from Hypercity could have been forgiven for wondering what could have been.

Reliance Retail had snagged the property last year after a court dispute with the Raheja group, which had the original lease agreement. Hypercity executives had bargained on a monthly rental of between Rs 18-25 per sq. ft. But the moment Reliance Retail entered the fray, they were asked to fork out nearly three times the agreed rental amount.

“There will be more bidding and overbidding for prime retail space in the coming months,” says an industry veteran.

What this could do to retail margins is anyone’s guess. As anchor tenants in malls, hypermarkets would typically pay less than a third of what other tenants would be charged, but that could work out to be as high as Rs 70 per sq ft per month or 7-8% of revenues.

If overheads and employee costs are included, then total costs would rise to about 16%, which leaves virtually nothing in terms of margins. Hypermarkets, at the best of times, don’t operate with more than 1-2% net margin, but make up in terms of volumes.

At any rate, Reliance’s aggressive entry, coupled with the fact that Bharti Wal-Mart will soon jump into the fray, simply means that finding large parcels of land will get a lot tougher. “Big boxes require over 60,000 sq ft space and are not easly available in urban cities. Space at the right price is the biggest issue and till then we have to reach consumers through convenience formats,” says Rakesh Biyani, CEO of Pantaloon Retail.

But the problems of real estate aren't restricted to just availability or price. The retailers and real estate developers still can't meet halfway. Says Raman Mangalorkar, head (Consumer and retail practices, Asia) AT Kearney, “There’s still a gap between what retailers expect and what the real estate developers are offering. Many expats working in India today expect catchment studies to come from the developer, but that isn’t happening.”

So, an available property needn’t necessarily be the right property. Says Vinay Singh, managing director, Max Retail, “Big box retailing in the classical sense may not work because there are few available plots that can guarantee footfalls. We might have stores with two-three floors, but that is just not ideal for customers.”

Many retailers talk about developers who have called them to anchor their mall in places like Raipur. These developers often start developing properties without involving the hypermarkets, typically anchors in the mall, during the planning phase.

The Indian consumer conundrum

As retailers - and packaged consumer goods companies before them - have discovered, the Indian consumer isn’t just highly demanding, but equally hard to change.

“A hypermarket needs a large bill and a large bag and the means to reach the large bag home. Typically, the large formats cater to the four-wheeler crowd. You cannot generalise shopping in a diverse nation of middle class consumers who use public trnsport most of the time,” says Subhiksha’s managing director R Subramanian.

Yet most hypermarkets - especially like Spencer - which are located as a part of a large mall attracting traffic into the store isn’t a problem. In terms of footfalls, a hypermarket typically get about 8-10,000 footfalls a day, while a supermarket gets about a third and a neighbourhood convenience store gets about one-tenth that amount.

The novelty of a new hypermarket does bring in traffic, but very soon the 15-minute rule does kick in, says Ireena Vittal. Says Ms Vittal, McKinsey’s partner for the retail practice, “From our research, we’ve established a global “15-minute rule”. No consumers want to travel more than 15 minutes to buy anything they require, unless it’s something that requires high involvement, categories like wedding dresses, jewellery or complete home furnishings.This is true of virtually all markets across the world.”

But the real problem is in converting that footfall into sales. For the moment, retailers say consumers tend to visit large formats as entertainment zones, to wander around the aisles and look at products as much as to make purchases. “The larger formats intimidate the consumer and land up confusing them. Structurally, we are not therefore aping the European big-box formats. Earlier, we found people walking around, making the smallest purchase and walking out. It makes business sense to focus on generating volumes through smaller formats to sustain the big-box formats,” said a top official in a leading retail company.

Perhaps it also has something to do with the value proposition itself. Most hypermarkets use price-offs on a range of products to trigger buying. But the trade-off of travelling a fair distance for a few rupees of savings may not quite work, says S Raghunandan, an independent retail consultant, “You can’t continue to charge small discounts on small ticket items, adding up to savings of Rs 20. Customers are more discerning than that.”

Also, hypermarkets have been set up are largely replicated from established formats like Carrefour and Tesco, which have a far greater range in food and grocery, a category that drives footfalls. Says Andrew Levemore, CEO, Hypercity, “The mix (in food) is not only determined by eating habits but also product availability in each category. In India the FMCG ranges carried by our MNC suppliers are much smaller than the western world, so the in-store representation is accordingly smaller.” In such a scenario, it’s easier to stick to a smaller range, than go with unbranded food items as hypermarkets sometimes do.

Damodar Mall, chief executive, innovation and incubation, Future Group, who played a part in the KB’s Fairprice Value store concept, simply says, “Give the Indian consumer a few more years and she’ll be ready for the classical hypermarket format. But not right now.”

Hence, every hypermarket without exception has been forced to relook at the space it has allocated for backend and warehousing, which ideally should be close to 20% of overall retail space. Reliance Mart’s 165,000 sq ft store has a storage and warehousing area of less than 20,000 sq ft, or just about 12%. The result: it puts tremendous pressure on logistics, so that large trucks coming in and going out have to be perfectly synchronised.

SOURCE:ET

 

Sir, Reporting from Ahmedabad.........

 

 store timings are 10 to 10, 7 days. i reached there around 10.20am.
The place was getting crowded gradually. they have arranged for  queuing system by placing the white clothe covered tables and positioning the security there.

Entry/ floors/ General: The first thing you come across at the entry is promotion of Hero Honda electrical scooter. Being offered at 2000 discount i.e. Rs. 26,500/-. Just on the other  side they have book store, DVDs, CDs and toys on one side and typical grocerry items on the other side. In addition to these items ground floor contains vegetables, fruits, sweet shop, bakery shop. Ground floor contains a digital photo development section with front machine based on hp equipment. First floor has beauty section, garments, watch, jewellery and pharmacy. In addition to that it has shoe repair and watch repair section.2^nd floor contains home idea (furniture/furnishing) and electronics section. They have reasonably good number of staff, but some times they also seem to be lost may be due to being new store/ inexperienced people. But there are few senior persons/ supervisors moving around who turn out to be helpful. All around they have offer papers hanging from top in red and white card papers. To me it reminds more of Seiyu/ Lotus stores of Tesco.

Passage and payment counters: passages are reasonably wide. There are about 22 payment counters in L shape at the ground floor.  1^st and 2^nd  floor has got very few payment counters, may be 3 to 4 nos. each.
BookStore: has good collection of books. much more on business, management, philosophy and a section for kids etc. reminds more of book racks of crossword.
Grocery: All branded items were available. Few selective items were on approx 20% discount. Discount is mentioned more in absolute rupee terms than in % terms. Amul butter was 6 rupee less than its mrp 40 Rs. On pack. There is also loose grains/ dals/ chawal for sell. Also contains vegetable. nicely packed cut vegetable boxes were also available in show case. Some boxes had assorted small quantity of cut vegetable like mix of bhindi, cucumber, onion etc, which may be easy to carry home for ready to cook mode. Also there were bulk quantity packs for atta, rice, wheat etc stacked along the passage. I was looking for toilet cleaner, but could not locate any thing other than harpic!

Luggage/ Car accessories: Luggage section was having most of the VIP/ Aristocrat items. Car Accessories had good selection including Tyres.

Beauty/ Pharmacy/ Jewellery: As expected there were very few customers stopping at these counters.

Garments: it contains good range. Price wise seems reasonable. Shirts were sold for 199+. T-shirts 99+. Good collection of T-Shirt with pockets in range of 200 to 400 rupees, which is at times difficult to find. Queues were building up out side change room. As I understand they have not put their own lable. The floor also contained section of Raymond and Arvind suiting/ shirting. Stitching was offered free for purchases above 599.

Furniture/ Furnishing: It was having about 3 odd drawing room setting, 5 to 6 bed room settings and 2/3 children room setting. Prices were looking very reasonable. Also there were 2 kitchen settings. There was not much of the staff in this area. Presumably most of the people were coming for casual visit and most of the shopping must be happening on instinct basis and therefore not much of the interest in this section by customer as well as by store.

Electronics Section: they have good collection of TVs, laptops, ACs, Refrigerators,  Music/ Film players. Most crowded area was around MP3 players, where they had kept some operational pieces, tied up to the table. Youngsters were really enjoying it. However, I could hardly see much sell happening here.

HP photo Editing/ album making machine: This was an excellent concept I liked which they had kept on the 1^st floor. As per the sales man this is reliance owned machine and only second installed in the world (I really do not know, this is true or not). You can hand over your photos in memory card of your mobile/ camera or usb data stick. They instantaneously off load photos on HP machines, which looks like mini ATM. All editing/ labeling/ sizing of photos can be done over touch screen. They offer about 4 to 6 page greeting card size booklet with around 30 to 40 of your photographs depending on sizes of photos selected. The regular price fro same was 99 and it was on offer fro 79 rupees at present. This was excellent quality and real good value for money. They intend to bring Bluetooth feature for off loading photos from mobile/ laptops etc. but not present now. They also do not have archive system, where, my album can be stored, and later on I can order further copies.

The off loading of photos takes few minutes, development takes 30 minutes from start to finish. Which they suggest to come back after shopping and collect while leaving.

 

Cafeteria: One corner seems having been reserved for the same on 1^st/2^nd floor. But was not operational.

 

IsconMall: This mall where Reliance Mall resides is being claimed as the largest shopping mall of Gujarat. Reliance Mart is the anchor tenant of this mall. I inquired with 2/3 salesman and as per them this is purchased property. But as we all know, for reliance, who purchases and who uses within the group may be mystery!! The shopping mall contains about 90+ outlets, including reliance mart and west side of trent. There are 11 food courts in total. However, at present may be 30% of stores are operational as others are getting ready/ furnished. All the stores are of known retail brands in garments, jewellery, watches, hobby ideas, shoes makers, luggage makers etc.

 

By the time I came out it was 1 pm. The store was crowded like chandni chawk bazaar. One of the escalator on which I was coming down stopped working may be due to over load. There was stamped like situation while getting down from escalator as they had narrowed the  passage at escalator exit. I won’t be surprised, if some people are getting hurt there regularly. When I came out there was long queue to enter the store. Parking was haphazard in all the nearby  area. Though I had parked my car little away, I went to see basement parking. It is fairly large parking. But was not even 30% occupied. May be with experience people were anticipating difficulty of traffic jam when they go out of parking.

 

 Many of the items are sourced from ahmedabad (shoes from mirza tanners. Sarkhej, ahmedabad), delhi (many food items packed at delhi) etc. Quite a few items were made in China.

 

All in all, I would again reiterate, it was more of Lotus/ Seiyu/ Carefour experience. Big Bazar I have visited only  once and long time back. But comparatively Reliance looks more structured. May be due to the large space. Vishal I went twice in last 6 months. Reliance experience is 100 times better than Vishal. Compared to Star Bazar also it is more spacious. Having more verities, more sections.