Reliance Fresh Case Study
4. 1Introduction. India’s retail sector is undergoing a transformation and with a three year CAGR of 46. 64%, retail is the fastest growing sector in the Indian economy. Traditional markets are making way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls had begun appearing in metros and second-rung cities alike, introducing the Indian consumer to an unprecedented variety in shopping experiences. India’s vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets.
While organized retail in India is only 2% of the total US$ 215 billion retail industry, it is expected to grow 25% annually, driven by changing lifestyles, strong income growth and favorable demographic patterns. 4. 2Company selection with background study. Reliance Fresh was the first foray into retailing by the $25 billion behemoth known as Reliance Industries Limited. There were three basic reasons for Reliance Industries Limited (RIL) choosing foods and vegetables for entering into retailing. ?It wanted to go after the very core of the great Indian retail opportunity.
Food accounted for over two-thirds of the $200 billion Indian retail market and yet, it had seen hardly any penetration by modern retail so far. ?Its aim was to build a high-profitability business and food was perhaps the best place to start. ?The grossly inefficient food supply chain provided a well resourced and well managed organization like RIL with an opportunity to think of amending the flaws which would also make business sense. In the traditional supply chain in India, there were several intermediaries, who added their respective profit margin to the cost.
Besides, there was huge wastage in transit. This offered potential for savings and profits and Reliance Fresh was a step in that direction. Reliance fresh launched by opening new retail stores in Hyderabad on 3 November 2006. Stores remained open from 9am to 9pm. Reliance was testing its retail concepts by controlled entry, beginning in the southern states. RIL planned to invest $63. 50 billion (Rs. 2,500 billion) over the next five years in the retail business with 4,000 retail outlets in different cities. Globally, supply chains were fairly mature and efficient.
This gave the retailer little opportunity to improve profit margins. But in India, any retailer who built an efficient supply chain stood to gain. “With efficient sourcing, they can release margins into the system. This can be shared by customers and shareholders,” The company planned to own and operate a complete value chain by identifying potential geographical clusters to implement farm initiatives and create an infrastructure to collect, pack, store, process and distribute fresh and value-added products at the district level.