Mukesh Ambani's perseverance pays as Reliance Retail set to ink a first

Mar 21 2014, 11:08 IST
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Mukesh Ambani's Reliance Retail, which at end-December had 1,577 stores, expects to post a profit by the end of fiscal 2014. Mukesh Ambani's Reliance Retail, which at end-December had 1,577 stores, expects to post a profit by the end of fiscal 2014.
SummaryMukesh Ambani's Reliance Retail poised to perform a rare feat in India's notorious retail market.

advantages, Reliance Retail faces an uphill battle for growth.

When Ambani first set up the company, he envisioned a $20 billion business by 2011, a goal that proved wildly ambitious. Last year, Reliance Retail set a target to grow revenue to a more modest $6-$8 billion by 2016-2017.

Reliance generated just $1.8 billion in revenue in the nine months through December, a tiny fraction of India's $500 billion retail industry which is dominated by small, mom-and-pop shops.

The growth of a Westernised, and more affluent, middle class that prefers hypermarket-style shopping is likely to favour Reliance.

The company is also benefiting from a rise in nationalist sentiment among the influential individual traders who eased their stance towards home-grown retail chains after foreign retailers started circling, Technopak's president Nangia said.

Reliance Retail was forced by local traders and politicians to shut its shops in the states of Uttar Pradesh, West Bengal and Jharkhand shortly after their launch several years ago. It now has 36 stores selling fresh produce in these states, its website shows.

FIXING THE FOUNDATION

As it built up its network, Reliance Retail went through several management reshuffles - it is about to have the fourth head for the grocery business - and several executives said it has also gained expertise.

"We have got a better understanding of some important aspects like real estate, store build and manpower," a senior company official said.

Until two years ago, for example, Reliance would fly fresh strawberries from western India for delivery to stores in other parts of the country at a high cost. It now uses trucks to transport the fruit, and has invested in cold storage at farms.

About two years ago, Reliance rolled out technology that gives hourly updates on margins and revenue by store, city and region, along with data on how products are selling. Such systems are standard in developed markets, but new to India.

Previously, Reliance relied on weekly supply chain reports.

Reliance now intensifies its research before choosing locations, and tests product line-ups locally before opening stores, executives said. Earlier, it would often test items after a store opened, which meant frequent and costly tinkering.

Inventory decisions once set at Reliance's massive Mumbai headquarters are now made by individual store managers, enabling them to customise their stores to local preferences.

And while Indian retailers often lease warehouses to save costs, Reliance is building its own so it can customise them.

Its 400,000 square foot warehouse near

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