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

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“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.

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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.

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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

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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.

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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

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• 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

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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

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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

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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

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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

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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.

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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.

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• 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.

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- 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.

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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

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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.

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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

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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

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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

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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

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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

;

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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

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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.

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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.

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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

34

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.

36

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

37

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

38

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.

40

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

41

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

42

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.

50

PORTERS FIVE FORCES MODEL FOR SPECIALITY INDUSTRY

51

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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