The Hindu Business Line : Retailers not enthused by Reliance's mega plans

Reliance Industries Ltd's announcement to set up a subsidiary to expand into the retail business with a planned equity investment of over Rs 10,000 crore has elicited differing opinions from the existing players in organised retail.

``Organised retailing will be an overarching theme of the expansion and growth of Reliance in the near-term future,'' according to the text of the speech by its Chairman Mr Mukesh Ambani to shareholders today at its AGM.

Reliance expects to spend as much as Rs 25,000 crore to expand its retail business - from retail stores to farm-related businesses — helping create jobs for more than 1 million people, Mr Ambani said.

Retailers are neither surprised nor enthused by the mega plans announced by the company.

Mr Kishore Biyani, Managing Director, Pantaloon Retail, who is currently holidaying in the US, said, "The modern trade is too big a business and more people are always welcome. Everybody has plans and Reliance is known for its execution capabilities.''

Adding to Mr Biyani's comments, his colleague Mr Rajan Malhotra, Head, Big Bazaar, Pantaloon Retail, says, "At the moment Reliance is projecting its plans. While it might achieve scale with time, it would lack softer consumer knowledge. It would have to go through the same learning curve that all retailers go through. After all consumers are different across India.''

At the same time hiring big names from the industry is not expected to help either.

As Mr Malhotra says, "They may be the who's who, but none of them have worked long enough in the retailing industry. They will need people who can think on their feet in the business which requires learning on a daily basis.''

Mr Govind Shrikhande, Customer Care Associate & CEO, Shoppers' Stop, says there is always room for more players as organised retail comprises a mere fraction of the modern trade.

As he points out, the market is simply huge and divided and it is not possible for a single player to become significant.

Even Wal-Mart, the largest retailer in the US, has only between 8-9 per cent of the total market.

"It may be holding a large share in its petroleum business but it will not be possible for it to command such a huge share in any other business and this includes retailing,'' he says.

Pace and Scale

The pace and scale of operations is also going to be paramount to the business.

As Mr Vinay Nadkarni, CEO, Globus Stores, observes, "It all depends on how much scale they build up. The time taken to build up its sales turnover may be much longer than what they are claiming. But at the same time, they have the money power and got the stalwarts from the industry to manage the business. Besides it also depends on how well they manage their back-end operations. In my view that will be a challenging area for them.''

But another player is more than welcome in the nascent retailing industry is the view of Mr Nandan Piramal, Executive Vice-Chairman, Piramyd Retail, "More than looking at Reliance as a threat to us, we need a big player like them to grow the market which is just three per cent of organised retail. Besides Reliance has a good track record and usually delivers on what they say.''

Mr R. Subramanian, Managing Director of discount retail chain Subhiksha, says that it is great news for Indian retail that such a large-scale investment by a serious player will happen as it will spur the industry growth and is welcome news for consumers.

More Stories on : Retailing | Diversification | Reliance Industries Ltd

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