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Reliance Mart bets on value, private labels to drive sales

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Apparel being positioned as a big differentiator

A view of the Reliance Mart in Ahmedabad.
A view of the Reliance Mart in Ahmedabad.

Vinay Kamath

Chennai, Aug. 31 Reliance Mart, the first hypermarket opened by Reliance Retail in Ahmedabad on August 15, has bet on the value platform and its private labels to drive sales.

Mr K. Radhakrishnan, CEO, Hypermarkets, Reliance Retail, told

Business Line

that the Ahmedabad store, spread over 1.65 lakh sq ft with a staff of 550, “would be a good test market for mass brands offering a value proposition.”

The store stocks a high proportion of private labels in select categories such as apparel, grocery, staples, (

atta

, sugar, tea under the Select and Value labels) footwear and watches.

Value Brands

Apparel, he said, is being positioned as a big differentiator where 50 per cent of the stocks are private labels with only half being made up by brands, again only those perceived as value brands. Footwear has 90 per cent private labels and watches 15 per cent. Prices, he pointed out, are extremely competitive, with shirts and jeans being offered for Rs 199 and t-shirts for Rs 99.

The Mart also stocks wrinkle-free shirts and trousers for Rs 599. Companies such as Celebrity Fashions, among others, which markets the Indian Terrain apparel range, supply to Reliance under its private label called Spirit. Arvind Mills too, for instance, has supplied a denim label to the Mart. “Now all the templates for the expansion will flow from this store,” said Mr Radhakrishnan. The next hypermarket will come up in Jamnagar, followed by stores in the NCR region, Hyderabad, Tirupathi, Vijaywada, Pune and Ludhiana. These stores will be smaller, in the range of 20,000 sq ft to 40,000 sq ft. “There will be 30 Marts by year-end,” he emphasised. The store saw record sales of over Rs 60 lakh on the first day and Mr Radhakrishnan said that Mart should see an operational breakeven in about three months time. The store is averaging 7,000 bills a day.

Concessionaries

A Morgan Stanley research report on Reliance Mart says that the retailer occupies 75 per cent of the space in the Iskon mall in Ahmedabad and has reportedly paid Rs 100 crore for the space.

The entire store is managed and run by the company with concessionaries only for small operations such as shoe and watch repairs. The report says that Reliance plans to have 150-200 malls up and running by December 2008 and 500 all over the country by 2010.

It has already acquired 40 properties to set up Marts all over Gujarat, adds the report.

Elaborating on all its formats, it says that Reliance plans to have 100 million sq ft of retail space in the next three to five years and targets Rs 12,000 per sq ft per year for hypermarkets with an EBIDTA margin of 8 per cent.

(This article was published in the Business Line print edition dated September 1, 2007)
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