Saturday, July 12, 2008

Reliance must think a'Fresh'

While the debate over entry of modern retail in India is quite stale, Reliance can still aim at ‘Fresh’ strategies.

The year was 1993 and Sameer Jain of Bennett, Coleman & Co. Ltd. decided to launch the mother of all newspaper wars in Delhi, to close the gap between his flagship The Times of India and the then market leader Hindustan Times. The price of The Times of India was slashed to Re.1 from Rs.2.50 per copy. Consumers were delighted; but distributors and vendors declared war on The Times of India. Their grouse: lower prices would reduce their revenue per copy, posing a threat to their livelihood. That was a classic war between a company trying to connect with consumers directly and middlemen who controlled the distribution chain. About 14 years down the road, it is clear that Sameer Jain has decisively won the war against aggrieved and angry middlemen.

Can Mukesh Ambani do the same with Reliance Fresh? To answer that question simply, one can only say that at least he is trying, and trying so hard that he has an entire batallion of middlemen, distributors, traders, vendors and political parties up in arms against his Rs.250 billion retail ambitions. So, if in Kerala and West Bengal, Ambani is facing the wrath of trade unions, Maoist groups and Left allies, the quagmire in Orissa is equally daunting – following violent protests from traders and vendors in Bhubaneswar, Mukesh Ambani’s dream of opening Reliance Fresh stores in the state has become a non-starter. News of protests and ransacking of Reliance Fresh stores have also poured in from cities like Ranchi, Indore and even Ahmedabad. In Uttar Pradesh, where Reliance Fresh has already invested about Rs.5 billlion, the Mayawati administration has come down hard, by ensuring forced closure of outlets in Lucknow, Ghaziabad and Noida.

The protests are against big corporates getting into retail and that their presence will virtually kill millions of small traders, vendors and mom & pop stores across the country. The argument is that thanks to an improved supply chain, modern retail will offer goods and services at a cheaper rate to consumers, so local vegetable hawkers and neighborhood grocery stores will perish. ‘Their margins will be slashed and their livelihood will be under threat,’ is the common refrain. Proponents of modern retail disagree. “You can’t deprive consumers from this benefit on the ground of closing of small shops. Organised retail also means mass-scale employment, so players like Reliance will go ahead,” so proclaimed Gibson Vedamani, CEO, Retailers Association of India.
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Source :
IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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