Reliance all set to conquer retail segment in India

Reliance all set to conquer retail segment in India
By James Hall, The Telegraph Group Limited, London 2006
In April a Mumbai branch of Sahakari Bhandar, a dowdy Indian state-owned department store, closed mysteriously for renovation. It reopened a month later equipped with air conditioning and staff in bright uniforms.
Goods on sale included everything from CDs to frozen peas. The store is just one in a chain, which includes at least 20 sites in Mumbai, being used as a dry run for a vast new retail concept by Reliance Industries Limited (RIL), India's largest private company.
Reliance Retail, a newly launched RIL subsidiary, used the stores as a secret testbed for product lines and a new system of supply chain management.
The experiment worked: sales at Sahakari Bhandar trebled. The stores have given Indian shoppers the first glimpse of an operation of such scale and ambition that it is making global rivals such as Wal-Mart, Carrefour and Tesco shudder. Mukesh Ambani, RIL's chairman, plans to open 100 million sq ft of retail space in India by 2010.
Local press reports talk of between 5,000 and 10,000 stores spread across 1,500 towns and cities. Reliance will operate hypermarkets, convenience and speciality stores, as well as business-to-business operations, selling food, clothing, electrical goods, consumer durables, luxury goods and financial and travel services.
The project will employ one million people within five years. "Without a doubt, this is the biggest retail launch in India's history," says P. Phani Sekhar, an analyst at Angel Broking, based in Mumbai.
Wal-Mart and Tesco are beating at India's door but have not been granted entry because of restrictions on foreign ownership in the retail sector.
So-called "organised retail" (sales from chain stores rather than kirana, or market stalls) accounts for just 3.3 per cent of the £130 billion retail market, but it is growing at 30 per cent a year.
Ambani's target of 100 million sq ft of space would catapult Reliance Retail into the global league of retailers from a standing start. It would be smaller than Wal-Mart, which has more than 450 million sq ft in the US alone, and Carrefour, which has 285 million sq ft globally, but it would dwarf Tesco's 58 million sq ft worldwide. The project will cost up to £4 billion, a figure Ambani appears happy to lay down. RIL has already invested pounds 400 million in the "pilot" stages of the project.
Press reports in India suggest that this stage alone could comprise a breathtaking 1,575 stores within six months of launch. A recent report by CLSA Asia-Pacific Markets, the brokerage, predicted that Reliance Retail could achieve sales of $20 billion (£10.5 billion) or five per cent of India's overall retail market and profits of $1 billion within six or seven years. This revenue target would give an implied market capitalisation of $17.5 billion.
The company has been busy signing deals with state governments to set up large rural hubs to buy vegetables, fruits, pulses and dairy products from farmers. In turn, these hubs will be supplied by hundreds of smaller satellite bases in India's thousands of villages.
Traditionally, India's farmers work in small co-operatives and sell at a local level.Not any more.