In India, Reliance looks for 'lion's share' of retail
By Saritha Rai International Herald Tribune
Published: June 27, 2006
BANGALORE, India Gearing up for competition in anticipation of the much-awaited opening of the Indian retail market and the arrival of global players like Wal-Mart and Carrefour, Reliance Industries, the top energy company in India, said Tuesday that it would enter the retailing industry with a $5.6 billion investment and one million employees over the next few years.
The Reliance Industries chairman, Mukesh Ambani, told shareholders at the annual general meeting in Mumbai that the company had set up a subsidiary, Reliance Retail, with equity of $2.24 billion to propel "a retail revolution in the country." The first of a planned 5,500 retail outlets will open later this year in the state of Gujarat.
Soaring economic growth and an increasingly affluent middle class, with growing aspirations and a craving for newer consumer experiences, make India an attractive market for domestic and international retailers.
A recent study by the management consulting firm A.T. Kearney detailed India's appeal to overseas retailers.
"India is at the peak of attractiveness for retailers right now, with a $350 billion retail market expected to grow 13 percent this year," said Fadi Farra, author of A.T. Kearney's annual study of retail investment in 30 emerging markets.
The Indian market is gradually opening up while China's market becomes increasingly saturated, Farra said.
Piquing overseas investors' interest, India this year allowed foreign direct investment of up to 51 percent in single- brand retailer businesses, triggering the entry of names like Tommy Hilfiger, Nike and Timex.
Under current regulations, foreign retailers cannot own stores in India, but they can make franchise agreements, as has Marks & Spencer of Britain, or operate wholesale stores like the Germany-based Metro.
Experts forecast that more of the rules that block foreign investment would be relaxed in the coming months to allow the entry of global players like Wal-Mart and Tesco. India has no Wal- Mart stores at present, but neighboring China has 60, with plans for another 20 within the year.
For now, India's protectionist regulations give homegrown companies like Pantaloon Retail, RPG Retail and now Reliance Retail a head start. But there is political opposition to opening the retail sector to foreign investment, with fears that overseas competition would lead to job losses and drive smaller domestic operations out of business.
"Reliance Retail is already preparing to take a lion's share of the market ahead of the entry of foreign competition," said Arvind Singhal, chairman of the retail consulting firm KSA Technopak.
Reliance Retail's plan is to blitz both foreign and local competitors. The new retail chain will sell food, clothes, footwear, consumer durables, home essentials, farm supplies, travel services, health care products, and even educational and entertainment products.
Reliance is also in talks with luxury brands like Giorgio Armani and Manolo Blahnik to bring them to India.
Reliance Retail plans to cover 1,500 Indian cities and towns with a network of neighborhood convenience stores, supermarkets, specialty stores and hypermarkets. The company will cater to both mass market and luxury segments.
In India, glitzy shopping malls and well-stocked supermarkets are still relatively new, with a majority of shoppers making their purchases in neighborhood "mom-and-pop" stores, or kirana stores, as they are referred to locally.
According to A.T. Kearney, India's top five retailers together still account for less than two percent of the retail market.
Reliance Retail currently has a 2,200- strong work force. In the coming years, the company plans to recruit 500,000 workers and train them in product knowledge, technology and customer service.
"Organized retailing will be an overarching theme of the expansion and growth of Reliance in the near future," Ambani said.
Reliance Retail's strategy includes buying durable goods from China, the world's low-cost supplier, to sell under its own brand name. It will set up warehousing facilities in Thailand, making that country its procurement hub.
BANGALORE, India Gearing up for competition in anticipation of the much-awaited opening of the Indian retail market and the arrival of global players like Wal-Mart and Carrefour, Reliance Industries, the top energy company in India, said Tuesday that it would enter the retailing industry with a $5.6 billion investment and one million employees over the next few years.
The Reliance Industries chairman, Mukesh Ambani, told shareholders at the annual general meeting in Mumbai that the company had set up a subsidiary, Reliance Retail, with equity of $2.24 billion to propel "a retail revolution in the country." The first of a planned 5,500 retail outlets will open later this year in the state of Gujarat.
Soaring economic growth and an increasingly affluent middle class, with growing aspirations and a craving for newer consumer experiences, make India an attractive market for domestic and international retailers.
A recent study by the management consulting firm A.T. Kearney detailed India's appeal to overseas retailers.
"India is at the peak of attractiveness for retailers right now, with a $350 billion retail market expected to grow 13 percent this year," said Fadi Farra, author of A.T. Kearney's annual study of retail investment in 30 emerging markets.
The Indian market is gradually opening up while China's market becomes increasingly saturated, Farra said.
Piquing overseas investors' interest, India this year allowed foreign direct investment of up to 51 percent in single- brand retailer businesses, triggering the entry of names like Tommy Hilfiger, Nike and Timex.
Under current regulations, foreign retailers cannot own stores in India, but they can make franchise agreements, as has Marks & Spencer of Britain, or operate wholesale stores like the Germany-based Metro.
Experts forecast that more of the rules that block foreign investment would be relaxed in the coming months to allow the entry of global players like Wal-Mart and Tesco. India has no Wal- Mart stores at present, but neighboring China has 60, with plans for another 20 within the year.
For now, India's protectionist regulations give homegrown companies like Pantaloon Retail, RPG Retail and now Reliance Retail a head start. But there is political opposition to opening the retail sector to foreign investment, with fears that overseas competition would lead to job losses and drive smaller domestic operations out of business.
"Reliance Retail is already preparing to take a lion's share of the market ahead of the entry of foreign competition," said Arvind Singhal, chairman of the retail consulting firm KSA Technopak.
Reliance Retail's plan is to blitz both foreign and local competitors. The new retail chain will sell food, clothes, footwear, consumer durables, home essentials, farm supplies, travel services, health care products, and even educational and entertainment products.
Reliance is also in talks with luxury brands like Giorgio Armani and Manolo Blahnik to bring them to India.
Reliance Retail plans to cover 1,500 Indian cities and towns with a network of neighborhood convenience stores, supermarkets, specialty stores and hypermarkets. The company will cater to both mass market and luxury segments.
In India, glitzy shopping malls and well-stocked supermarkets are still relatively new, with a majority of shoppers making their purchases in neighborhood "mom-and-pop" stores, or kirana stores, as they are referred to locally.
According to A.T. Kearney, India's top five retailers together still account for less than two percent of the retail market.
Reliance Retail currently has a 2,200- strong work force. In the coming years, the company plans to recruit 500,000 workers and train them in product knowledge, technology and customer service.
"Organized retailing will be an overarching theme of the expansion and growth of Reliance in the near future," Ambani said.
Reliance Retail's strategy includes buying durable goods from China, the world's low-cost supplier, to sell under its own brand name. It will set up warehousing facilities in Thailand, making that country its procurement hub.
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