The venture was flawed from the beginning in more ways than one
The Indian retail sector has grown at a stupendous rate and is touted to touch $450 billion by 2015 (as per McKinsey). At that rate, it is not surprising how major business houses have made inroads into the sector. But the chequered journey of Mukesh Ambani’s Reliance Retail in this sector merits analysis.
It was the winter of 2006 when Ambani announced the arrival of his Rs.250 billion retail gamble – Reliance Fresh convenience stores in India. Reliance Fresh had to face the wrath of all be it middlemen, small retailers or politicians. The company had to shut down shops across the country amidst vehement protests. Gibson Vedamani, ex-CEO, Retailers’ Association of India points, “Reliance Fresh failed because it was too aggressive with its strategies and wanted to capture the entire market without leaving any space for the middlemen and local retailers.” The company planned a number of formats viz. hypermarkets, supermarkets, convenience stores & specialty stores. This attracted unwanted media attention & got them into trouble.
With the looming spectre of economic slowdown, Reliance has had to cut down severely on its expansions. It merged the management of its hypermarkets, supermarkets and convenience stores last year to save on administrative, man-power and operational costs. However, the biggest blow came earlier this year, when Ambani, after deferring the launch of its wholesale market, finally scrapped its cash & carry (C&C) model and showed the door to the entire team of 36 professionals headed by Harsh Bahadur (erstwhile CEO of Metro AG’s C&C business in India).
The Indian retail sector has grown at a stupendous rate and is touted to touch $450 billion by 2015 (as per McKinsey). At that rate, it is not surprising how major business houses have made inroads into the sector. But the chequered journey of Mukesh Ambani’s Reliance Retail in this sector merits analysis.
It was the winter of 2006 when Ambani announced the arrival of his Rs.250 billion retail gamble – Reliance Fresh convenience stores in India. Reliance Fresh had to face the wrath of all be it middlemen, small retailers or politicians. The company had to shut down shops across the country amidst vehement protests. Gibson Vedamani, ex-CEO, Retailers’ Association of India points, “Reliance Fresh failed because it was too aggressive with its strategies and wanted to capture the entire market without leaving any space for the middlemen and local retailers.” The company planned a number of formats viz. hypermarkets, supermarkets, convenience stores & specialty stores. This attracted unwanted media attention & got them into trouble.
With the looming spectre of economic slowdown, Reliance has had to cut down severely on its expansions. It merged the management of its hypermarkets, supermarkets and convenience stores last year to save on administrative, man-power and operational costs. However, the biggest blow came earlier this year, when Ambani, after deferring the launch of its wholesale market, finally scrapped its cash & carry (C&C) model and showed the door to the entire team of 36 professionals headed by Harsh Bahadur (erstwhile CEO of Metro AG’s C&C business in India).
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