Organized Retail in India

June 15, 2012
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In our last post, we discussed our basic background research on Indian e-tailing. In this post, we will list few relevant details for Reliance Retail, which might help us to analyze our question – “Would Reliance enter online retailing?”

Reliance Retail

  • RIL entered organized retail in 2006 with a plan to invest over $5 Bn over the next few years. Organized retail in India was $12 Bn in 2006.
  • Today, revenue of RIL is ~$70 Bn. Net profit  is $4 Bn
  • Reliance Retail earned revenue of $1.5 Bn this year contributing 2% to RIL’s turnover.
  • Reliance Retail is ~5% of Indian organized retail ($26 Bn) today. Organized retail in India is expected to reach $200 Bn by 2020.
  • RIL has recently announced to invest $18 Bn in next five years to expand it’s existing businesses including retail. Reliance Retail is targeting a growth of five to six times to achieve ~$10 Bn in revenue over the next three to four years. Mukesh Ambani has indicated, that consumer business is the ‘second dimension’ for future growth and that Reliance Retail would become one of it's important growth engines soon.

Indian organized retail

  • Indian organized retail is currently at $26 Bn size with large business houses like Tata (e.g., Westside, Croma, Star India Bazaar), Birla (e.g., More), Bharti (Bharti Wal-Mart), Future Group (e.g., Big Bazaar, Pantaloon) besides Reliance Retail.

 

Conglomerate

Retail businesses

Current Revenue

Future Group

Pantaloons, Future Value

$2.5 Bn

Tata Group

Trent, Infiniti, Tata International, Titan Industries

$2.2 Bn

Reliance Industries (RRL)

Reliance Fresh, Reliance Digital, Reliance Jewels, Reliance Timeout, reliance Trends

$1.5 Bn

Aditya Birla (ABRL)

Madura Fashion & Lifestyle, The Collective, More

 $800 Mn

(Excluding Pantaloons)

 

  • RIL invested ~$1Bn of fresh capital in Reliance Retail last fiscal. Reliance Retail board also has an approval of Rs ~$9 Bn fund infusion from the parent.
  • Aditya Birla Retail plans to invest Rs 1,500 crore (~$3 Bn) in five years to expand its hypermarket and supermarket stores.
  • Foreign players are partnering with Indian players including Wal-Mart with Bharti, Tesco with Tata’s Start Bazaar.

Please visit our analysis on how Reliance can view e-tailing market and provide your comments.

 


Authors

Pankaj Garg: Pankaj is currently an entrepreneur in K-12 education space and has worked extensively in payment and loyalty space in India. He is class of 2012, Sunstone Business School and a graduate from IIT Kanpur.

Pragati Dhingra: Pragati has worked for various technology companies such as Microsoft, Samsung, Sapient in the past. He is class of 2012, Sunstone Business School and a post graduate from IIT Guwahati.

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Comments

  1. Bikram Garg says:

    Reliance according to me will join the banwagon of E-Commerce retailing if its management consider online a big disruptive technology.  There are example of big company putting all efforts into sustaintable technology and minimal thoguht to possible disruptive technology thinking it to be small to consider.
    If Reliance consider online not disruptive they will not join else if they consider it to be disruptive then I am sure that it will be jump into online retail. So assuming they think online disruptive the question is when will it jump?
     
    The disruption S-curve shows that when the technology in a sector moves towards plateau region on S's top at that inflexion point the disruptive technology starts. So the questions and the data that will useful to collect will be where are we in organized sector (offline retail)? What is the current growth numbers for the offline organized retail?
    This information will be helpful to know the timeline for Reliance entry.
     
    thanks
    Bikram

  2. Manish Garg says:

     

    Reliance retail would definitely give itself a break in online retailing in comings times. Its nationwide network would provide much needed infrastructure to e-commerce platform through its warehouses and procurement/delivery channel. With mammoth cash reserves and ability to buy in bulk, it has muscle power to buy goods at lowest prices. Mukesh Ambani is planning to buy Nework 18 group and that could enable its RIL to have access to Home Shop 18 e-commerce platform….
     
    But retail success is also driven by the human psychology factor of a country. How many people in India would buy things without a trial at store? How many of them still feel confident to use credit card online? To remove these anxieties, retailing sites in India are lowering down their profit margins by offering COD with FREE Shipping! Although this has revolutionised e-retailing in India but how long it will last? Amazon doesn’t give these options for all products. RIL would certainly analyse compulsion of this business model before taking any decision..