Reliance Fresh Channel Design

Marketing Management II Sales and Distribution Channel Study of

Reliance Fresh

Introduction

Reliance Fresh is the convenience store format which a part of Reliance Retail limited, a fully subsidiary of Reliance Industries Limited. Reliance plans to invest Rs 25000 crores in the next 4 years in their retail division. RRL launched its first store in Hyderabad in November 2006; major focus was on selling fresh fruits and vegetables at lower prices by eliminating the middle men and intermediaries. Now it has more than 560 reliance fresh outlets across the country of which 117 are in Delhi and plans to increase this number to 784 to have pan-india presence by 2011. These stores sell fresh fruits and vegetables, staples, groceries, fresh juice bars dairy products and non vegetarian products. Stores, size varying from 2000-4000 sq ft, are located in the radius of 1-2 km of each other providing a good coverage of the area. Reliance retail has decided to reduce its exposure to fruit and vegetable business and position itself as a pure play super market and will focus on categories like food, auto accessories, FMCG, with food accounting for most of its business. High quality products are offered to the customers having better shelf life and more consistent quality. Company has expanded its supply chain management and it is capable of handling it rapidly growing stores network effectively and efficiently. When stores were launched, there was some initial problems post launch due to circumstances prevailing in West Bengal, Orissa and U.P. In 2008-09, Reliance fresh limited had a turnover of Rs 1778.06 crores and reported a loss of Rs 249.30 crores.

Structure of Channel

National Sourcing

National Sourcing

 The vegetables are collected in villages from farmers directly.  They are submitted to Collection Centres (CC) like Baktawar Pur, Khewrada, Hapur,

Patodi, Panipat,etc.  Payment and quality checks are done in collection centres.  From CC they are transferred to Distribution Centres (DC) via Reliance own logistical

units. Kundli is the DC for Delhi/NCR.  If the capacity is not fulfilled by the collection centre then National sourcing is used  This leads us to the next and final step in the process, i.e. the local Reliance Fresh

stores. The order for new vegetables has to be placed one day before. Till evening the stock is in distribution centres. At night it is transhipped to the local store. So there is a delay of one day from farm to the stores which are 113 in New Delhi. The distribution centre and the local stores are rent based.

Daily rates are monitored. The farmers are paid less than the prevailing rates in mandi. If the requirement is not met through farmers then the additional goods are brought directly from mandi at a 3-4% cheaper rate from the usual mandi rate.

The total volume entering in NCR is at average around 100 tons, but due to rising prices of vegetables, the consumption has fallen. This has made the volume fall to 70-80 tons. Almost 65% of the volume bought is from Collection Centres and warehouses, the rest 35 % is procured from mandis.

Movement of Goods (Logistics) Reliance itself pays for all logistics from the collection centre to the retail stores. Reliance earlier has a logistics company which used to provide man power as well as transportation of goods. But now the logistics company is no longer in place. Some of the company owned trucks of logistics company are used for transportation along with other trucks on rent based system from a third party vendor.

Members and their Roles Farmers: The farmers harvest the crop and bring it to the collection centre. They save on the transportation cost they would incur in taking the vegetables to the mandi. Collection Centre: One Reliance authorized person is in charge of collection centre. He inspects the quality and takes in the vegetables. He is also responsible for payment of the farmers. He ensures the loading of all vegetables in the trucks which are sent to the DC. National Sourcing: In order to provide a constant supply of all perishable vegetables warehouses have been bought where goods are kept in cold storage. Whenever there is a shortage in supply from any region then, these warehouses takeover and start supplying goods. Eg. Tomatoes are stored in Nasik, Ratlam, Jaipur; Potatoes in Agra and Shahbad. This gives Reliance a competitive edge. It also ensures that they buy at the cheapest rate and sell it out when the rates are considerable higher. Mandi: A team of two people is situated at the mandi. These teams are responsible for constantly monitoring the rates and communicating the same to the head office. If there is an urgent need which cannot be fulfilled by the collection centre then reliance purchases the supply directly from mandi but at a rate which is 3%-4% less than the actual mandi rate. Distribution Centre: The distribution centre receives the vegetables and does a thorough quality check. They prepare the vegetables for the retail stores and also ship the vegetables depending on the requirement for each store. Retail Stores: They are just responsible for receiving and checking the quantity of vegetables arriving each night. Then they put up all good vegetables on display for customers.

Quantum of Volumes

The total volumes procured per day is currently about 70-80 tonnes. This is the figure for last two months. Due to rise in prices the volume has dropped as it was earlier about 100 tonnes per day.

Management Policies If the store owners are able to reach their target then there is a monetary award and recognition. It is worked on monthly percentage increase in the sales. The customers are offered services like home delivery on orders exceeding Rs 500

Conflicts The stores in Uttar Pradesh had closed because of protests from the local vendors. This resulted in a Reliance de-hiring all its stores. This resulted in a loss of Rs 200 crore in tax payments to the UP government. The latest internal news is that Mayawati has sent her top IAS officers to Mumbai to woo Reliance Fresh back in Uttar Pradesh