Reliance Rishi Report

A REPORT ON RELIANCE FRESH

SUBMITTED TO : BY:

PROF . PRAVIN PATIL SRIVASTAVA RELIANCE FRESH

SUBMITTED

RISHI KUMAR

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SECTION B 08BS0002456

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ACKNOWLEDGEMENT As far as the Retail Project is concerned, it is inseparable part of management education and very important as far as the final placement is concerned. The experience and knowledge one gets in this project adds immense value towards shaping one’s carrier. I am very happy that I have chosen Retail Management as one of my subjects because the learning which I have got here is unique. I am highly thankful to our project guide Mr. Pravin Patil who helped me at every stage of my project. He has been the source of inspiration for me and without him the project wouldn’t have been completed.

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INDEX S.NO.

CONTENTS

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1.

Introduction

4

2.

Retail Format

5

3.

Merchandise Assortment

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4.

Store Layout

10

5.

Store Exteriors and Interiors

13

6.

Atmospherics

16

7.

SCM and IT

17

8.

SWOT Analysis

21

9.

Store location and Site Evaluation

10.

Recommendation andConclusion

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INTRODUCTION Retailing is the interface between the producer and the individual consumer buying for personal consumption. This excludes direct interface between the manufacturer and institutional buyers such as the government and other bulk customers. A retailer is one who stocks the producer’s goods and is involved in the act of selling it to the individual consumer, at a margin of profit. As such, retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. The retail industry in India is considered as one of the sunrise sectors in the economy. At Kearney, the well-known international management consultancy, recently identified India as the ‘second most attractive retail destination’ globally from among thirty emergent markets. It has made India the cause of a good deal of excitement of many foreign eyes. With a contribution of 14% to the national GDP and employing 7% of the total workforce (only agriculture employs more) in the country, the retail industry is definitely one of the pillars of the Indian economy. The Indian Scenario Trade or retailing is the single largest component of the services sector in terms of contribution to GDP. Its massive share of 14% is double the figure of the next largest broad economic activity in the sector. The retail industry is divided into organised and unorganised sectors. Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail RELIANCE FRESH

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chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, paan / beedi shops, convenience stores, hand cart and pavement vendors, etc. Unorganized retailing is by far the prevalent form of trade in India –constituting 98% of total trade, while organised trade accounts only for the remaining 2%. Efficiency enhancements and increase in the food retail sales activity would have a cascading effect on employment and economic activity in the rural areas for the marginalized workers. Thus, the corporate owned sector is expanding at a furious rate. RETAIL FORMAT-TYPE AND AREA OF OPERATION We can see many examples of businesses where, first we grow and then think of expanding but Reliance is quite different. Reliance has developed such huge amount of resources and capital over the years that whenever it steps into any segment it is not required to wait for growing signal, that’s why it always thinks of expanding without any boundaries. Reliance retail is next Step by RIL which will be a pan India project. “Reliance Fresh” is the retail chain division of Reliance Industries of India which is headed by Mukesh Ambani. Reliance has entered into this segment by opening new retail stores into almost every metropolitan and regional area of India. Reliance plans to invest Rs 25000 crores in the next 4 years in their retail division and plans to begin retail stores in 784 cities across the country. The Reliance Fresh supermarket chain is RIL’s Rs 25,000 crore venture and it plans to add more stores across different segments, and eventually have a pan-India footprint by year 2011. The super marts will sell fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products and also will sport a separate enclosure and supply-chain for non-vegetarian products. Besides, the stores would provide direct employment to 5 lakh young Indians and indirect RELIANCE FRESH

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job opportunities to a million people, according to the company. The company also has plans to train students and housewives in customer care and quality services for part-time jobs. The company is planning on opening new stores with store-size varying from 1,500 sq ft to 3,000 sq ft, which will stock fresh fruits and vegetables, staples, FMCG products and dairy products. Each store is said to be within a radius of 1-2 km of each other, in relation to the concept of a neighbor store. However, this is only the entry roll-out that the company has planned. Bangalore is said to have 40 stores in all by the end of the year. In a dramatic change due circumstances prevailing in UP, West Bengal and Orissa, It was mentioned recently in News Dailies that, Reliance Retail is moving out stocking. Reliance Retail has decided to minimize its exposure in the fruit and vegetable business. The company may not stock fruit and vegetables in some states, Orissa being one of them. Though Reliance Fresh is not exiting the fruit and vegetable business altogether, it has decided not to compete with local vendors partly due to political reasons, and partly due to its inability to create a robust supply chain. This is quite different from what the firm had originally planned. When the first Reliance Fresh store opened in Hyderabad last October, not only did the company said the store’s main focus would be fresh produce like fruits and vegetables at a much lower price, but also spoke at length about its “farm-to-fork’’ theory. The idea the company spoke about was to source from farmers and sell directly to the consumer removing middlemen out of the way. A typical Reliance Fresh store is approximately 3000-4000 square Feet and caters to a catchment area of 1-2 km. With a vision to generate inclusive growth and prosperity for farmers, vendor partners, small shopkeepers and consumers, Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead Reliance Group’s foray into organized retail. RRL launched its first store in November 2006 through its convenience store format ‘Reliance Fresh’. Since then RRL has rapidly grown to operate 590 stores across 13 states at the end of FY 2007-08. RELIANCE FRESH

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During the year, RRL also focused on building strong relationships in the agribusiness value chain and has commenced marketing fruits, vegetables and staples that the company sources directly to wholesalers and institutional customers. RRL provides its customers with high quality produce that has better shelf life and more consistent quality than was available earlier. RRL has made significant progress in establishing state-of-the-art staples processing centers and expects to make them operational by May 2008. Through the year, RRL also expanded its supply chain infrastructure. The Company is fully geared to meet the requirements of its rapidly growing store network in an efficient manner. Recognizing that strategic alliances are going to be a key driver to its retail business, in FY 2007-08, RRL established key joint ventures with international partners in apparel, optical and office products businesses. Further, RRL will continue to seek synergistic opportunities with other international players as well. This year, RRL will continue its focus on rapid expansion of the existing and other new formats across India. When the store was launched it had some initial problems Post launch, in a dramatic shift in its positioning and mainly due to the circumstances prevailing in UP, West Bengal and Orissa, it was mentioned recently in news Dailies that, Reliance Retail is moving out of stocking fruits and vegetables. Reliance Retail has decided to minimize its exposure in the fruit and vegetable business and position Reliance Fresh as a pure play super market focusing on categories like food, FMCG, home, consumer durables, IT and wellness, with food accounting for the bulk of the business. The company may not stock fruit and vegetables in some states. Though Reliance Fresh is not exiting the fruit and vegetable business altogether, it has decided not to compete with local vendors partly due to political reasons, and partly due to its inability to create a robust supply chain. This is quite different from what the firm had originally planned. When the first Reliance Fresh store opened in Hyderabad last October, not only did the company said the store’s main focus would be fresh produce like fruits and RELIANCE FRESH

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vegetables at a much lower price, but also spoke at length about its “farm-to-fork’’ theory. The idea the company spoke about was to source from farmers and sell directly to the consumer removing middlemen out of the way. Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint, Reliance Wellness, Reliance Jewels, Reliance Timeout and Reliance Super are various formats that Reliance has rolled out. In addition, Reliance Retail has entered into an alliance with Apple for setting up a chain of Apple Specialty Stores branded as iStore, starting with Bangalore. Several formats is being run by the company, which include – Reliance Fresh Reliance Time Out Reliance Jewels Reliance Wellness Reliance Trends Reliance Digital Reliance Home Reliance Super Reliance AutoZone Reliance Footwear Reliance Mart

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MERCHANDISE ASSORMENT CLASSIFICATION,CATEGORIES&SKU’S

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STORE LAYOUT The store layout should be planned in such a manner that customer finds enough space for movement. The layout should be in such a systematic manner that customer can easily locate products he/she wants to purchase. At Reliance Fresh a very impressive layout has been put in place where customer easily finds what he wants. The store’s size varied from 1,500 sq ft to 3,000 sq ft, and stocked fresh fruits and vegetables, staples, FMCG products and dairy products (Exhibits 5-7). The stores stocked their own private label in staples and food under the "Reliance Select" label (Exhibit-8). Eventually the label would include other food categories such as dairy products, jams and colas. The Fresh model was engineered to clock a faster turnover of inventory — Reliance expected consumers to visit the store at least twice a week for their top-up groceries. Each store would have an investment of approx $127,000 (Rs. 5 million) to$153,000 (Rs. 6 million). Industry sources expected Reliance Fresh to turn this capital over six times. Tasks involved in Store Administration which can contribute towards achieving customer delight: 1.

Floor Maintenance: The premises of the store need to be maintained as per standards decided upon by the management. Floor cleanliness and merchandise arrangement play a very crucial role in creating an image of store in the minds of the target customers. This is crucial when customer tries to evaluate several stores and matches the pricing of products offered with the services provided by the store.

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Therefore when a customer tries to compare Reliance Fresh with Fair Price store, Fair Price fails terribly as Reliance Fresh has specially emphasized on its services apart from pricing strategy.

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HOME FURNISHING NONPLAS DAIRY PROC STAP P FOOD F FRUITS VEGE BEVE Custom PROCESSED MOBILES STAPLES TILL FOOD EXIT TIC ESSE ROC LES ERS OOD & TABL RAGE er FOOD WAR D ESSE ONA BEVE & VEGETA ES S/DAI Service (Pers ES FOOD D L RAGE BEVE BLES RY onal FOO CAR S RAG Care) D E ES

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But Reliance Fresh is using a combination which definitely making it lead is that it is providing all services a convenience store can provide but at better price which is leading to Customer Satisfaction and Delight. At Reliance Fresh very impressive initiative was taken to maintain its overall store floor maintenance in the name of “Operation Shine” where days were systematically assigned for a particular task and at end of it store performance was evaluated for each store which lead to store maintained and cleaned which gave a very good signal to its customers for its uncompromising take on floor maintenance. 2.

Manpower Planning: The next most important thing that a customer looks after entering the store is how Customer Care Associates (CCA) attend to them, how well a CCA and other staff members at the front end are dressed, educated and competent enough to respond to their queries. Manpower Planning may include certain functions like: a.

Shift Planning: A roster is maintained at a Reliance Fresh Store in which the store manager plans and assigns optimum staff to each shift also considering weekdays and weekends. This is done basically on the basis of footfalls of customer at a particular time. Hence providing for more staff during evening hours when

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footfalls are high. The Store Manager also has to intelligently assign work to his staff members according to footfalls as he can assign routine work to supervisor and CCAs at lean hour of the day for work like stock take (Physical Inventory, Stock Indenting etc). He has to push his staff towards attending customers at rush hours ask them to drive sales through their efforts. This helps Reliance Fresh to not only increase sales but gain Customer Satisfaction and Delight. b.

In charge: For every task in the store a staff member is made incharge of that task so that no confusion is there on the floor and in the store as a whole. Various tasks like opening of store, indenting of F & V and milk, GRN, stock correction etc. is assigned among supervisors shift wise. CCAs are assigned bays and responsibility given to them regarding their bay regarding maintenance of Planogram, FIFO, FEFO, proper stacking etc. By doing the above the store can manage display efficiently and ensure the service of the store to an optimal level. MSRs are assigned to regularly make announcements of schemes offered by the store as it is very crucial as communication helps consumer make decision and push sales . STORE EXTERIORS AND INTERIORS The explanation and diagram of store exteriors and interiors is given in the adjacent pages.

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ATMOSPHERICS

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A very integral part of managing inventory at store level is display it correctly. The best merchandise may remain unsold if it not displayed in a manner that is appealing and convenient for the customer. A very simple example can be illustrated like if rice packets are put on high bays it will become very inconvenient for which mostly female customer do the buying, hence would negatively impact sales. Display can be considered as a silent salesperson helping to self sell the products. Display is such a critical part in serving customers as it helps avoid confusion and guides customer to make prompt decision. Some of the key aspects of Reliance Fresh’s atmospherics are as follows: Layout and ambience was Well lit, Neat, Bright and Easy to read Signage. Highly visible store promotion, re iterating value for money proposition. Store Façade- Bright, Striking and Primary Colors. RELIANCE FRESH

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Prompt security round the clock.

SCM AND THE IT SYSTEM BEING FOLLOWED BY THE ORGANISATION Diagram and explanation are given in the adjacent pages. It is to be noted that the organization uses the SAP Technology.

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Some important processes followed by Reliance Fresh in inventory management helping them reach optimality in inventory levels and customer satisfaction are as follows:

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1.

Physical Verification of Stock: Under this process stocks are physically verified and entered into the SAP. This activity is known as Stock Take. Any variation with the book stock is recorded. This helps the store to control its shrinkage if the SKUs are physically lesser than the book stock. Similarly excess stock if any is also recorded. The implication of these variations on planogram display is such that in case of Negative variation i.e. Physical Stock < Book Stock then it leads to shortages of that SKU as Auto Replenishment fails to function as inspite of stock in realty should have triggered the Target Stock but will not as the system shows that there is more stock (Book Stock). This causes great inconvenience to the customers like if a customer comes to purchase a product of daily requirement like Spices and he is not getting it regularly due to such a discrepancy he will definitely get unsatisfied and the store loses sale of that SKU due shortage inspite of demand. And in case of Positive variation i.e. Physical Stock > Book Stock it creates a different kind of problem where excess stock is sent by the DC and it becomes difficult to manage it as it have to remain scattered all over the floor waiting for the stocks on the bay to get cleared. This also gives negative impression about the store as an ill managed store where products are scattered and there is problem in free movement. This should also be avoided.

2.

Proper recording of Dump and Shrinkage: To maintain proper MBQ it is very important to regularly update dump and shrinkage. This has to be done

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apart from Stock take which is done once a month or as and when asked by the management. 3.

Push Indenting of Promo article for a particular scheme: During an offer on a product a sudden spurt in demand can be seen which is quite temporary in nature. There it is not advisable to change MBQ as it is more permanent in nature. In case of upward revision of MBQ the product will be delivered in increased quantity even after removal of promo offer. There a temporary increase in indenting is done called Push Indenting. Hence after withdrawal of the scheme the product is delivered on the normal basis.

4.

Revision of MBQ: There is also a process of revising MBQ in case there is a regular increase in demand and the store is maintaining lower MBQ meaning regular shortages. There an upward revision is done. In case of slow moving goods which the store manger feels is a drag on store performance and is just blocking space he can request for revising the MBQ to lower levels or removing it from the shelf altogether. The product has to be sent back to DC.

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5.

DSD Indenting: Direct Store Delivery (DSD) Indenting is done for very fast moving goods like beverages, highly perishable goods like ice-creams and also glass items which highly fragile in nature. On the part of consumer it helps him to receive products fresh in case of perishables leading to maintainability of high quality standards. On part of management it reduces cost of holding such perishable and fragile products as the store will receive from the vendor only products which are saleable and meet standards. SWOT ANALYSIS The SWOT ANALYSIS on Reliance largely depends on the growth of the Retail Sector and the SCM ( supply chain management). However it is really ironical on the part of SCM that it is really in a very bad shape. Our SWOT analysis hinges on the part of SCM and its effective utilization. The figure in the adjoining represents the diagram of the inefficient SCM.

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STRENGTHS: Reliance is the first into enter into this unorganized sector of vegetables and fruits. According to them its intentions to have100% farm fresh foods in their new retail stores. It is also adding shortly a juice bar, and even a large counter for puja flowers. In fact, over 60 per cent of the floor space has been dedicated to fresh fruits and vegetables, the rest to other food products like staples, spices, bakery, etc. But reliance has decided not to add any bar soap or toothpaste and detergent in its shelves. So by using this strategy they are positioning themselves different from other players of the industries like Food world, Big Bazaar and Nilgiris. But over come the short comings of these specialized stores they are also introducing new Reliance full-fledged supermarket called Shakhari Bhandar which offers each and everything from the staple to soap. Most of the staples are under its own private label brand — ‘Reliance Select’. There is a 500g channa dal pack priced at Rs 28, a 500g urad dal pack for Rs 39, all under Reliance’s own brand. Excepting a few packets of Nestle’s Maggi, or MTR’s masalas or Pepsi’s Lays chips, there is very little shelf space given to the big brand owners in the country. Reason: private RELIANCE FRESH

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labels offer far better profit margin to the retailer than branded products of FMCG companies. Most of these outlets will need only 2,000-5,000 sq. ft. A supermarket may need as much as 8,000-10,000sq.ft. Weakness: This is definitely an interesting business venture but it may miss out on the opportunity to capture a greater share of the customer’s wallet. For customers, too, this could be irksome, as they would have to visit another store to pick up essentials. Reliance could easily fix this problem by adding a few small counters for some basic non-food products. According to their official this format is not final one they are accepting the new changes which are required to attracr large number of customers. Opportunities Reliance wants to build a high-profitability business and food is, perhaps, the best venture to start. That is because the Indian food supply chain is grossly inefficient. There are several intermediaries, each of whom adds his own profit margin to the cost. Besides, there is huge wastage in transit. This offers potential for savings and profits. To reduce the cost and increase the profit it has been sourcing out its requirements from the farmers. For example, the leafy vegetables, brinjals, tomatoes and green chilies in the Banjara Hills outlet were sourced directly from farmers in Vantimamdi, Chevella and nearby mandals in Ranga Reddy district of Andhra Pradesh. The supply chain already has been backed by few hundred farmers the number is estimated to touch million in next five years. The main aim of the reliance is to eliminate the intermediaries in the sector and reduce the cost. Smaller stores have two advantages. They bring down the cost of real estate (and increase profits). It is easier to find space for small convenience stores in a quiet neighborhood than for supermarkets in high streets. Threats: This model is engineered to clock a faster turnover of inventory — Reliance expects consumers to visit the store at least twice a week for their top-up groceries. Each store will have an investment of Rs 50 lakh to Rs 60 lakh. Unlike global retailers who operate on thin margins, Reliance Retail is looking at a fairly highRELIANCE FRESH

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margin business model. Deliberately stopped short of being a full-fledged supermarket rather, it has limited itself to a food and grocery convenience store. They also have a threat from the existing supermarkets which provides all the services to its customers. For Example Food world and Nilgiris also provides food and beverages with other personal care products. These convince are not existed in the present Reliance retail stores. Competition: In the next few years reliance will be facing strict competition from companies like Spencer, More and Dorabjee. It’s high Reliance Fresh should understand the dominant nature of these industries and formulate its policies and strategies accordingly.

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STORE LOCATION AND SITE EVALUATION

Reliance Fresh works explicitly on proximity to customers, provision of good quality of products and excellent ambience. Some of the parameters which are considered under site evaluation and store location are as follows: Demographics- Rise in the working population which is young, paypackets which are hefty, more nuclear families in urban areas, rise in the number of women working, more disposable income and customer aspiration, western influences and growth in expenditure for luxury items. All these are the factors for the growth in Indian organized retail sector. In fact, India retail industry is the fastest growing industry in India and it accounts for 10% of the country's GDP. In 2006, the retail industry in India amounted to US$ 200 billion and out of this the organized retail sector in India amounted to RELIANCE FRESH

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US$ 6.4 billion. By 2010, the Indian organized retail sector is expected to rise to US$ 23 billion.

Proximity to supply sources- Reliance started its retail operations of reliance fresh stores with following supply chain model. Procuring directly from the farmers and operating with moderate margin but mass selling was key to reliance fresh operations for first few months. Whole Sale Trading (WST) Reliance formalized its second supply chain model to shift itself from grocery retailer to grocery supplier by focusing and establishing itself in Mandi’s.

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Economic base: Today, Reliance Retail’s 920 stores are spread across 20 formats in 80 cities and 14 States covering almost 4.5 million sq. ft. of consumer-facing retail space. Its Hypermart encompasses a million sq ft as of now, and this year will see a few more opening up. However, like other retailers are, Reliance too, is grappling with the slowdown which has impacted its plans. In the last one year, because of the slowdown, say these sources, there have been some cut backs. While there have been reports of cutting back of staff strength in RRL, industry sources say that of Reliance Retail 25,000 employees, around three to five per cent of managerial staff were rendered surplus and were either redeployed or moved out Reliance plans to invest Rs 25000 crores in the next 4 years in their retail division and has plans to begin retail stores in 784 cities across the country. Union Bank of India and FINO has enrolled 1,600 vegetable and fruit vendors who are regular suppliers to Reliance Fresh. These vendors will soon be issued biometric cards using which they can avail themselves of small loans from the bank. RELIANCE FRESH

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Competition-

Spencer: Oldest Retailer in India 135 Stores in 27 Cities Plans to open 365 Stores in 365 days. Big Bazaar: 53 Stores and fast expanding. Aditya Birla Group: Acquired 160 stores of Trinetra. Took over Fabmall about 50 stores Plans to set up 15 Hyper Markets in Pune. Additional 1000 Super/Hyper markets across the country in the next 3 years. Bharti: Joint Venture with Walmart Plans to begin operations next year. TATA Group: Has set up Star Bazaar and Westside all over country .

Store location and its availability: As already mentioned Reliance Fresh is located keeping in mind proximity to customers and suppliers both. There is smooth transport facility for carrying goods and commodities. It is to be noted that vegetables and fruits from such farms are collected through reliance own logistics and brought to collection Processing centers where quality check and other required processing is done. Recommendations & Conclusions

1. Reliance Fresh has a tremendous potential where it can improve its revenue drastically by concentrating on its existing customer base.

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2. As in the research findings it is very clear that even regular customers are still not spending major part of their monthly expense in the Reliance Fresh Store. Hence this shows that they are expecting more from Reliance Fresh store and here lies a task where Reliance Fresh can improvise on its services to cater to the requirements of its customers. 3. Reliance Fresh should improve its operations in its Fruits and Vegetable section as it has been seen that people coming just to buy F&V go ahead and buy other products in the store. F&V is the major footfall driver in the Reliance Fresh Store. Hence high Standards of Freshness and Quality in the F & V section has to be maintained by the Reliance Fresh Store to keep driving customers. 4. Reliance Fresh has to improve its Store Operations significantly to match customer expectations as the study indicates that most of the customers viewed Freshness and Quality of products as more important than holding large number of merchandise. This is the area where Reliance Fresh is struggling to make a mark as customer didn’t find Freshness and Quality as a USP of the store as it is projected by the company. 5.

During the course of study it was found that Queuing problem exists at the billing counters which need immediate attention. This problem can be sorted

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by improving operational efficiency by way of better managing the staff available at the stores.

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