Reliance Fresh SWOT (3rd May,07)

The Indian retail market accounted for $ 200 billions. Food accounts for over two-
thirds of the $200-billion Indian retail market. Yet, it has seen less than 1 per
cent penetration by modern retail so far.
Reliance industries which always looking for new business opportunities just
started a new era with its introduction of new concept stores named Reliance
Fresh with opening convince store in high streets of Banjara hills of Hyderabad.
Reliance Fresh is very different from what modern retail has offered in India so
far and with this reliance is planning to establish strong retail network in India in
food and farm sector. They have started with new eleven stores in the last week
and they are thinking to add 100 more stores to their feather by the end of this
year.

Let’s do a SWOT analysis on the Reliance Fresh.

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 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-
10,000 sq. 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 attract the
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
high-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.