A REPORT

ON

RELIANCE FRESH

SUBMITTED TO : SUBMITTED BY:

PROF . PRAVIN PATIL RISHI KUMAR SRIVASTAVA

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 PAGE NO.

1. Introduction 4

2. Retail Format 5

3. Merchandise Assortment 9

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 24

10. Recommendation and Conclusion 27

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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

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

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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 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

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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.

During the year, RRL also focused on building strong relationships in the agri-business 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.

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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 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.

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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.

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 PROCESSED FOOD

NO

N-FO

OD

(Personal Care)D

AIRY

PLASTIC WARES

PROCESSED

FOO

DS

PROCESSED

FOO

D

STAPLES

PERSON

AL CARE

FOO

D &

BEVERAGES

FOO

D &

BEVERAGES

FRUITS &

VEGETABLES

VEGETABLES

BEVERAGES/D

AIRYCustom

er Service

TILL

TILL

STAPLESMOBILES

PROCESSED FOOD

EXIT

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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 footfalls

are high.

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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

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

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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.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:

1. Physical Verification of Stock: Under this process stocks are physically

verified and entered into the SAP. This activity is known as Stock Take.

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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

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

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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.

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.

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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.

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

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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 8,000-10,000sq.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.

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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.

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, pay- packets 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 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

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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.

Competition- Spencer : Oldest Retailer in India 135 Stores in 27 Cities Plans to open 365 Stores in 365 days.

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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.

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.

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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

by improving operational efficiency by way of better managing the staff

available at the stores.

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