Advantages and disadvantages of Private labels for Reliance Retail Ltd

Indian retail sector is valued at US$ 353 billion in 2009 – 2010 and is projected to reach US$ 543.2 billion by 2014. The Indian retail sector is the second-largest employer after agriculture IBEF – Retail – (2010), and this sector is primarily much unorganized / traditional. Organized retail in India is still in the nascent stage with only 5% penetration, The retailer, Ernst & Young, Jan (2009) and this signifies the immense potential this holds for growth. Traditional Kirana stores (small ‘mom-and-pop’ general stores) are now being replaced by large format stores like Hypermarkets, Supermarkets and other Specialty stores – and these shifts is mainly due to the increased consumer expectations & increase in the consumer class and will grow nearly from 50 million at present to 583 million by 2025.

As discussed earlier Indian retail sector is highly unorganized and the access of modern retail is very negligible (5% penetration). And with the relaxation of Government policies pertaining to retail sector and with more addition of retail space every year will definitely boost the growth of modern / organized retail in India. And even the mindsets of Indian consumers are changing – they are now very demanding in terms of value and a shift from low price goods to more focus on convenience and all this with a superior shopping experience, also they are more brand conscious these days. IBEF – Retail, (2010)

There are only a handful of organized key retailers in the Indian retail sector:

Group

Store Brands

Tata

Landmark(books and music), Croma( electronics), World of Titan (watches), Tanishq(jewellery), Titan Eye+ (eye wear),Westside (lifestyle retail store), Star Bazaar (hypermarket), Fashion Yatra (fashion store)

Reliance Group

Reliance Fresh (neighborhood store), Reliance Super (mini-mart), Reliance Mart (supermarket), Reliance Digital (consumer durables and information technology), Reliance TimeOut (books, music and entertainment), Reliance Trends (apparel and accessories), Reliance Wellness (health, wellness and beauty), iStore (Apple products), Reliance Footprint (footwear), Reliance Jewels, Reliance Living (home ware, furniture) and Reliance AutoZone (automotive products and services)

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Future Group

Central (shopping mall), Big Bazaar (hypermarket), Pantaloons (fashion outlet), Blue Sky (sunglasses), eZone(electronics), KB’s Fair Price (essential products), Navaras(jewellery), Planet Store (multi-brand sports and lifestyle speciality retail), aLL(fashion garments), Ethnicity (Indian ethnic wear), Home Town (home needs), Furniture Bazaar (furniture), Electronics Bazaar (electronics), Home Bazaar, Collection I (furniture), Brand Factory (multi-brand readymade apparels), Gen M & One Mobile (cell phones), M-Port (electronics), Shoe Factory (footwear) and Depot (books and music)

Few more to the list would be players like RPG group, K Raheja group, Landmark group, Bharti group, Mahindra group, Aditya Birla group and Vishal retail. IBEF – Retail, (2010)

In 2009 Reliance Retail as a part of its growth strategy planned to introduce Private labels in FMCG segment for selling in its retail stores (Livemint.com – 2009). In view of the above it is decided to carry out a study to weigh the existing opportunity for Reliance Retail Ltd, acquisitions if any? And to evaluate the benefits of introduction of Private labels in its retail stores.

Conceptual underpinnings of the research

Retailing amongst the world’s biggest industries. From the marketing standpoint retailers are closer to consumers than the manufacturers (Reynolds 2004b, p.3). Many factors are accountable for the current changes in the modern retail management. Many large retailers have huge turnovers and employee strengths – Wal-Mart employs 1.8 million worldwide and Carrefour the largest European retailer (no.2) has more than 12,000 stores across the globe. Joachim Zentes, (2007).

ESTABLISHED FORMATS:

Kirana stores

Departmental stores

Evolution of Retail in India:

EMERGING FORMATS:

Hypermarkets

Supermarkets

Specialty stores…etc

CONVENTIONAL FORMATS:

Melas

Mandis

The advantages of Private Label:

The key advantage from a retailer perspective could be the Private labels will fill the needs gap that is present in the market place – unique product or a differentiated product in the market place. The critical aspect of the private label for the retailer is that it gives the retailer a higher profit margin than what is offered on other brands. Though the Private label introduction may not always be advantageous to the retailer as they may face hostile response from other brand manufacturers and hence the retailer must have a good monetary base Swapna Pradhan,(2008)

Mergers & Acquisitions:

Both these terms are used as though they were identical, but in real sense they are both different. An acquisition occurs when one company takes over the management of another business clearly establishing itself as the new owner of that firm.

Merger occurs when two companies agree mutually to work together as a single entity going forward. This can be mergers of two companies of equal size or unequal sizes Edward & Gerald, (2005)

Companies through Mergers & Acquisitions can expect to achieve: Edward & Gerald, (2005)

Competitive advantage over others

Increase its market share / profitability

To enter new market’s / geographies

Access to latest technology / talent

Diversification into new businesses

Purpose

The key focus of this study is to explore:

The advantages / disadvantages for Reliance Retail Ltd after introducing Private labels?

And also explore if there is any scope for growth by inorganic means.

SWOT for Reliance Retail Ltd

Research questions

What are the advantages / disadvantages for Reliance Retail Ltd with the introduction of Private Label?

Is there any opportunity for Reliance for acquisitions in retail space?

Scope of the present research project:

The current study is carried out at the Reliance Fresh outlets located in Bangalore, India, due to restrictions and limited time available. Such a study can also be carried out at Reliance fresh stores across all the major Indian cities.

Section -2: Research methodology

2.1 Research strategy

Research methodology is a systematic method of solving a research problem. It includes the set of methods and techniques required to approach a particular research problem. In general marketing research process can be split into the following broad steps:

Ranjit Kumar,(2005)

Data Collection

Research Design

Problem Definition

Data Analysis

Report Presentation

2.2 Sampling

Sampling can be defined as a process of drawing conclusions to the whole but by only probing a part of it Ranjan Kumar, (1996). Private Labels has already been introduced by few of retail giants here in India and Mergers & Acquisitions in Indian retail space is almost negligible – in order to probe further into this Reliance fresh outlets (Store Managers) in Bangalore will be contacted. And Convenience sampling will be used as the sampling technique as this will be more appropriate for such a study. The sample size of 15 Reliance fresh stores has been selected here.

2.3 Data collection

Data collection forms an important part of any research project. Data can either be from Primary or Secondary sources. Primary data refers to the data collected by the researcher in context to the research and these are mainly collected through a structured Questionnaire consisting of both open ended and closed ended questions. For the current study primary data forms the core. The questionnaire will be sent to the concerned personnel via email and also based on requirement they may also be contacted on their phones.

Secondary data can be from trade associations, journals, news articles and other research information providers like IBEF (Indian brand equity foundation)

2.4 Data analysis

Data obtained from the sources will be processed to obtain information using which the researcher will arrive at a conclusion and make his recommendations / give insights (Decision making) to the client.

2.5 Validity and Reliability

Validity and Reliability are often associated with each other. Reliability is defined as any test or procedure yielding the same output for a given set of repeated trials. Reliability does not mean Validity. Validity in general refers to the concepts & conclusions that correspond to the real world. Edward & Richard, (1986)

2.6 Access

The research is primarily based on the ease of data accessibility and for this research store managers of Reliance Retail Ltd in Bangalore will be contacted either by sending the questionnaire via email or by contacting them on phones and prior to this we are required to fix a suitable time slot with the Store manager for the interview. And the final output from this study will be shared with all the Store managers who has been interviewed during this study.

2.7 Gantt Chart

Task

Description Weeks

1

2

3

4

5

6

7

8

9

10

11

12

13

1

Literature Review

 

 

 

 

 

 

 

 

 

 

 

 

 

1.1

Workshop on user needs

 

 

 

 

 

 

 

 

 

 

 

 

 

1.2

Draft of methodology

 

 

 

 

 

 

 

 

 

 

 

 

 

1.3

Evaluation of methodology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

Specification of Integrated System

 

 

 

 

 

 

 

 

 

 

 

 

 

2.1

Inventory of resources in selected regions

 

 

 

 

 

 

 

 

 

 

 

 

 

2.2

Review of existing facilities

 

 

 

 

 

 

 

 

 

 

 

 

 

2.3

Specify technical developments required

 

 

 

 

 

 

 

 

 

 

 

 

 

2.4

Impact analysis of different scenarios

 

 

 

 

 

 

 

 

 

 

 

 

 

2.5

Prepare detailed business plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

Feasibility Studies for each region

 

 

 

 

 

 

 

 

 

 

 

 

 

  3.1

Review existing practices

 

 

 

 

 

 

 

 

 

 

 

 

 

  3.2

Review technologies (state of the art)

 

 

 

 

 

 

 

 

 

 

 

 

 

  3.3

Sensitivity analysis of scenarios

 

 

 

 

 

 

 

 

 

 

 

 

 

  3.4

Report on most suitable options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

Project Management and Coordination

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dissemination of information: Workshops

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Milestones and Deliverables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guideline for methodology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interim Reports

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Plans for four regions

 

 

 

 

 

 

 

 

 

Draft

 

 

 

 

Public Workshop on results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Final Report