Retail News Update

In a dramatic shift in strategy, Reliance Retail has decided to minimise its exposure in the fruit and vegetable business and position Reliance Fresh as a pure play super market focusing on nine categories including food, FMCG, home, consumer durables, IT, wellness and auto accessories, with food accounting for the bulk of the 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.

“The company underestimated the might of the middlemen and the small vegetable vendors in the current political scenario,’’ said a source. “Also, the strategy to constantly talk about low prices was not such a great idea after all,’’ the source added.

Though the rollout has been fairly quick and 400 Reliance Fresh stores have been launched in a year’s time, it has not been able to meet its internal targets in terms of critical parameters, said a source. This is largely to do with political pressures from two large states: West Bengal and Uttar Pradesh which are totally opposed to large retailers entering organised retail. This has slowed down expansion in other states for fear of a trickle down effect.

The Reliance spokesperson however says all targets are being met. “Reliance Fresh stores have received an excellent response from the customers and meeting all business targets. Our expansion is progressing as per plan. We also deny that there is any March deadline or plan to exit any business.’’

Following the Mayawati government’s diktat not to sell fruits and vegetables from standalone shops and public outcry in West Bengal, the company has decided not to operate Reliance Fresh stores in these two states.

Perhaps the public antipathy is the reason why Reliance Fresh has not responded to Mother Dairy’s price cuts on a dozen odd vegetables, though smaller competitor Subhiksha has cut prices on some select vegetables. “The priority and focus has clearly changed for Reliance Retail. And this will continue until the general elections in 2009,’’ the source added. var RN = new String (Math.random()); var RNS = RN.substring (2,11); b2 = ‘ ‘; if (doweshowbellyad==1) bellyad.innerHTML = b2;