Apparently, emerging retailers are increasingly adopting IT solutions for merchandising and supply chain needs, multi-channel requirements, store-level innovations and planning as well as for business intelligence solutions. Interestingly, even mom-and-pop stores are starting to invest in tech infrastructure.

So much so that IBM has identified the mid-to-small chains to drive its retail business vertical in India. The company has set up a business development team in India to deploy its own solutions as well as those developed by its ecosystem partners like SAP and Oracle.

NEW DELHI: 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.

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India is an important market for us due to the opportunities it presents. We have plans to launch more than 32 new models here, of which six will be touch phones, while many other models will be 3G-enabled and some of these will also be entry level phones. At present, we have about three touch phones and six 3G-enabled handsets already in the market and we plan to have about 10 models each in both these segments by the year-end. We are betting big on the touch screen segment and we are targeting sales of up to six lakh units  and a 10% market share in this space alone within the next six months.

What will be your investments in India this fiscal?

We will double our investment this year and the company as a whole will spend about Rs 400 crore on advertising this year. Additionally, we will invest Rs 200 crore in R&D to study market dynamics and consumer behaviour here. We are looking at increasing our headcount in our sales vertical to enhance our presence.

How many of the products you sell here are made here? How have your sales been so far?

Currently, we manufacture mobile phones at two units located in Pune and Greater Noida and these plants have a production capacity of three million units per year. About 70% of the production is exported while the rest is for domestic consumption. We sold about 2.4 million GSM handsets in India last year and we expect a 50% increase in sales this year.

Our institutional sales account for just 10% our total mobile sales.
Currently the Indian mobile handset market is dominated by some of your competitors.

How are you looking at improving your brand visibility here?

LG is rapidly gaining market share in the GSM market, despite being a late entrant. We are already the fifth-largest player in the segment. I believe our distribution line was poor earlier, but now we are reworking our strategy here. Based on the analysis of our marketing team, we are deploying 1,000 additional shop sales executives and we will be launching about 1,000 additional shop-inshop formats in rural and tier II cities. On the organised retail front, the overall channel coverage is at 42%.

India is an important market for us due to the opportunities it presents. We have plans to launch more than 32 new models here… We are betting big on the touch screen segment
MOON B SHIN

MANAGING DIRECTOR, LG