Ahmedabad/Mumbai: Reliance Industries Ltd (RIL), India’s most valuable company, has chosen Ahmedabad to start its wholesale store that would cater to establishments including neighbourhood grocery stores, hotels and restaurants.
The first wholesale store in Ahmedabad will be operational in August under the brand name of ‘Reliance Market’ and will occupy 100,000 sq. ft, a person familiar with the development said. He did not want to be identified. In 2007, RIL had chosen Ahmedabad to start its first hypermart under the ‘Reliance Mart’ brand.
RIL chairman Mukesh Ambani mentioned in his address to shareholders at the company’s 37th annual general meeting earlier this month that the conglomerate will soon open wholesale stores.
An official from Reliance Retail Ltd, a RIL unit, confirmed the development and said the wholesale store will come up in the city’s Shahibaug area where RIL had acquired a portion of the shut Tata Advance Mill in 2006. The official did not want to be named as the company will announce it in August, when the store is opened.
The choice of Ahmedabad for its first Reliance Market store could be a strategic move by RIL for a number of reasons. The company that claims to have the most diversified portfolio in terms of retail formats may be testing water in a market it knows well and where no other large, organized wholesale retailer is present.
Raghav Gupta, principal at consulting firm Booz and Co.(India) Pvt. Ltd., said the market for the so-called cash-and-carry format in India is better in smaller cities than in the metros. Ahmedabad, in particular, made sense since no other retailer is present in the same format.
Three of the world’s largest wholesalers to enter India have built stores in other parts of the country but haven’t entered Gujarat.
Germany’s Metro AG has six stores across Mumbai, Kolkata, Hyderabad and Bengaluru. Bharti Walmart Pvt. Ltd, an equal joint venture between telecom-to-retail conglomerate Bharti Enterprises and US-based retailer Wal-Mart Stores Inc., has five stores in India— three in Punjab and one each in Rajasthan and Madhya Pradesh. French retailer Carrefour SA that entered India in December has its lone store in Delhi.
The Reliance Retail official cited earlier stated that the Ahmedabad project will be a pilot, whose success will determine the future roll out of more such formats in other cities.
An analyst at a domestic brokerage said RIL had plans to enter the wholesale format two years back but shelved the plan because of unfavourable market conditions. He spoke on condition of anonymity.
“Even in the case of RelianceMart, the company had tested the market in Ahmedabad before going for a pan-India roll out,” the Reliance Retail official said. RIL had enough real estate across the country to expand the format whenever required, he said.
Another person familiar with RIL’s retail plans said that RIL would look to replicate the scale it has achieved in the other retail formats it entered. He did not want to be identified as he is not authorized to speak to the media.
“It will not be a one-city or one-store affair, but there will be at least 10 stores in a year,” he said.
Gujarat is also a safer bet for RIL to start a new retail venture as the likelihood of encountering resistance the organized retail faced in recent times in other cities is relatively less in the western state.
The Ambanis hail from the state and its chief minister Narendra Modi has an investor-friendly image. RIL has invested heavily in Gujarat over the years, most notably at Jamnagar where it built the world’s largest integrated refinery and petrochemical complex.
The entry of RIL’s earlier agri-retail format, called Reliance Fresh, had met with stiff opposition in various states it tried to enter including West Bengal, Kerala, Uttar Pradesh, Madhya Pradesh, Jharkhand and Orissa. Vegetable hawkers and neighbourhood shopkeepers had protested the entry of several organized retail players, including RIL, fearing loss of livelihood.
Retail is a $450 billion market in India and the opportunity in wholesale is around half of that, Gupta of Booz said.
Ajay Sheodaan, customer management director, Metro Cash and Carry India Pvt. Ltd, said the market for cash-and-carry operations in India is huge and competition is welcome.
Wholesale is a long gestation business, Sheodaan said, adding, in China, wholesale took 10 years to start making money. Reliance Market will offer more than 20,000 products ranging from fresh fruits and vegetables, dairy products, detergents and toiletries, groceries, office furniture, stationery, footwear to electronics and consumer durables. The company is in the process of visiting grocery stores and other business establishments across Ahmedabad to get them registered as members over the next two months, the Reliance Retail official said.
Nirav Kothary, local director -strategic consulting, Jones Lang LaSalle India, said the retail market in Gujarat’s major cities is seeing an upswing with increased shopping activities. “Below the surface lies a considerable consolidation in rentals, most evident in Ahmedabad, Surat and Vadodara,” he said.