Reliance lowers retail stores target by 500

Reliance lowers retail stores target by 500

New Delhi: Reliance Industries Ltd, which last year launched India’s most ambitious multi-billion dollar retail venture through subsidiary Reliance Retail Ltd, says its flagship grocery stores will fall short of the planned target by at least 500 outlets in the wake of intense protests against organized retail in many states.

In a sign that the company doesn’t want to antagonize protesters, two top officials at India’s largest listed conglomerate say it will launch a little more than 1,000 Reliance Fresh grocery stores in the next four years. They didn’t want to be named because of the sensitivity of the matter.

This growth will take the total number of grocery stores owned by the firm to 1,500.

Currently, the company operates more than 430 Reliance Fresh stores in various cities and its target was to reach 2,000 stores by 2011. During the initial months after its announcement to enter the retail business, Reliance had said that it planned to open more than 6,000 stores—a mix of hypermarkets, specialty stores and fresh-produce stores—at an investment of Rs25,000 crore over five years.

The scaling down largely stems from setbacks faced in states such as Uttar Pradesh, West Bengal, Kerala, Orissa, and Uttarakhand. Some of these are heavily populated, while others have a high population density.

The company had to exit India’s most populous state, Uttar Pradesh, after the state government asked it to shut all its stores there saying their operations could trigger violence. The authorities were alluding to protests by groups opposing the entry of large corporations into India’s $12 billion (Rs47,292 crore) modern (or organized) retail market that is expected to grow to $165 billion in 10 years.

Close on the heels of the Uttar Pradesh debacle, the company had to indefinitely abort its plans to roll out stores in West Bengal due to strong resistance from some political parties.

“Uttar Pradesh and Kolkata go off the radar for the moment, so to that extent, there will be some numbers (reduced in terms of stores)," said one top Reliance Retail official, who did not wish to be identified. “Uttar Pradesh is one (state) we are struggling with... (West) Bengal is where we are struggling and those (outlet) numbers have been in hundreds," the official added.

A Reliance spokesman did not return calls seeking comment.

In Uttar Pradesh and West Bengal, the company had to fire around 1,400 employees.

The latest in the ongoing reversals for the company was in the tiny and relatively young state of Uttarakhand, where it asked around 150 employees to “go on leave without pay" for an indefinite period after store openings in the state capital Dehradun were affected by protests from local traders and farmers.

Although there has been an unprecedented surge in corporate investments in retail in recent years by companies including India’s largest listed retailer Pantaloon Retail (India) Ltd, Aditya Birla Group and Chennai-based discount retailer Subhiksha Trading Services Ltd,Reliance, in particular, has emerged a proxy target for people opposing the entry of large companies into the retail business in India.

Reliance’s stores in various cities were targeted even as its rivals ramped up operations. Small shopkeepers fear losing their businesses to companies such as Reliance which, they argue, can afford to undercut on prices.

“They are probably the largest potential target that can be...being the biggest company in this phase potentially in terms of size and plans… (In terms of) the investment outlay that has been announced they are the largest. Just like Wal-Mart is the symbol (of retail) in the US and Tesco is a symbol in the UK, it almost seems like Reliance is the symbol (of retail) in India," said Devangshu Dutta, CEO, Third Eyesight, a retail consultancy firm.

Protesters in India have also targeted Wal-Mart Stores Inc., which has teamed up with Bharti Enterprises Ltd to open cash-and-carry stores, or hypermarkets to sell multiple products to other businesses, early next year.