Reliance Retail plans major expansion of Reliance Trends in e-commerce push

The expansion, which has not been reported before, is the latest move by RIL chairman Mukesh Ambani to grab a dominant share of Indian consumer spending in a struggle with rivals, particularly e-commerce giants Amazon.com Inc. and Walmart Inc.'s Flipkart.

Reliance's plans to diversify into e-commerce and expand in fashion come on the heels of India's new e-commerce policy that have dealt at least a temporary blow to Amazon and Flipkart.

Prime Minister Narendra Modi's government in December modified FDI rules for e-commerce, barring online retailers from selling products via vendors in which they have an equity interest, and also from making deals with vendors to sell exclusively on their platforms.

Ambani, Asia's richest man, founded Reliance Retail Ltd in 2007 to transform his petroleum behemoth into a consumer-facing conglomerate. On 25 February, Mint reported that Ambani is planning to list Reliance Retail.

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Targeting 300 cities

Expectations that Ambani will increase bets on retail have been growing, and the latest plan was presented at meetings earlier this year, the people said, citing proposals the company shared with retail advisors.

Reliance Retail did not reply to an email seeking comment.

The expansion plan should allow Reliance Trends, which sells accessories as well as clothing, to rapidly grow its private labels—the retailer's own brands—the people said.

Reliance Trends would be in 300 cities in five years, from 160 now, said the second person briefed on the plan.

A Reliance executive, speaking on condition of anonymity, said integrating the availability of private labels with its e-commerce venture and penetrating deeper into smaller, Tier 3 and 4 cities is the next level of growth for Reliance Trends.

The executive did not confirm the store expansion plan.

Last year, Reliance Trends opened over 100 stores, according to the executive.

"With the new commerce venture that we have planned, it will even be easier to sell our private labels from even third-party stores," the executive said.

Ambani's so-called "new commerce" venture aims to connect small and mid-sized merchants with his retail network and warehouses, helping them better manage inventory as well as boost sales of Reliance's private labels.

Both the people quoted above declined to be identified as the expansion plans have not been publicly announced.

Cheap prices for India's youth

India has the world's largest population in the 18-35 year age group at 440 million people, constituting nearly half of its workforce, global consultancy Deloitte said in a recent report. With rising use of the internet and smartphones, e-commerce retailers have doled out discounts to lure people to shop online for goods as varied as basic groceries and large electronic devices.

"The millennial opportunity is what every retailer is looking at. Reliance is no different," said a retail industry veteran and independent adviser to several retailers.

Retailers tend to make better margins out of their own brands than third-party brands because they can keep a much sharper eye on costs of production and associated marketing.

"Reliance Trends' aggressive expansion will see products such as private labels available across multi-brand outlets and smaller format stores as well," said independent retail consultant Govind Shrikhande when asked how Reliance will manage the aggressive expansion.

Almost 80% of Reliance Trends' revenue comes from private labels. A team of designers work across seven centres in India and one in London to design items such as jeans, trousers, shirts and t-shirts, the company executive said.

"They are looking at global fashion and then they are looking at how that fashion can be adopted for India at a price which is affordable to churn out our private labels," said the executive.

On Friday, RIL shares fell 0.26% to ₹1,266.60 apiece on the BSE while the benchmark Sensex shed 0.15% to end the day at 36,671.43 points.