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RELIANCE FRESH
STUDY OF RETAIL MANAGEMENT
[Pick the date]
SIDDESH JADHAV
SUBMITTED BY : SIDDESH
JADHAV
ROLL NO : 1031 (MARKETING)
MUMBAI INTSITUTE OF
MANAGEMENT AND
RESEARCH
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INTRODUCTION
RELIANCE FRESH
The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest
private sector enterprise, with businesses in the energy and materials value chain. Group's
annual revenues are in excess of USD 27 billion. The flagship company, Reliance Industries
Limited, is a Fortune Global 500 company and is the largest private sector company in
India.
Reliance Fresh is the convenience store format which forms part of the retail business of
Reliance Industries of India which is headed by Mukesh Ambani. Reliance plans to invest inexcess of Rs 25000 crores in the next 4 years in their retail division. The company already
has in excess of 560 reliance fresh outlets across the country. These stores sell fresh fruits
and vegetables, staples, groceries, fresh juice bars and dairy products.
About Reliance Fresh a convenient store format, is governed by the Mukesh Ambani and
is the most important part of Reliance Industries retail Business. Reliance Ltd. has planned
to invest more than Rs. 25000 crores in the retail division.
It also comprises more than 560 reliance fresh stores all over the country. The outlet sells
fresh fruits, staples, dairy products, fresh juice bars, groceries and vegetables. A distinctive
Reliance Fresh outlet is around 3000 to 4000 sq. feet and accommodates catchment area of
one to three Kilometers.
History of Reliance Fresh
The Reliance Retail had to face various difficulties before the launch of Reliance fresh,because of the various circumstances prevailing in Orissa, West Bengal and UP, along with
the news focusing on the dearth of vegetables and fruits stocks. The retail business of
Reliance then minimized its exposure in vegetable and fruit business, as a result
established Reliance fresh positioning a pure super market play focusing on various
categories like IT, consumer durables, home, FMCG and food.
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The retail company of Reliance may not supply the vegetables and fruits in a few states, the
Reliance Fresh decided to not to race with local wholesalers partly because of the political
reasons as well as its incapability to maintain a healthy supply chain.
The Reliance Retail had to face various difficulties before the launch of Reliance fresh,
because of the various circumstances prevailing in Orissa, West Bengal and UP, along with
the news focusing on the dearth of vegetables and fruits stocks. The retail business of
Reliance then minimized its exposure in vegetable and fruit business, as a result
established Reliance fresh positioning a pure super market play focusing on various
categories like IT, consumer durables, home, FMCG and food.
The retail company of Reliance may not supply the vegetables and fruits in a few states, the
Reliance Fresh decided to not to race with local wholesalers partly because of the political
reasons as well as its incapability to maintain a healthy supply chain.
Growth of Reliance Fresh
The first ever a Reliance Fresh store was established in Hyderabad, wherein the company,
mainly focused on the fresh produced vegetables and fruits at comparatively low price
along with an introduction of farm to fork theory.
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Growth through Value Creation
With a vision to generate inclusive growth and prosperity for farmers, vendor partners,
small shopkeepers and consumers, Reliance Retail Limited (RRL), a subsidiary of RIL,
was set up to lead Reliance Groups foray into organized retail.
Since its inception in 2006, Reliance Retail Limited (RRL) has grown into an organisation
that caters to millions of customers, thousands of farmers and vendors. Based on its core
growth strategy of backward integration, RRL has made rapid progress towards building
an entire value chain starting from the farmers to the end consumers.
Reliance Retail continued to expand presence of its value and specialty formats. During
the year, Reliance Retail opened 90 new stores spanning across 'value' and 'specialty'
segments. In-store initiatives, wider product choice and value merchandising enabled
the business to achieve robust growth during this period.
Its presence in the optics business is in partnership with Grand Vision. 51 new stores
were added during FY-11 taking the total presence to 100 stores across key markets in
the country. The retail chain offers single brand optical products including Vision
Express frames, lenses, contact lenses, sunglasses, solutions and accessories.
For the very first time, consumers in India got the opportunity to experience Hamleys,
which is considered to be the world's most wonderful toy shop. The brand was launched
in India with opening up of 2 stores during the year.
I-Store by Reliance Digital is a one-stop-shop for all Apple products and services. There
are 17 such stores currently operational.
Reliance Brands also announced exclusive licensing arrangement with two leading
international brands:
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This was the idea, which was anticipated by the company was to take the supply direct
from the farmers and then sell straightaway to the consumers removing the middle-men off
the beaten track. Reliance introduced several formats in the marketplace to cater to needs
of common people, which includes Reliance Fresh, Reliance Super, Reliance Footprint,
Reliance Timeout, Reliance Jewels, Reliance wellness, Reliance Mart and Reliance Digital, to
name a few.
In addition to this, the Reliance Retail also entered into a treaty with Apple, which is a
leading Information Technology company, to set up a series of Apple Specialty Outlets
branded as I-Store, with its first ever store in Bangalore.
With an idea to produce inclusive prosperity and growth for farmers, consumers, small
shopkeepers and vendor partners, Reliance Retail was set up in order to lead the foray of
Reliance Group into an organized retail.
Steve Madden, a leading designer, wholesaler and retailer of fashion-forwardfootwear and accessories for women, men and children.
Quiksilver, a leading outdoor sports lifestyle company to launch their core brands'Quiksilver' and 'Roxy'.
Across India, Reliance Retail serves over 2.5 million customers every week. Its loyalty
programms, "Reliance One", has the patronage of more than 6.75 million customers.
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VISION AND MISSION
To be the most admired and successful organized retail company in India that materially
enhances the quality of life of every Indian by
- Providing unprecedented affordability, quality and choice
- Being the partner of choice in creating prosperity for Indian
farmers and other vendor partners
- Unleashing the power of the Indian workforce through the
generation of new & attractive employment opportunities
To generate inclusive growth and prosperity for farmers, vendor partners, and consumers,
Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead Reliance Groups foray
into organized retail.
FORMAT
Convenience Stores:
These are relatively small stores 400-2,000 sq. feet located near residential areas. They
stock a limited range of high-turnover convenience products and are usually open for
extended periods during the day, seven days a week. Prices are slightly higher due to the
convenience premium.
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OVERALL STRATERGY
The first of their format is Reliance Fresh, a convenience store. These stores, range from
2,000 to 5,000 sq feet, provide customers with a variety of fresh fruits, vegetables, staple
foods and other products in a world-class ambience. They aggressively partnered farmers
by following a farm-to-folk strategy to ensure fresh fruits and vegetables at affordable
prices. They chose Hyderabad to test waters, as the city offers real estate at a price that
does not quite pinch. They selected the cream crowd from pioneers in organized retailers
to head the organization. With such a strong foothold, they ventured and their cash
counters clicked Rs 3.5 to Rs 6.5 lakh per day and some outlets at prime locations are
averaging Rs 5 lakh per day.
Reliance Fresh will not compete with local vendors due to political reasons, and their
inability to create a robust supply chain. This is different from their original plans. In states
like Kerala, West Bengal and Orissa, where they face opposition, they have changed their
retail strategy by introducing large supermarkets, where they will not trade in fruits and
vegetables. This is a critical factor in assessing the impact of retail giants on the
unorganized segment. These Reliance Super stores are large supermarkets with an area of
4,000-10,000 sq ft and will stock grocery, stationary, pharmaceutical products and apparel
only.
In the foods business, they have consciously segregated its vegetarian and non-vegetarian
items by having a separate brand - Delight for the latter, with a separate distribution
centre. This may be a smart move as vegetarians are sensitive to these issues. Seeing huge
opportunities, they have introduced own brands like Dairy Pure for milk, ghee, (the only
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other major player being Amul) and Reliance Select for other categories like staples. This
will optimize margins and streamline supply chain because of bulk procurement.
Reliance Fresh will also retail FMCG, home, consumer durables, IT, pharmaceuticals, and
auto accessories, in different formats like hypermarkets, supermarkets and discount stores;
however, food will be a major account.
Organized retailing and supply chain integration displace labor in a labor-surplus society.
These chains negate a large and growing proportion of added value away from producers
to companies. Bulk procurement decreases producers margins. By controlling both ends of
the chain, the company can buy cheap and sell dear, thus severely undercutting the small
retailers and creating a monopolistic situation.
In addition, retail trade also has a sky rocketing effect on the real estate prices. Markets,
wholesale sales and retail form one axis of the economy, while productive sectors like
agriculture, textile, and industries form the other. Ambitious MNCs are trying to control
both the axes of the economy on the pretext of privatization, liberalization, and
globalization.
Therefore, Reliance Fresh along with other domestic corporations have a moral standing.
Along with the support of the government, they must pave a path for an efficient retail
market (no monopoly) in India and help maintain a socio-economic equilibrium. This will
remain the biggest challenge for Reliance who leads the way as a corporate citizen. The
growth must be through value creation. This will help the Indian retail sector to remain
fresh in a hygienic and ethical market.
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INTEGRATED MARKETING COMMUNICATION (IMC)
Integrated marketing communications (IMC) is a process for managing customer
relationships that drive brand value primarily through communication efforts. Such efforts
often include cross-functional processes that create and nourish profitable relationships
with customers and other stakeholders by strategically controlling or influencing all
messages sent to these groups and encouraging data-driven, purposeful dialog with them.
IMC includes the coordination and integration of all marketing communication tools,
avenues, and sources within a company into a seamless program in order to maximize the
impact on end users at a minimal cost. This integration affects all firm's business-to-
business, marketing channel, customer-focused, and internally directed communication
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DIWALI SPECIAL COLGATE EVENT
LAYOUT OF THE STORE
Reliance fresh have Grid type layout
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Counters and Fixtures are placed in long rows or runs usually at right angles,throughout the store
This layout is used in grocery, discount store and drugs stores, like- Reliance fresh Advantages-: Easy to locate merchandise, cost efficient, easy accessible for
customers
Disadvantages-: limited browsing and limited creativity in dcorReliance Fresh like other organized retailers in food & grocery has a Grid Layout
format. This could be because of the following reasons:
a) They get more shelves to stock productsb) Lesser space is wasted in Aisles
c) Customer Familiarityd) Higher Space productivity
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VISUAL MERCHANDISING
Visual Merchandising - The Concept Visual merchandising, in simple terms, is the art of
displaying merchandise in a store. It is the sales promoting activity by the way of effective
presentation in a retail store. The environment of the retail store is made conducive to
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enhance sales. It is aimed at creating an ambience that will prompt the customers to
purchase the product. Visual merchandising is aimed at making the shopping experience a
happier and a comfortable one. Visual merchandising makes the store look attractive and
appealing to customers. It also helps in routing the store traffic. The sole objective of visual
merchandising is to make the shopping experience a pleasure by inculcating the feeling of
self-accomplishment in the buyers. The buyer himself chooses the product and this self-
decision making formulates the base for the feeling of content in his mind. Visual
merchandising also eases the marketing pressure of the seller by making the
communication with customers more effective. Moreover, it relieves the pressures on
inventories, as most of the items are stacked on the racks or in showcases being displayed.
Purpose of Visual Merchandising is pursued by retail stores with certain objectives. The
first and foremost purpose of visual merchandising is sales promotion and like all other
sales promotional strategies, it is aimed at increasing the overall sales of the store. Since
visual merchandising is the display of all products available in the store, it becomes
convenient for the buyer to pick up goods of his choice. Convenient buying also makes the
shopping experience enjoyable to the customers. As customers are not required to
remember the list of purchase they are more relieved while shopping. Visual
merchandising also fulfils the purpose of effective display
Vertical glow sign outside the store as typically seen in petrol pumps. Not
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seen till now in grocery stores. Increases visibility of stores in by-lanes --
where visibility is limited to just 2-3 stores from the main road. Products
available listed on the glow sign.
Store Faade Bright, Striking, Primary Colours
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Highly visible store promotions, re-iterating value for money
proposition
Vegetables in Basket
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LOCATION JUSTIFICATION
Reliance retail stores are largely like a Super market set up or like a convenience
store format with their stores ranging from 1100 to 7500 sq. ft. Also, Food and
perishables form a large share of their product offerings.
These stores are usually spotted in a Neighborhood location as stand-alone stores.
The reason for such a strategy could be to provide customers with proximity and
also have high visibility to cut out competition from stores like Spencers, Big Bazaar,
Subhiksha etc.
ORGANISATION STRUCTURE
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There is a Customer Desk in each Reliance Fresh store which is operated by Customer
Service Associates. But our secondary research and understanding through personal
experiences suggest that Customer Service Staff needs training as they lack focus on solving
customer problems and are also a little apprehensive about receiving customer complaints
PRICING STRATERGY
Reliance Fresh claims to offer Affordable Pricing but we find their pricing strategy to
be:
a) Discount pricing: As they offer spot discounts on membership cards. Also, theyoffer discounts on volume purchases for example Rs 10 off on a 5kg pack etc.
STORE
MANAGER
ASISTANCE
STORE
MANAGER
Supervisors
Customer
Service
Associates
FINANCE AND
ACCOUNTS
MANAGER
ACCOUNTANT
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b) Competitive Pricing: Their product price range is wide and they offercompetitive price i.e. a little lower (marginally lower) than the identified
competition.
c) Also, they mark price in Paisa to make it appear as low priced.
SUPPLY CHAIN MANAGEMENT
A supply chain is a network of facilities and distribution options that performs the functions of
procurement of materials, transformation of these materials into intermediate and finished
products, and the distribution of these finished products to customers. Supply chains exist in
both service and manufacturing organizations, although the complexity of the chain may vary
greatly from industry to industry and firm to firm.
Farmers
Collectioncenter
Distribution centerReliance Fresh
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From the above pictorial representation of supply chain management of reliance fresh it is clear
that raw material is procured from vendors, transformed into finished goods in a single step, and
then transported to distribution centers, and ultimately, customers. Realistic supply chains have
multiple end products with shared components, facilities and capacities. The flow of materials is
not always along an arborescent network, various modes of transportation may be considered,
and the bill of materials for the end items may be both deep and large.
SWOT ANALYSIS
STRENGTHS:
Brand Reliance:
Due to the attachment of Brand Reliance, which is symbol of quality, trust & transparency
gives an edge to the Reliance Fresh as people know that this brand will never deceive
them at any point of time. This name itself earns lots of customers for the retail venture of
Reliance.
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Maximum number of Retail Stores:
Due to the 4 stores in the Ajmer city, reach of the Reliance Fresh is maximum as
compared with other retail stores. These 4 stores of the city are situated at different
location covering all major residential areas of the city. This reach makes the Reliance
retail a local store with international quality and standards. This reach & quality takes the
business ahead of the competitors.
Centralized Management and Inventory System:
Technology provides interconnectivity among the different stores & thus makes the
management among the stores more efficient and helps in the flow of information
regarding various aspects of the management of the stores, especially inventory of goods
& services. This centralized system helps in balancing the deficiency and surplus of
different goods & services at different stores. If any product is deficient at any store and is
required urgently, then the required product is arranged from the store having the
surpluses.
Rate of Fruits & Vegetables are Nominal:
The rates of fruits & vegetables are nominal compared other retail stores in the city and
this low price gives the best utility to the consumers.
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Home Delivery FacilityHome Delivery Facility was started to tap those customers who have time paucity to
come to the store for shopping & this ultimately increases the customer base of the
Reliance Fresh.
Multi Commodity Shopping:
This store provides opportunity to the customer to shop many different commodities at
one place and this saves their time & money and thus enhances their utility.
Good Ambience:
Hygiene, cleanliness, housekeeping & friendly behavior of the staff makes the store
ambiance perfect for shopping.
Cordial Staff:
Cordial & Cooperative staff makes the shopping experience of the customers excellent
and makes customer a delighted customer as he or she returns home with a smiling face.
Promotional Schemes:
Excellent promotional schemes attract the customers towards the retail outlets. When the
promotional schemes are attached with the different activities then it becomes the besttool to showcase that the company is customer oriented.
Customer Engagement Activities:
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After completing the competitive analysis it is analyzed that the major strength of
Reliance Fresh are Customer Engagement Activities. It is specially designed to attract
more customers and to retain them for longer period of time or to convert them into loyal
customers as well as in retaining the old & loyal ones and these activities adds value to
the customers spent money.
Customer Engagement Activities are done with the objective of:
To attract more customers. Activities were planned to attract females & children to Fresh outlets as they
play a major role in the buying decisions of the family.
To create a long-term relationship with the customers. To create Bench Mark.
It provides different types of offers to customers on different occasions, which makes
customer feel more special and associated with the store.
Inclination Towards Corporate Social Responsibility:
The basic structure of Reliances retail formatis to provide goods & services in
correlation with corporate social responsibility. It starts with procurement of raw
materials i.e. directly purchasing from the farmers and giving them the best return for
their produce and it ends with customer engagement activities where children are taught
how to be healthy throughout their life.
Other Value Added Services:
Membership Cards Mobile Recharge Health Insurance
Two & Four Wheeler Insurance Prepaid Voucher
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Strong Financial Backup
Good Employee Base
The Location of the Stores is Excellent
First Mover Advantage
Strong Customer Base\Network
Providing brand to customer at an affordable rate
WEAKNESSES:
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Products are sold only at MRP:
All the products are sold at their MRP only and this may hamper sales as, many customers
wants the products at discounted rate and thus this may drive the customers towards
other retail formats & competitors. So this weakness has to be tackled with utmost
importance, as the customer always wants maximum utility at the lowest prices.
Slow Billing System:
During the peak hours or rush hours, only two or three counters remain operational out
of five. Most of the time staff is not available at the counters. Billing takes too tong
sometimes as the system shows different prices of the same products. This will deter the
customer and others in his contact to visit the stores during the rush hours & thus
Reliance may lose its customer base.
Shortage of Man Power:
Staff is less in Reliance Fresh in comparison to its competitors like Spencers & Big
Bazaar. Shortage of manpower is mainly felt during peak hours and thus quality of
services deteriorates considerably & this impacts the consumers satisfaction level.
Un-Trained Staff:
This is the major drawback in the service industry, as ill equipped staff cannot render the
required quality of services. It was observed that many a times they do not have complete
knowledge about the rates & promotional schemes at different sections of the stores fordifferent products. They are sometimes not aware of what product is kept where.
Stock Outs & Bad Quality:
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It was observed that many a times the quality of products was not up to the mark
especially in F & V sections. It has also been observed that the old and bad stocks lay on
the shelf for the sale with new stock due to which new stock also gets perish in very short
time.
OPPORTUNITIES:
Provides Online Shopping:
Most of the customers buy their products by home delivery service because going &
buying the products from the store is very time consuming, therefore Reliance has the
opportunity to provide online shopping to such customers. Through a centralized online
system, Reliance can render services to any customer living anywhere in the town, state
or in the country, provided that Reliance Fresh has a store in that particular area.
Through the centralized system, orders can be taken at a particular place and through an
automatic system; the order is passed to the nearest Reliance store.
Loyal Customer Base of Competitors:
More customer base can be achieved by studying the competitors consumer behavior,
likes, dislikes & facilities being provided by the competitors.
Changing life style:
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Changing life style always provides best opportunity as it creates demand for new things
& thus provides opportunity to the business community to tap the changing environment
opportunities.
Venturing into other commodities in demand
More varieties of products & services can be added to the portfolio by analyzing the
demand for the new products and services. By venturing into new product market new
customer can be gained and thus helps in increasing the customer base.
Innovative promotional schemes to attract masses:
Innovative promotional schemes which make the products and services more attractive
and appeals the consumers to visit the stores to avail the scheme. For example If
Reliance gives discount to the customers for off time shopping then not only the
consumers will visit the stores during lean time but will also stores to manage the peak
hours.
Boom in the Retail Sector:
Booming retail sector is providing new opportunities to the retail business houses as
more & more customers are becoming aware of this new way of shopping experience and
are relishing this new experience.
Change in the mindsets of the customers towards retail industry:
With growing awareness among the customers about hygiene & health they have started
buying the products from the retail stores to have quality products having highest
standards.
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New formats are coming like hypermarkets, supermarketsThis gives opportunity to tap the upper segment of the society & thus adds to the
bottom line of the company.
Should keep providing gift vouchersReliance Fresh should keep providing gift vouchers to the customers with the
option of shopping anything with limit of the gift voucher. This would help to create
new customers.
Can take advantage of its 28 locationsReliance Fresh is the only retail outlet which has 28 stores all over in Ajmer, so it
can take the advantage of serving more & more customers.
Emerging Segment with huge potential and opportunities
Increase in Purchasing Power of Consumers provides a huge potential in thissector.
Opportunity to capture other potential untapped markets in Ajmer.
Can add more brands to its existing portfolio of brands
Huge scope in selling consumer products under its own brand name.
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THREATS :
Competition from the local vendors:
Local vendors posses a major threat to the booming retail industry as they provide the
cheapest goods & services, the only difference is the hygiene & quality of the goods and
services being provided. Local vendors often had strong political support and thus mayinfluence the decision makers.
Competition from other retail players:
Other retail competitors like Spencers, More, Express City, etc. also pose threat as they
poach on the customer base of the company. Any innovative product & service can easily
attract the customers towards them, thus reduces the customer base & hence
profitability.
Bad quality products
One of the major threats for Reliance Fresh is that customers are switching over the other
retail outlets because fruits & vegetables are of bad quality and even the rates are high
according to the quality and thus make them dissatisfied with the services of the store. So
the customers are now searching a place from where they can buy good quality products
at reasonable prices.
Disappointing Staff Services
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Retail being a service industry heavily depends on the quality of services to retain its
customer base and thus any mismatch in expected & delivered services can be fatal for
the business. Most of the customers leave the store without buying anything from the
store just because the staff is not available to guide them, most of the staff is not aware of
the offers & schemes and all the counters are not operational even during the rush hours.
Economic Factors
Economic factors like inflation, recession, etc., heavily hampers the normal functioning of
the business and leads to heavy losses to the industry as well as to the companies
operating in that economy.
Change in governments policy
Any change in the government policy can heavily can severely influence the running
business as is in the case of West Bengal where many retail businesses were not allowed
to open the retail stores especially Reliance Fresh and the change in the policy has
allowed it to open the store in West Bengal.
Local Political Environment
Peace, stability & security are very important factors for the growth of any business and
any disturbance can have a dead blow on the retail business. Recent blasts (13/05/08) in
Ajmer have hampered the business as people have started to be away from the crowded
areas and therefore have hampered the sales of many retail stores.
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FINANCIAL ANALYSIS
As per their Annual report for the fiscal 2009-2010 we arrive at the following conclusion:
1. Their Labour Productivity comes out to be Rs 52.70 lakhs i.e. each employee on anaverage makes Rs 52.70 lakhs of sales per year.
2. Also, Sales per sq. ft. comes out to be 0.2342 lakh/sq. ft.3. Reliance Fresh derives most profit from Sales of Fresh fruits and Vegetables and
least from the sales of Staples and Non veg items. This might indicate that Staples
might be the traffic builder for Reliance fresh as the margins on the same are lower
where as Fresh vegetables, Home Care, Personal Care and Processed food can be the
destination goods as these stores are usually located in a neighbourhood set up.
Also, the margins on Fresh fruits and vegetables could be a result of their
association with farm folks and the fact that they have long term contracts with the
farmers for direct supply thereby increasing the efficiency of their supply chain.
Please see the following graph to understand the performance of each category of
reliance fresh.