No announcement yet.

Reliance watch out : Aditya Birla Group to venture into Retail.


Reliance watch out : Aditya Birla Group to venture into Retail.

Last updated: November 6 2006
0 | Posts
2995 | Views
  • Time
  • Show
Clear All
new posts

  • Reliance watch out : Aditya Birla Group to venture into Retail.

    All the big daddies of the corporate world are jumping on the retail bandwagon. How soon can they do it and where would it take the indian retail sector is for us to decipher. Check out this article :

    November 06, 2006
    The Financial Express

    India’s fledgling retail sector will soon have yet another mega rollout announcement. The Aditya Birla group’s blueprint to set up over 6,000 stores in three years with an investment of over Rs 15,000 crore is second only to Reliance’s Rs 25,000 crore plans to set up 11,000 stores by 2011. The duo is trying to achieve in three to five years what the world’s largest retailers managed in three to five decades. Their quest to telescope this timeframe so dramatically has analysts burning the midnight oil over the likely fallout and the unprecedented upheaval to follow in domestic retail. Their carpet-bombing approach—they will be present in nearly every format—to retail has a significant financial downside. Especially when players like Reliance and the Aditya Birla group intend to enter the business, without partnering with an experienced international retail player. The investments (about $3-5 billion or, Rs 15,000-25,000 crore) are so huge that they leave little room for error. Even a mid-course correction could cost a few million dollars. Reliance Infocomm discovered this the hard way. Its unconventional handset financing plans and aggressive rollout cost the company nearly a billion dollars, which had to be written off its balance sheet.

    But, unlike Reliance and Birla, which are planning to start out in metros and large cities, the world’s largest retail chain today, Wal-Mart, took quite the opposite approach. In the early ‘60s, when today’s large discount chains were born in the US, Wal-Mart started in small towns in the south of the country, while rivals Kmart and Target began in the large cities. Wal-Mart took nearly 30 years to become a truly national chain, while Kmart did that in eight years. But the bottom-up approach made Wal-Mart a dominant chain in Small Town America, helping it to take the world No.1 slot. Kmart, on the other hand, was only the 29th largest chain in 2005. Can another player outsmart the Indian duo? Indeed, some of the fastest growing domestic chains, like Vishal Retail and Spencer’s, are focused on small towns. Analysts, though, are still divided over the best approach for India. Only time—and buyers’ wallets—will tell.
    Last edited November 6 2006, 09:29 PM. Reason: typo error
Have any questions or thoughts about this?