Tuesday, October 30, 2007

Reliance woos mom & pops with franchisee plan

Sporadic protests against retail biggies in recent months have driven Reliance Retail to tweak its business model a little, to ensure the enterprise isn't derailed before it has really taken off. Under the new scheme of things, it plans to partner local kiranas in smaller outlets, understandably as a pacifist ploy, while going it alone at the higher end of the retail spectrum - the hypermarts.
Jai Bendre, head-marketing, food business, Reliance Retail admitted as much in a recent brand summit. However, while conceding that the company was working on a plan to integrate small retail stores in the overall retail system, she refused to give away further details.

Sources, though, said Reliance Retail has started inviting retailers and individuals to become franchisees. As per the plan, the company will select and revamp the retail outlets, which would then be run on a revenue sharing model by the small retailers.

The company will go for the franchisee model in almost all product categories, including cosmetics, jewellery, watches, books and toys. The outlets will sell both Reliance and other brands.

Retail sector analysts believe such a move augurs well for the company. "It gets ready infrastructure and can eventually buy out these stores, when the dust has settled," said an analyst, preferring anonymity.

From the point of view of a small retailer, taking a franchisee offers an opportunity to both upgrade his store and increase business by stocking more brands.

All the same, not everyone's convinced.

Viren Shah, joint secretary, Federation of Retail Traders Welfare Association said some 20,000 small and medium kirana stores in Mumbai would form area-wise associations to collectively purchase goods, extend credit facilities and negate the big retailers' advantage over them by passing on the discounts derived from collective purchase of goods.

"We are looking at forming 30-50 associations, each having anywhere between 100 and 1,500 kirana stores in that area. Each retailer will have to spend Rs 400 per sq ft to standarise the interiors. Talks are already on and we will have our first meeting after Diwali. Hopefully, by early next year, we will have our action plan ready," said Shah.

Mohan Gurnani, chairman, Federation of Associations of Maharastra (FAM), though, chose to differ.

"Revenue sharing model is a good thing. Look, we are not against big malls or retailers. We are against displacement of lakhs of people dependent on the business model of the small retail," said Gurnani.
Credit: Sify.com

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