Retail News India : Mukesh Ambani’s Reliance Retail is converting some of its big hypermarkets into wholesale cash-and-carry stores, in an apparent sign of modern retail’s inability to effectively take on neighbourhood stores in India.
The Reliance Mart hypermarket in Bhopal’s Aashima Mall is currently under renovation and getting refitted to be reopened in February in a new avatar, as a cash-and-carry store.
This 44,000-sq-ft hypermarket is among Reliance’s big-box stores, including one in Ludhiana and another in Aurangabad, that are being converted into cash-and-carry formats.
The company has realised that in some locations, low-frills wholesale stores have better prospects of making money sooner than consumer-centric hypermarkets, which have wide margins but also are more expensive to operate, two people with knowledge of the development said on condition of anonymity.
So, in order to convert the adversaries — the mom-and-pop stores in this case — into allies, Reliance is adopting a simple strategy: It is courting them.
In the cash-and-carry format, companies sell to bulk buyers, such as neighbourhood or kirana stores, who are their members. Reliance is setting up its wholesale stores in places where the concentration of kiranas is high as it is easier to make them customers than competing with them. The business also offers huge potential.
Industry experts estimate cash and carry in India to become a $22-billion (about Rs 1.4-lakh crore) annual opportunity by 2017, and the market leader in the segment is expected to corner $4 billion to $5 billion of this. The main rival for modern cash-and carry stores in India is “wholesale retailers” — thousands of small retailers crowded into large markets, such as the Sadar Bazar in Delhi.
Source: economictimes.indiatimes
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