Reliance Fresh, the offline retail venture of the Mukesh Ambani led Reliance Group has been around for many years now and has developed a number of private labels sold through stores. These include Best Farms, Good Life, Masti Oye, Kaffe, Enzo, Mopz, Expelz and Home One. A majority of these are in the foods and grocery segment, while other products are covered through the brands/private labels. The corporate giant now wants to take these products out to the market by creating a distribution network that could supply these products to retail provision counters across the country.
This appears to be part of a larger plan the Reliance Group has drawn up to enhance the contribution made by products and services that are consumer facing. The areas the Group is already engaged in, apart from the Reliance Fresh retail stores, are the communications sector with its Reliance Jio offerings which will see the Jio Giga Fiber broadband services being commercially launched this year. There are the Reliance Digital consumer electronics stores, the fuel outlets and the Reliance Trend fashion stores.
Observers feel the company intends to reach a stage where these consumer-facing businesses are able to contribute as much as 50% of its overall earnings by the year 2025. They have reached around 20% levels now from a meagre 5% in 2015. Is this the result of the declining trend in the main petroleum refining business? The company’s latest results showed a fall in the refining margins and there are no projections of the margins improving in the near future either. There is no official word from the company and therefore this cannot be confirmed but if this information is current, then the strategy can be understood and appreciated.
Having said that, the going may not be as easy as it found with the communications foray. Well-entrenched giants like ITC and Hindustan Lever in the FMCG sector and Walmart (Flipkart) and Amazon in the e-commerce sector may not yield their territories so easily.
Reliance has been working on its offline-to-online (O2O) model for some time, trying to leverage on the retail presence it has established countrywide. The new introduction will be Jio stores, where customers can avail assistance from the store staff to place orders and opt for taking delivery from the stores or to have them delivered at their residence.
The new effort to appoint FMCG distributors to buy products from Reliance and sell them to the retail stores will definitely expand the reach and add to the topline of the company if it takes off in the right direction.
The e-commerce venture too will be keenly watched as it evolves. More clarity may emerge when the company’s AGM is addressed by its Chairman Mukesh Ambani.