New Delhi: Reliance retail is entering into a joint venture agreement with European supply chain company Wincanton, for its food, grocery and hypermarket businesses.
Having launched a number of specialty formats, Reliance Retail is looking to leverage synergies with Wincanton to effectively manage its back-end operations, which are a critical success factor in the retail business. These include transportation and warehousing of goods and efficient inventory and supply chain management to ensure that the correct stocks hit the store shelves on time.
Industry sources say while Reliance Retail's has managed its front expansion to 600 stores across various retail formats extremely fast, its supply chain leaves a lot to be desired, with customers not being able to find adequate supplies at goods on Reliance's food and grocery outlets.
Wincanton, the UK-based $4-billion provider of specialist logistical and distribution services is expected to completely take over the supply chain for Reliance Retail's food, grocery and hypermarket businesses. It will deploy warehousing solutions, and ensure that goods are transported to stores in time, and in the needed quantities.
The supply chain management company has information technology solutions that allow it to have a seamless view on inventory levels across stores and warehouses, and is capable of knowing the store's requirements even without the store manager's intervention.
Wincanton's customers include customers across industry segments, spanning fast moving consumer goods to retail, automotive and oil. Among the big names, its client list includes retail behemoths Tesco and Woolworths, auto companies Ford and Daimler Chrysler, and consumer goods companies P&G, Nestle, SAB Miller and GSK.
Two years ago, when it rolled out its retail initiative, Reliance had said that it would manage all aspects of the retail endeavour by itself. Cut to the present day, and you could be forgiven for saying that it has a partner in almost all of its retail initiatives. The partnership with Wincanton marks a shift in strategy for Reliance.
Reliance's partnerships started with its speciality store endeavours, and expanded to cover its retail businesses. Indian regulations do not allow foreign direct investment (FDI) in multi-brand organised retail businesses, but there are no restrictions on foreign direct investment in the wholesale cash-and-carry retail operations. Consequently, while Wal-Mart favoured a partnership with Bharti for its retail foray into India, Reliance preferred to go alone, earmarking Rs25,000 crore for its retail business.
While Reliance built scale on the front end of the retail business fairly quickly its back end lagged and ended up dragging down its speed of expansion. Also, it became the target for protests in the states of Uttar Pradesh and Orissa. (See: Bags packed, Reliance Retail plans to shelve UP and Orissa, along with 10,000 jobs in both states)
Recent partnerships by Reliance for its retail formats include foreign companies for several speciality stores such as Pearle Europe for opticals, Hamleys for toys, and Marks and Spencer for apparel. The company is also in a joint venture of office supplies with US retailer Office Depot, and has opened iStores for exclusive retail of Apple's products.