Marketing Management II

Sales and Distribution

Channel Study of

Reliance Fresh

Introduction

Reliance Fresh is the convenience store format which a part of Reliance Retail limited, a fully

subsidiary of Reliance Industries Limited. Reliance plans to invest Rs 25000 crores in the

next 4 years in their retail division.

RRL launched its first store in Hyderabad in November 2006; major focus was on selling

fresh fruits and vegetables at lower prices by eliminating the middle men and intermediaries.

Now it has more than 560 reliance fresh outlets across the country of which 117 are in Delhi

and plans to increase this number to 784 to have pan-india presence by 2011. These stores

sell fresh fruits and vegetables, staples, groceries, fresh juice bars dairy products and non

vegetarian products.

Stores, size varying from 2000-4000 sq ft, are located in the radius of 1-2 km of each other

providing a good coverage of the area. Reliance retail has decided to reduce its exposure to

fruit and vegetable business and position itself as a pure play super market and will focus on

categories like food, auto accessories, FMCG, with food accounting for most of its business.

High quality products are offered to the customers having better shelf life and more

consistent quality. Company has expanded its supply chain management and it is capable of

handling it rapidly growing stores network effectively and efficiently.

When stores were launched, there was some initial problems post launch due to

circumstances prevailing in West Bengal, Orissa and U.P.

In 2008-09, Reliance fresh limited had a turnover of Rs 1778.06 crores and reported a loss of

Rs 249.30 crores.

Structure of Channel

The vegetables are collected in villages from farmers directly.

They are submitted to Collection Centres (CC) like Baktawar Pur, Khewrada, Hapur,

Patodi, Panipat,etc.

Payment and quality checks are done in collection centres.

From CC they are transferred to Distribution Centres (DC) via Reliance own logistical

units. Kundli is the DC for Delhi/NCR.

If the capacity is not fulfilled by the collection centre then National sourcing is used

This leads us to the next and final step in the process, i.e. the local Reliance Fresh

stores.

The order for new vegetables has to be placed one day before. Till evening the stock is in

distribution centres. At night it is transhipped to the local store. So there is a delay of one day

from farm to the stores which are 113 in New Delhi.

The distribution centre and the local stores are rent based.

National Sourcing

National Sourcing

Daily rates are monitored. The farmers are paid less than the prevailing rates in mandi. If the

requirement is not met through farmers then the additional goods are brought directly from

mandi at a 3-4% cheaper rate from the usual mandi rate.

The total volume entering in NCR is at average around 100 tons, but due to rising prices of

vegetables, the consumption has fallen. This has made the volume fall to 70-80 tons. Almost

65% of the volume bought is from Collection Centres and warehouses, the rest 35 % is

procured from mandis.

Movement of Goods (Logistics)

Reliance itself pays for all logistics from the collection centre to the retail stores. Reliance

earlier has a logistics company which used to provide man power as well as transportation of

goods. But now the logistics company is no longer in place. Some of the company owned

trucks of logistics company are used for transportation along with other trucks on rent based

system from a third party vendor.

Members and their Roles

Farmers: The farmers harvest the crop and bring it to the collection centre. They save on the

transportation cost they would incur in taking the vegetables to the mandi.

Collection Centre: One Reliance authorized person is in charge of collection centre. He

inspects the quality and takes in the vegetables. He is also responsible for payment of the

farmers. He ensures the loading of all vegetables in the trucks which are sent to the DC.

National Sourcing: In order to provide a constant supply of all perishable vegetables

warehouses have been bought where goods are kept in cold storage. Whenever there is a

shortage in supply from any region then, these warehouses takeover and start supplying

goods. Eg. Tomatoes are stored in Nasik, Ratlam, Jaipur; Potatoes in Agra and Shahbad. This

gives Reliance a competitive edge. It also ensures that they buy at the cheapest rate and sell it

out when the rates are considerable higher.

Mandi: A team of two people is situated at the mandi. These teams are responsible for

constantly monitoring the rates and communicating the same to the head office. If there is an

urgent need which cannot be fulfilled by the collection centre then reliance purchases the

supply directly from mandi but at a rate which is 3%-4% less than the actual mandi rate.

Distribution Centre: The distribution centre receives the vegetables and does a thorough

quality check. They prepare the vegetables for the retail stores and also ship the vegetables

depending on the requirement for each store.

Retail Stores: They are just responsible for receiving and checking the quantity of vegetables

arriving each night. Then they put up all good vegetables on display for customers.

Quantum of Volumes

The total volumes procured per day is currently about 70-80 tonnes. This is the figure for last

two months. Due to rise in prices the volume has dropped as it was earlier about 100 tonnes

per day.

Management Policies

If the store owners are able to reach their target then there is a monetary award and

recognition. It is worked on monthly percentage increase in the sales. The customers are

offered services like home delivery on orders exceeding Rs 500

Conflicts

The stores in Uttar Pradesh had closed because of protests from the local vendors. This

resulted in a Reliance de-hiring all its stores. This resulted in a loss of Rs 200 crore in tax

payments to the UP government. The latest internal news is that Mayawati has sent her top

IAS officers to Mumbai to woo Reliance Fresh back in Uttar Pradesh