Reliance returns to cash-and-carry

Tuesday, 07 June 2011

Reliance Industries is planning a second go at the cash-and-carry format. Three years back, Reliance had experimented with this format but abandoned it due to opposition toward organized retail. But now Reliance Retail aims to bargain harder with producers and vendors and, in turn, improve margins of its chains. Reliance has fewer formats now and probably feels it’s ready to re-enter this model. The first such outlet may come up in Ahmedabad.

Reliance Retail, the largest food retailer in the country, has already got the largest portfolio in terms of number of formats. Nearly 25 lakh customers are shopping at the company’s various stores every week. This model is followed by companies like Wal-Mart, Metro and Carrefour. Cash-and-carry means goods are sold at wholesale outlets or warehouses. Its customers are retailers, professional users, institutional buyers and other businesses, who need special licenses to buy from these outlets. There’s no restriction on foreign direct investment in the cash-and-carry format. However, for front-end multi-brand retailing, foreign players are not allowed. In single brand retail, FDI is capped at 51 per cent.

However, the cash-and-carry business is extremely cutting edge in terms of margins. It’s not a very profitable business and is a low margin and high sales business. With cash-and-carry, Reliance will compete with global biggies such as Bharti Wal-Mart in this segment domestically. The company will open cash-and-carry stores through its retail arm Reliance Retail.

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