July 2006

Reliance Retail moves in. And we find ourself at a decisive juncture.

My partner thinks there is nothing to be worried about. It will be another five yrs before they move into towns like CBR, and that gives us enough lead time to grow S&D to the point where it would make an attractive acquisition for Reliance. Or for other players like Pantaloon (now Future Group), Subiksha (provided they are not acquired by Reliance itself before that) or Trent etc.

Given the highly focused individual he is, he is very much right. Yes, he wants to step on the gas and go into overdrive. He wants to run bigger promotions, launch more aggressive schemes, and set up twice as many stores in coming months than initially planned, (which means hiring employees and building up inventory twice as fast at a capital outlay of atleast twice as allocated) and things like that.

Unlike him though, I find myself thinking. Given my knowledge of Reliance and the way they operate I have an uncanny feeling that we are hitting the end of it. I won’t really go into exact details of why I think so, except this – Reliance is only like Reliance. They dream up large-scale, truly gigantic projects. And then execute them with utter ruthlessness in record times at globally competitive capital costs. That is what I admire about them.

So what is the difference between then and now. I guess only this much – VCs are suddenly wary of anything Retail. You give the best presentation, and show them the biggest market opportunity to be cashed on, and a growth record with impressive profits but the moment your slide shows Reliance as one of your competitors, the water dries up. ‘Reliance! Forget about returns. If I don’t invest, I will actually have saved my money!’ – That’s the effect of Reliance.

And it is no surprise. Who will bet on you when there is a Reliance Retail charging ahead with a pan Indian roll-out in 1500 towns, with multiple formats ranging from neighbourhood convenience stores to hypermarts, integrating the chain all the way right from farmers in Punjab, Haryana and UP to end consumers across India, and covering an entire spectrum of goods including services. That they are pumping Rs 15,000 Crores in their venture makes any VC money look like petty change. If Biyani is worried by this $20 Billion monster in the making, maybe I should also be. 🙂

Though I pride myself for being one hell of an optimist, I think that speeding up things at our end won’t help. Infact it will only make it worse. Should I listen to VCs and save myself, or – fight it out. The problem is, howsoever glamorous and adrenalin pumping fighting out seems, if it reaffirms my thinking then it will have done that at a greater cost of time, effort and money.

Plus everytime we have been aggressive (for ex, by offering really steep discounts for a limited period of time or giving away free gifts to customers) we have faced not-so-kind resistance from the local shop owners. These are people who have been here for 20 years, and suddenly they found an ‘outsider’ eating their pie. There have been various manifestations of this resistance, from trying to form a union to get us ousted, to threats, break-ins in the shop and other forms which are better not listed here. But we have managed it. Given the software background that I come from it has not been easy. But with an ear on the ground, and an eye on the speedometer, we have somehow managed it till now.

Now what I am wondering is this – if offering deep discounts, running huge promotions, or giving gifts to customers can draw this kind of resistance, what would expanding twice as fast mean. I think then we will need to be prepared for anything.

In the meantime, over the horizon Reliance Retail is emerging. How will Reliance change the retailscape (ah! new word?!) of India? Inspite of all the competition that Pantaloon, Trent, Pyramid, Lifestyle etc may offer, I have just one thought about Reliance Retail.

Where does an 800 pound Gorilla sleep?

Anywhere it wants to.

I can either be transparent or happy.

What happens when trust is broken?
A heart is shattered.
Someone dies.
Another person is born.

I can either be consistent, or human.