Indian corporate giant Reliance Industries began a multi-billion dollar superstore rollout Friday with promises to the nation's small traders that it would not drive them out of business.
The 11 slick, air-conditioned stores, which opened in this southern city are a novelty in the country of 1.1 billion people, and are part of Reliance's plans to create a "Wal-Mart in India."
The foray into retail by Reliance - India's biggest private company by market capitalisation and its most profitable - has sparked fears among mom-and-pop traders who comprise about 97 percent of the nation's retail trade.
But Reliance, whose main business is energy and runs the world's third-biggest oil refinery in Gujarat, said small traders should not worry over its entry into the 300 billion dollar retail market.
"We are not harming small retail players," Raghu Pillai, president of Reliance Retail Ltd, said at the launch. "The market is growing by eight per cent which is 24-25 billion dollars every year," Pillai told reporters.
"We are aiming at revenues of only 25 billion dollars in four years. Even if the market grows by 100 billion dollars by 2015, organised retail would be still less than 10-12 percent of retail trade," he said.
Reliance Industries chairman Mukesh Ambani has set an ambitious annual sales target of 25 billion dollars by 2011 for the stores arm and has said that retail will be the conglomerate's main immediate focus of development.
Company officials say Reliance plans a start-up investment of seven to eight billion dollars in the project. The first 11 small supermarkets, to be known as Reliance Fresh, are a pilot project to "listen and learn" from consumers, the company says, and are stocked with a wide variety of keenly priced groceries.
Their opening marked the launch of the front-end of Reliance's retail strategy that involves setting up farm product sourcing centres, supply chain and retailing.
Reliance aims to ramp up operations swiftly and have stores in 784 cities and 6,000 towns in the country by 2011, Pillai said. The launch of Reliance Fresh is to be followed by other formats, including a nation-wide chain of hypermarkets, supermarkets, discount stores, department stores, convenience stores and speciality stores over the next five years.
"There's no retail venture which has been attempted on this scale in the world," said Arvind Singhal, head of India retail consulting firm KSA Technopak. The potential for organised retail in India with its increasingly affluent 300 million-strong middle class makes it an attractive market for foreign retailers who have reached saturation point in other countries.
Foreign retailers like America's Wal-Mart and JC Penney, Britain's Tesco and France's Carrefour are all awaiting an expected easing of rules on foreign investment in the retail sector. Reliance could also see competition from telecoms tycoon Sunil Mittal's Bharti Group, which is searching for a partner for its retail project.
Reliance chairman Ambani, who has a reputation for completing mega-projects ahead of schedule, skipped the stores' opening but performed prayers for the enterprise's success the previous night, the Press Trust of India reported.