Reliance Retail to close stores, cut operation size

November 8, 2008 · Filed Under Reliance Retail 
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Story on LiveMint said that Reliance Retail Ltd, an arm of Reliance Industries Ltd (RIL), India’s biggest company by market value, has embarked on a restructuring exercise that involves shutting, relocating or resizing at least 200 of its smaller stores, said two persons familiar with the development.

Most of the stores are part of Reliance Fresh, the supermarket chain, said one of them who did not want to be named.

The firm has also temporarily shelved expansion plans to focus on making existing stores profitable. It currently has 816 stores in 60 cities.

“The company will relocate some unprofitable stores and even close down a few, and some of the smaller stores will be integrated into the larger hypermarket format,” the same person said.

A supermarket typically ranges between 1,000 sq. ft and 5,000 sq. ft in size, while a hypermarket can be between 100,000 sq. ft and 200,000 sq. ft. As part of the restructuring, Reliance Retail plans to reduce the size of some stores. It recently cut the size of its Ahmedabad hypermarket to 100,000 sq. ft from 165,000 sq. ft. In the smaller supermarket format, too, some stores have been reduced in size, the person added.
Neucom Consulting, the company’s external public relations firm, declined comment on the development.

The second person familiar with the development, a company executive who did not want to be named, said such resizing and restructuring is happening across cities, and expansion plans are either being put on hold or significantly reduced. For instance, an initial plan to have 70 small stores in Pune, which already has 20, has been pared to about 30. The company is cancelling realty agreements now considered expensive and not in sync with current times.

Even in Mumbai, the initial target of opening 100 stores has been scaled down to around 70. Mumbai currently has about 40 outlets. “The company will shut down stores that are not viable, bring down the present size of the stores and also cancel some of the agreements that were signed when rentals were high,” the executive said. The restructuring comes at a time when the entire organized retail industry is scaling back expansion plans.

At RIL’s annual general meeting in June, Mukesh Ambani, chairman and managing director of the company, spoke about the retail business being on track to “create a significant value-creating platform.”

The retail business of the company continues to open new stores in the smaller formats and the recently unveiled Reliance Footprint, which sells footwear. According to the company executive, Reliance Retail is looking to consolidate its back-office operations as well. About six months ago, it closed down a collection and processing centre in Pune.

In a related development, the company is reopening some stores in Uttar Pradesh that were earlier selling vegetables and grocery items. These stores, which were asked to be closed by the state government following protests, will now retail non-food items. For instance, its outlet in Noida’s Shopprix Mall that opened on Thursday is now selling home furnishings.

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    One Response to “Reliance Retail to close stores, cut operation size”

    1. Reliance Retail to layoff 600 | Reliance Insider | Reliance News, Stock Market Updates, Ambani Brothers, RIL, RNRL, Retail, Communication, Power on December 10th, 2008 9:30 pm

      [...] Reliance Retail to close stores, cut operation size [...]

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