Reliance Retail – engineered to Fail

As it appeared on Retail Angle.com :

As per an article on the website ‘Commodity Online,’ Rick Boozell, who worked as a Retail Consultant with Reliance, hired to help establish retail operation from inception, has said that having had an insiders look at Reliance, he felt the company organization itself is the failure. He is quoted in the article as saying “When the Store Operations vertical is not at the center of a retail company, the venture is doomed. For two years, I tried to convey this, but the other “Powerful” vertical heads – EPC, D&L, HR, FMCG, Marketing, Reliance One, etc, all dictated to the store operations team”. He further added “I have never seen such a dysfunctional company structure, and at least 75% of all resources expended were battling internally, versus trying to take care of the customer. The truth is, retailing is a simple business, and India is aware of this, Reliance wanted to make it a grand business venture, where all the retail leaders sit in nice offices, looking at reports – while rarely even entering a store. Reliance really never did enter into the retailing business – at least not a retailing business that the rest of the world would recognize as a modern retailer… It is unfortunate, as this could have been a great value for the Indian people. There are a few great Reliance leaders who could change this, but their words fall on deaf ears.”

I remember while looking for options outside of Wal Mart the consultant had given me two choices – ITC Limited or Reliance Retail.Needless to say that everyone I checked with was apprehensive about Reliance even though it seemd that they had plans to take over even Wal Mart at that point in time.Every newspaper,business magazine was talking about the so called “dream team” with smiling faces of industry stalwarts staring at you in all their glossiness.Well the dream team has turned out to be a nightmare.Fortunately for me the consultant herself suggested that it is much better for me to look at ITC as they offer a long term stable career with a growth opportunity.Almost at the same time my GM at Wal Mart left to join  some fancy position as CEO of Worldwide sourcing or something.It was amusing to note that he traveled  from Mexico to China looking to buy products for stores which were not even there !I cannot tell you the joy I felt about my decision after he left and joined Wal Mart back exactly 6 months after going to Reliance.Some say he was asked to leave due to internal politics but I believe he would have left of his own.A very hardworking and ambitious guy that he was.

Since then the horror stories have just not stopped.It seems Reliance retail has become one Hotel California with everyone sharing their macabre experience after coming out alive or crying for help if still trapped.Employees,suppliers,service providers you name it … and they have been  tossed like shuttles between so many departments and 100 vice presidents.What pains me most is that we are talking about human beings here not numbers or head counts.I have a friend who moved to Bangalore just 6 months ago and was asked to leave last month.He has a kid and even his wife left the job In New Delhi so they could shift.This is not funny.The guy who hired him should be taken to court for harassment.

While no one can challenge the enterprise  savvy and business acumen of Mr. Ambani the credibility of his commanders is certainly under the scanner.Some of the mistakes made were so basic that even a novice would have known better :

1.Over hiring -100 ‘s of people in merchandising and sourcing at humongous pay packages with no defined roles.(Wal Mart has 10 folks in footwear merchandising and PD ,our friends had 105 at last count. Merchandising karoge to kal subah se kaam par aa jaana.Are you hiring a maid or a manager?)

2.Not taking time to understand consumers behavior(You assume that everyone is looking for poor quality cheap stuff but that is not necessarily true 100 Rs this ,20 Rs that- people buy stuff not just the bar code.Reliance Hyper has suffered big time since it opened in Ahmedabad)

3.No clear positioning(you do not sell a Rs 99 t shirt to a customer who drives down on a Mercedes looking at BMW and Debnehams as he enters the mall- Ambiance mall,Gurgaon)

4.Multiple formats without proven ability to run any one profitably or successfully.(One could just look at other retailers in the west -are all of them fools at IKEA and Pier 1 to have stuck to just one line of product over the last 50 years? Uncle Uncle mujhe bhi kisi vertical Ka CEO banao na,pls.)

5.Indiscriminate placement of orders (100000 pcs was the minimum quoted at the time of negotiation and the order would be just 1000 -2000 pcs.Supplier expectations were set so wrongly that they were asked to set up special assembly lines with no CPFR in place.Reliance soon became a laughing stock among suppliers with their 20 page agreement,many of them wary of entertaining out of this world requests from under qualified,over enthusiastic buyers)

6.Buying produce with no prior relationship with farming community and selling in urban areas making so much noise like everyone else will get wiped out( UP was a disaster and Reliance had to shut operations firing everyone in the process.It also got the unwanted attention of UP politicians who thought of it as a golden opportunity to make a fast buck)

7.Deferred payment terms –  loading interest costs on a low margin product even when the parent company was sitting on piles of cash.Quick payments should have been the edge for Reliance where as it was just the opposite.I never understood the logic.

These are just some examples from the outside.The problem is that the party was spoiled by the top guys and the ones who are suffering are the CSA’s,Assistant managers and Merchandisers.There are no takers for them in a recessionary market at even half the price and their EMI’s are more than what someone will ever pay them.

It is really sad.All of us were looking forward to Mr Ambani making India proud once again but I guess the ones he trusted most failed him by giving a completely distorted account.

I hope that they get their act together,Sooner than Later.

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