Monday, January 14, 2008

Retail notes

Over the last few months, I have been a regular shopper at Reliance Fresh. Why? More than convenience, I like their prices, their range and the fact that I wont get cheated on weight. I know that when there is a festival, they wont charge me more just because there is a festival round the corner (and they are pretty much the only ones who do that). The kiranas, vegetable vendors everybody jacks up the price because there is higher demand. (I wish the queues at their counters were better managed...)

The kiranas are nimble chaps, they know how to make a buck in the market. So, over the past few months I have observed that many of these kirana chaps buy stuff from Reliance and sell it to their customers - obviously at a higher price than what they buy at. So, obviously Reliance has a good sourcing model that is able to buy cheap, which means the consumer gets the benefit. In this case the kirana acts as a go between, and makes some more money in the bargain.

Nothing wrong with that, except that as a consumer all this opposition to organized retail and the fact that organized retail will kill kiranas is coming not from the consumer, but from vested interests, those who want to keep doing the same thing and continue to make money.

5 comments:

Karthik/SK/wimpy/SKimpy said...

reliance not hiking prices in festival season is just bad revenue management. just shows that they don't have an ear to the ground and don't keep pace with the market.

the real killer in retail is not the reliance fresh. it's the metro cash and carry types. wait till they can source vegetables. the whole market will change. superior SCM by the wholesaler, and superior CRM by the vegetable seller on the street!

cOOL_aLIEN_fRM_mARS said...

Hi,

I thought that vegetable prices going up near the festival seasons was not just down to the retailer but the whole supply chain.

and people raving about retail should look at examples in countries like UK where people are quitting farming cuz the organized retail sector is pushing prices too low. Of course we are not in any better state right now in terms of revenue to the agriculturists but organized retail unless controller properly is not the solution (just look at the condition of diary sector in UK)

Psychomantis said...

1. on kirana dudes buying things from Reliance Fresh and selling it at higher prices in the city... get a load of this...

This happened in Ahmedabad some time back where the Reliance Petrol Pumps had introduced a 'one day only' discount of 5% on one of its lubricant oils. At one of the petrol pumps there was an order of 4000 bottles of that lubricant oil. The payment was made by cash and by using a loyalty card thus enabling the purchaser an additional discount of 2% on the purchase value.. Thus a total discount of 7% on all of the 4000 units purchased...

The purchaser was a dealer in the wholesale lubricant market in the insides of the city.. Apart from the normal margins, he had a clear 7% lead as against the competitors in the area.

Freaky no!

Psychomantis said...

2. on Reliance Fresh giving competitive prices as far as vegetables are concrned.. I'd really like to know 'when' is it that you go to buy veges from Reliance Fresh?!

Because veges being a perishable commodity, the prices dont remain static the entire day. Early morning the prices are the highest... since the veges are fresh... and as the day goes by... the prices reduce... By evening the vegetable vendors sell the remainder at really cheap prices.

the major disadvantage that reliance fresh has is that it doesnt come to know easily 'when' the 'sabzi mandi' changes its prices in the day.

a 'subzi mandi' in terms of economics is basically an 'agglomeration' of vege vendors.. and information flow in an agglomerated market is very fast. All the sellers reduce the prices at one go at a particular point in a day... and this advantage is something reliance fresh cannot enjoy. it doesnt know when the prices in the subzi mandi got reduced and to what percentage.

thus its a large probability that the prices in reliance fresh has higher prices towards the evening than the small time vege vendors outside.

what say?!

Neelakantan said...

If there is demand, prices do up all along the chain, but in the current scenario, it increases exponentially for the customer rather than uniformly across.

And yes, the cash and carry point is well taken. I think Reliance realises this and that is why their pitch towards a "Reliance Mandi" is gaining ground.

Tata SPAR here does not sell anything more than 2-5 kg of many discounted items. Of course, Kiranas can get around that too, if they so wish...

Buying from vendors in the evenings, when stuff is "not fresh", well, thats what the hotels do. Where do you think all the veggies go in the evening :)