DTDIY SPECIAL THE 'HOW TO' ISSUE 2012
How to 'Manage a Business in a Slowdown'
The last few years have been quite tough for him as well as the group, but then both have emerged as clear winners. Bijou Kurien, President & CEO (Lifestyle), Reliance Retail talks about how slowdown has been a huge learning experience for him, and why he doesn't see any reason to hold back expansion
Onkar pandey | Issue Date - 03/02/2012
Q. Three years ago, when recession hit the global retail industry, Reliance Retail had put a stop to all its expansion plans. Lately however, it has started expanding again, but in a more silent and calculated fashion this time. Is it because the company has become more circumspect about the future?
A. Circumspect is when you stop and think a lot about what to do next. In our business, every day, every store, every transaction is a challenge. So we are not circumspect, we are clear about what to do. And in that context, achieving scale is an immediate priority for us. The slowdown had kind of hit us, but now we have resumed expanding. I don't see any reason to hold back expansion or slow down at all.
Q. Does that mean Reliance Retail will continue to expand the count of its value and specialty formats?
A. Obviously, that is the reason why we have already opened 20 different retail formats ranging from Reliance MART to Reliance SUPER, from Reliance FRESH to Reliance Footprint, to Reliance Digital, et al. Although every format didn't work the way we wanted it to work, there's a huge learning experience, there's a lot to know. In fact, the basic learning was to stop and reconfigure our business model as per the market needs, and then move forward in terms of expansion.
Q. What is the biggest challenge when it comes to managing multiple formats?
A. Managing multiple retail formats efficiently is always a big challenge. Every format needs a focused attention in terms of inventory levels, employees, store layouts, etc. Then you need to create a back-end which on one hand is able to aggregate scale, and on the other is flexible enough to support each and every single format. In addition, today's retail environment is characterised by tighter consumer budgets, rapidly expanding product selections, longer leaner supply chains, and tougher competition.
Q. During the last few years, the Indian retail market has seen considerable growth in the organised segment. Major domestic players have entered the retail arena and have ambitious plans to expand in future across verticals, formats, and cities. So, how do you plan to keep competition at bay?
A. That is what competition is all about. Everybody competes in order to build a business, but the only way to build a business is to create differentiation. That's what we have to do as well. We want to bring quality, affordability and variety to all people. In fact, we have been exploiting efficiencies of scale for quite some time now by introducing very low price points across product categories. This is what sets us apart from our competition.
Q. Inflation has been putting huge pressure on your margins, and in turn profits, for quite some time now. Going forward, how do you plan to manage your business in such a scenario?
A. Managing a business in an inflationary environment is a challenge for not just retailers but for everybody. Look at the last quarter results, almost every company's result reflected the fact that margins are getting thinner. Thus, the principle for everybody in such an environment remains the same – to make sure that you bring down the capital cost/ investments you are putting in the business, and chase sales.
Q. But, aren't these just fire-fighting measures to ensure margins and remain afloat?
A. Well, there are companies which have done really well in an inflationary environment. A case in point is the Dollar Stores in US, which despite a severe recession continued to perform excellently. All it did was to chase sales in an environment when consumers across the country were downtrading.