Reliance Brands Moves Ahead With Expansion Plans While Rivals Scale Back

The pace of expansion that Reliance Brands is planning, has amazed many. In the midst of a slowdown in the retail industry when most of the retail businesses have been scaling back their expansion plans, Reliance Brands unswervingly eggs on. The huge reserves have surely come in handy for the company.

Reliance Brands, a subsidiary of RIL (Reliance Industries Limited), led by Mukesh Ambani, had its first store opened in the year of 2010. It operated around 60 stores housing 12 brands including Diesel, Brooks Brothers, Thomas Pink, etc. by the end of March. It further intends to launch 40 new stores before the end of March 2013 and is keen on tie-ups with foreign brands.

Unlike the scenario two years back when it was possible for fashion retailers to attain a sales growth of 25%, things are different and more demanding now. However, Darshan Mehta, chief executive of Reliance Brand claims that they do not set their sights on valuations or the next round of funding, unlike other companies. Their present aim is to have profitable stores which may enable them to attain overall profitability, a few years down the line. He opined that the conglomerate is fortunate to have a patient parent who doesn’t zero in on the profits, but aims to build a robust business, despite the hurdles in their way.

Mukesh Ambani in the recent AGM (Annual General Meeting) announced that the retail business will be their thrust area, owing to the huge potential of this sector and targeting it to grow six – fold in the next four years. Reliance Retail comprises of 1300 stores, most of which are supermarkets, at present.

Companies like Future Group; the largest retailer in the country operating supermarkets and clothing outlets has rolled back its expansion to 2 million square feet from 2.5 million. The present economic slowdown has forced many companies to step down their activities. The economic growth this year was the slowest in the last nine years. The import duties have also swelled with the 15% fall in the value of the rupee.

The recent directive by the government making it mandatory for foreign companies to source 30% of their goods from local vendors (including small and medium scale) has benefitted companies like Reliance, though it can discourage them (foreign companies) from setting up their own business.

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