Malviya and Pradeep Pandey, The Economic Times
August 17, 2011
Reliance Retail has begun door-to-door direct selling through housewives and housing societies to boost sales of its private brands such as Sudz detergent, Amara soaps and Healthy Life food items.
Its subsidiary Reliance Home Products has launched a ‘Home Club’ initiative on a pilot basis to sell products at consumers’ doorsteps at 30% discounts through members-primarily housewives-who will earn 10% of their sales amount as commission.
Since the past two weeks, executives of the Mukesh Ambani-owned company have been distributing brochures and price lists in several housing societies in Navi Mumbai asking them to join Home Club.
"I took membership two weeks ago and sold products worth Rs 1,500 to my friends. I earned Rs 150 for that and I think it’s a good deal for a person like me," said Devika Diwekar, a housewife staying at Gitanjali Housing Society in Navi Mumbai.
A Reliance Retail spokesperson said it’s too early to comment on the pilot project. "Reliance Retail undertakes pilots of models which are under active consideration. It will be premature to comment on any of these pilots," the spokesperson said.
Two years ago, the retail subsidiary of India’s largest private company tried selling its own FMCG and food brands through its outlets and kirana stores but failed to mop up enough sales.
"This is an attempt to sell our products at wholesale prices which could not only exhaust the inventory that has been piling up but also create a new sales channel," a Reliance official said on condition of anonymity.
Launched in 2006, Reliance Retail runs about 1,000 stores across formats in 86 cities. Its flagship retail format Reliance Fresh, a food and grocery supermarket, grew 20% last year with sales of 2,514 crore for 2010-11. It posted a net loss of 160 crore.
Reliance Home Products, which is responsible for sourcing, quality checks, branding, distribution and marketing of its in-house brands, clocked revenues of 28.43 crore during the same period, with a net loss of 5.08 crore.
The retailer’s new discounting sales channel comes at a time when most consumer product companies are increasing sticker prices across categories to negate margin pressure. Reliance private labels are priced 15-30% lower than national brands in their categories.
A discount of 30% will make them more attractive at a time when consumers seek more deals and bargain to deal with rising prices and a squeeze on incomes.
Experts say several retailers in developed markets such as the US are quite active in such multi-level marketing initiatives. "Retailers including US-based Best Buy sell products through multi-channels such as online and catalogue modes," Boston Consultancy Group Director Amitabh Mall said. "In India, direct selling is becoming a huge success as one doesn’t need physical infrastructure to do it," he added.
"The overall margins for private labels are significantly higher than national brand. So it will allow them to play with the pricing," said retail and consumer products consultancy firm Third Eyesight CEO Devangshu Dutta.
The country’s largest retailer, Future Group, has a number of successful private labels under its belt. But Reliance Retail is the first national retailer to try direct selling.