Reliance Fresh set to shut shop in UP
Bowing to mass opposition from local shopkeepers, the company will also close down 20 Reliance Fresh stores in Noida and Ghaziabad.
By Mayur Shekhar Jha & Chaitali Chakravarty, TNN |
NEW DELHI: The opposition to organised retail has claimed its first victim. Reliance Retail is likely to hand out termination letters to 1,000-odd employees of Reliance Fresh stores in UP in the course of this week as it prepares to formally exit the state.
Bowing to mass opposition from local shopkeepers, the company will also close down 20 Reliance Fresh stores in Noida and Ghaziabad. A company insider said that Reliance Retail was being forced to exit UP owing to what he described as the “vindictive approach” of the state government.
When contacted, a Reliance Retail spokesperson said, “We have no comments to offer at this stage.” At present, the company employs 2,800 people in the state, and operates 20 stores in Noida and Ghaziabad. Industry observers also describe Reliance’s step as a tactic move to put pressure on the state government to reverse its approach.
While 1,000 people may lose their jobs, the company is likely to absorb the remaining employees. Reliance Fresh stores were also forced to close in Bhubneshwar by the local police on Tuesday, amidst protests by traders. Last week, traders had protested outside Reliance Fresh outlets in Delhi. The company had to shut down its Shakkarpur store in East Delhi for over an hour though it later re-opened.
Last month, the company started operations in Lucknow and Varanasi with 14 stores, which had to be soon closed down following violent protests by local traders. After the protests, the state government instructed all standalone food & grocery stores run by corporates to close down.
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Despite this, the company was able to continue operations in Noida and Ghaziabad, part of the National Capital Region (NCR). However, due to frequent intervention by the local administration, which would ask the stores to suddenly down shutters, Reliance is planning to exit the market.Being the most populous state of the country, UP is clearly one of the most important consumer markets for any retail chain. Apart from the Noida and Ghaziabad, various studies have shortlisted six UP cities as the fastest growing retail destinations in India. These include Lucknow, Kanpur, Meerut, Agra, Varanasi and Allahabad.
The strategic importance of UP for a large-scale retailer like Reliance is not limited to it being a large consumer market. The state is extremely important from the sourcing point of view as well. The Gangetic plain in the state is considered to be one of the most fertile agricultural belts in the country.
Persistent lobbying by various pressure groups had convinced the Mayawati-government to make amendments in the state’s APMC Act and allow corporates to procure directly from farmers. However, this amendment was also not implemented following political opposition.
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Sources say that Reliance’s food & grocery business has been in the line of fire, because of the popular perception of Reliance being the most ‘powerful’ business conglomerate in the country. This is evident from the fact that widespread political protests to corporate participation in retail started only after Reliance announced its roll-out plans. Companies like Kishore Biyani’s Future group, Subhiksha and Spencer’s have had operations in this format long before without encountering major problems. Moreover, the positioning of the Reliance Fresh format (small convenience stores) puts it in direct competition not only with neighbourhood kirana stores, but also with small fruit and vegetable vendors.
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This makes the company vulnerable to political attacks. Clearly, one reason why Reliance is going slow in its retail plans in most parts of the country is that the company does not want to become a part of any political party’s poll-agenda. “It should not become an election issue,” said a source.Start a SIP with as low as ₹500 with ET Money App!
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