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September 9, 2011, 3:00 pm UTC
Reliance hires housewives to peddle its wares in urban areas, much like HUL’s Shakti Amma concept for rural areas. Has it unwittingly hit the jackpot?
In 2001, Hindustan UniLever started the Shakti Amma concept where women in villages became direct distributors of their products. In less than a decade, the concept was so successful, that HUL decided to customize and take the concept global to countries like Sri Lanka, Bangladesh, Vietnam etc. Taking a leaf from their book, Reliance Retail, that has been running into loses for some time, is planning a similar project, but in urban areas.
Shakti Ammas in Urban Areas:
In a first such attempt at direct selling, Reliance Retail has begun a pilot project in Navi Mumbai. The company has been hiring middle-income, middle-class women in several housing societies in Navi Mumbai, asking them to join its ‘Home Club’. The women, who are hired under Reliance Retail’s subsidiary, Reliance Home Products, are selling Reliance’s private brands like Sudz detergent, Amara soaps and their ‘Healthy Life’ line of food items. These women would get 10% commission on the products they sell.
Advantage for Consumers:
The sops seem to be worth enough for consumer to go for it. First of all the products of Reliance Retail’s private labels are cheaper than other national brands in the category. Secondly, Reliance is offering a 30% discount on the products. This discount thus makes the product much more attractive for the consumer, considering that most other companies are increasing prices to negate margin pressures. Top that up with rising inflation and you’ll see why Reliance might have a winning strategy in hand.
It is nothing new for brands to sell their products through multiple channels. Reliance Retail, launched in 2006, already has over 1,000 stores in 86 cities. Yet, its Reliance Fresh, that sells food and grocery, despite registering growth of 20% last year with sales of Rs. 2,154 crores, posted a net loss of 160 crores. The company also tried to sell its own brands through its own outlets and general stores, but without the major advertising push that other brands indulge in, the company failed to accelerate sales. Spending on ads would have killed the USP of the products which was its low cost.
Reliance perhaps stumbled into direct selling in a desperate bid, but might have hit upon a jackpot. To understand that, one has to consider India’s demographics.
The Indian Lower Middle Class:
A large group of people in India are in the lower middle class income bracket. One can gauge this from the simple fact that according to the 2011 census, 78% people in Mumbai, live in slums today, up from 53% in 2001 and 25% in 1991.
For such families, even a few thousand rupees extra income a month eases tremendous financial pressures. On top of that this large social group continues to harbour certain idiosyncrasies – the most important being of women not talking up full time employment and rather staying housewives to take care of the family. In an ideal scenario, these women, with sufficient time to spare every week for a small business, would have been the target for brands looking to expand market into home retail.
Sadly that has not been the case, even after HUL demonstrated the concept in Shakti Ammas in Rural India. Perhaps the problem lies with marketing professional’s perception of the nation. Rural poverty and lack of opportunities are well documented, resulting in concepts like Shakti Ammas and eChoupal. What is not documented as well is urban poverty and sometimes the acute dearth of opportunities for a large strata of society to make a little extra living e.g. the housewives.
The numbers for Reliance, could thus be staggering. Even if a woman, spending barely a couple of hours of her usual free time in the afternoon, manages to sell just Rs.10,000 worth of products a month, to just a few block around where she lives, she’d make Rs. 1,000 with this very little extra effort. And for the 78% that live in slums, Rs. 1,000 a month is a good amount. Depending upon the number of such home-retailers Reliance manages to mop up, it might be on way to a phenomenal success story.It is hence surprising, when one considers the Indian market, as to why nobody had thought of the urban direct-to-home retail model before. This is surprising also because even today, most of the lower middle class India, buys a large percentage of its needs from door-to-door salesmen. Reliance’s current foray might thus prove to be that game changer in urban retail.
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