The Other Retail Story

My last long post was on retail as a barometer of reform. On the subject of retail, Neelakantan also has some very good posts up (here, here, here, and here), most of which deal with Reliance Retail.

All of these posts deal with the retailing of physical merchandise. But there’s another retail story brewing in services, and it’s slipping under the radar as far as I can see. Remarkably enough, the company on the leading edge of this retail story is the other Reliance: Anil Ambani’s group.

Reliance-ADAG runs the Reliance WebWorld cybercafe chain. However, WebWorld goes beyond being an ordinary cybercafe like a Sify IWay or an independent outfit. The cybercafe is only where it begins. Webworld is much more than that; it’s a platform for cross-selling other services and goods, including:

  1. Reliance phones
  2. Kingisher Airlines and Air Deccan tickets
  3. Reliance Insurance
  4. Reliance Mutual Funds
  5. (some minor merchandise like mugs and T-shirts, which are shipped rather than purchased on the spot- or you bring your own T-shirt).

The insurance and mutual funds started recently. What you need to look at is the profile of what they’re selling: except for the phones, these are all things where they need to carry no physical inventory.

Can this actually work, though? Converting a cybercafe chain into a profitable retail platform will depend on a bunch of stuff, including:

  • Converting single-service customers to cross-sell customers. The idea of using existing infrastructure and real-estate space to sell intangible, high-margin services os attractive, but will it actually happen? Cross-sell might be the holy grail, but if my employer’s experience is anything to go by, it’s bloody hard to do. Can you really convince someone who’s come by only to pay a phone bill or check his mail to buy mutual funds or insurance? It’s hard enough convincing someone who’s come by to check his bank balance.
  • Putting the marketing into place. I might see WebWorld as a retail opportunity, but are Amar, Akbar and Anthony going to think of WebWorld when they want to buy financial products? That needs branding and advertising, and more importantly, capability.
  • Getting the skilled people. You need trained insurance agents and investment advisors in each WebWorld if you want to cross-sell. Certification is the easy part. Training them to be effective salespeople is going to be much tougher.
  • Expanding the product range. To start attracting more walk-in customers and brand itself as a service retailer, WebWorld would have to sell a whole lot more than what they’re doing now. Off the top of my head, I can think of hotel and vacation bookings, job recruitment services (not for engineers and MBAs but for private tutors and maids), small money transfers (which would bring them into direct competition with postal money orders- I am not sure about whether financial regulations would actually permit this), and booking one time medium-ticket services, like movie tickets or A/C call-taxis.

I can think of two-ways for Reliance to immediately start pulling in more walk-in customers for stuff beyond mail checking and phone bill paying.

  1. First, move past paying only Reliance phone bills at WebWorld. Pull in customers by letting them pay any and all bills- rival telecom operators, utilities, personal loan instalments, and so forth. This can be done easily, really, if Reliance cuts a deal with EasyBill, which has taken the kirana distribution route till now. In fact, EasyBill could become a strategic acquisition target just for its back-end.
  2. Start a line of co-branded credit cards, or enter the credit card business themselves. I’m a little skeptical of whether co-branding would work. Who would do it? The PSU banks won’t, ICICI is in direct competition with Reliance for investments and insurance, and the MNC banks don’t have the reach. HDFC could do it, though, or perhaps Reliance could bypass banks entirely and do a tie-up with Amex.
    Once they have customers with established credit track records walking in to pay their credit card bills, their base of prospects for investments sales suddenly becomes a whole lot bigger.

Falstaffian Footnotes:

  1. I realised while writing this that the petrol retailers could employ the same strategy. WebWorlds have a better retail ambience though (IMO of course). I’d love to see this backed up by some figures on how many footfalls the petrol pump convenience stores get, and how that compares to similarly sized kiranas in residential areas. Or what the comparative sales are for that matter.
  2. Intuitively, I can see a big hole in the price range of WebWorld products. Surfing or gaming would have ticket sizes of R. 100-Rs. 500 per transaction, while insurance premiums usually start at Rs. 5000. Mutual funds SIPs can go as low as Rs. 1000 a month, but the effective entry level is usually Rs. 2500. Buying airtickets would again be at least Rs. 5000 per transaction. That means WebWorld’s regular customers are small-ticket spenders, to whom they’re trying to sell much bigger-ticket services. It can address the gap by bringing in a greater range of small-ticket cross-sell services- like employment registration.
  3. I know my next big post was supposed to be about what industry can benefit from network effects as much as telecom. Trust me, this post is a bridge to that.

12 Replies to “The Other Retail Story”

  1. What’s up with the telecom-expert charade?! Nice to see such posts, anyway. The Webworlds remind me of the Apple showrooms sometimes, with all their bright lighting, etc. What they should do, like the Apple showrooms, is have the equivalent of Apple Geniuses — Reliance experts, who know about the companies’ services accross the board, all about its packages, etc. Note that these are not cybercafe operators who help you when “it is not connecting….” — these are people from the PR department. Even one of these people per cafe is enough — a well-paid, smart, friendly guy who knows his shit would work wonders to the brand.

  2. Aadisht,

    It strikes me that the WebWorld provides a kind of reliable, standardised business infrastructure: electricity & lighting, (air-conditioning?), meeting facilities, computers, communication, office equipment and even snacks and drinks. Think of it, that’s what those business centres and serviced offices provide. Serviced offices also provide a mailing address and telephone secretarial services…but they charge a whole lot more.

    What the WebWorld can end up is as a ‘serviced office’ with no entry fee or monthly rentals. Quite ideal for self-employed people, even if they are not Reliance connected.

    It looks like Reliance has grappled with the fact that while they are selling phones and data services, the supporting infrastructure (computers, airconditioning, power etc) is weak.

  3. Arnab, why a charade? Strong agreer with the Apple Genius bit- though practically every service organization could do with people like that.

    Nitin, I didn’t think of that angle. But did you mean that the WebWorld infrastructure is weak? It’s fine where I sit. Did you mean in comparison to an actual serviced office?

  4. u know wat aadisht…u r losing ur touch..
    two years of b school is too short a time to take it away from u..
    be profound as always, but when u write it down, be your old self…soo simple n so wry that even my bums could have a chat abt it whenevr they rubbed against each other…

  5. hey i agree with you.When i was in bangalore i used Reliance web worlds all the time coz those are the only places with a decent broadband.

    But about i dont think arnab’s idea about the Apple kinda junkies will work mainly coz there are not half as many apple stores as there are reliance web worlds.

  6. champagnelyon, heh. I’m charmed that I had that effect on your bottom at one time. Hopefully I’ll have it again once I get my own computer and ‘net connection and don’t have to write blogposts out in longhand and then post them in a rush from WebWorlds.

  7. hey nice to see such blog buddy…
    but thot it ws more of general rather than specific with facts and figures….
    wld hav been been if it were to b more analytical

    cld u send me sumthin on retails chains such as hypermarkets., was lukin for tat and came across this da.
    kindly mail bak if u have any
    niranjanagarwal@gmail.com
    good one

  8. This is on the same lines of Home Depot trying out something new in the US. They are trying to tap their core business customers such as constuction companies etc. The attempt is to sell services such as telephone services, health insurance etc. But customer service/followup was the biggest concens the SVP of Home Depot was cribbing on CNBC. Now in this case, Reliance can guarantee some sort of service as the products being retailed are part of the Reliance Umbrella. But for this succeed, they would need to provide the same level of service to the non-Reliance products.
    It will be good experiment to watch how things turn out – when two humongous groups in totally different economies adopt similar startegies at the same time.

  9. I am in Bangalore after toiling years in the Gulf servicing the big time retailers of the world.
    Wonder if guys reading this could really help me start a career in retail in India!
    Thanks in advance to all those nice people who’d like to help me.
    id:sampathsrinivas@hotmail.com

  10. hi,

    We have boutique company called “Retail Insight”, working across Franchising, Storelayout, Research,Audit,IBP, Design,Strategy and Retail Roll out.

    We’re looking at like minded people who can consult with us as well as peoplewho can open up doors into new oppurtunities for us.

    Keep in touch
    Saumil
    Mumbai.
    saumilt@insightinside.co.in

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