Critics say the Reliance Retail model is very risky

The Financial Express reports that with the Reliance Retail model almost off the ground, global management guru Prof, Mohanbir Sawhney, director of Center for Research in Technology & Innovation at the Kellog School of Management has criticized its plans.

Prof. Sawhney who was named as one of the 25 most influential people in e-business by BusinessWeek once, said:

“The capital intensive business model of companies like Reliance Retail makes their ventures very risky. Three years down the line we may see these ventures going in for a spin-off (stake sell out).”

Navneet Saluja, CEO of Reliance Retail Delhi countered saying that:

“In India, there is space for everyone to flourish. The retail industry may adopt the cash-and-carry model for villages and small towns. Local kiranas will be allowed to source from large retail stores in such places.”

Bharti’s expansion plans are also being scrutinized by analysts, especially its plans to have trials, cultivating crops and storing products in its own cold storage facilities before sending them to retail stores. Prof. Sawhney added:

“In the medium to long run, Bharti and Reliance may be forced to outsource non-core functions like cold storage and logistics and concentrate on its core competency. Overall, I see the outsourcing model trickling down to all sectors in the future.”