Retailer to Supplier – Logistics based business model

Reliance the Indian business conglomerate has always built their success through implementing large scale infrastructure projects (Petrochemical venture, mobile and telephone services etc.,). Their new entry in to farming is a clear indicator of the huge potential in agriculture and food industry in India. India is the second largest producer of fruits and vegetables still less than 2% is being exported ( compared to nearly 50% in the developed countries). The competitiveness of fresh food (industrialisation) have been influenced by increased middle men affecting price levels, poor transportation (and cold chain) infrastructure and a large number of small farmers (giving the lack of scale & lack of sustainable supply).

The business model priority of Reliance have to get the transportation infrastructure installed ( which presently costs 15-25% of the food cost) and to leverage it to create efficiency for agriculture industry. The logistics infrastructure will also help reliance establish themselves as selling to customers directly and also to other traders and mom and pop stores. They are putting logistics (infrastructure) in the core of the business model to enhance profitability and change supply chain position ( from a Retailer to Supplier) and to have new customer segments. Reliance also dilutes the power position of the middle men by making middle men buy from Reliance.