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26 March 2019

Indian fashion business Reliance plans major expansion

The chain of low-cost fashion stores in India, Reliance, is gearing up to expand its offering from 557 outlets to 2,500 over the next five years and integrate them with its online business.

Mukesh Ambani, the organisation’s multi billionaire owner, seems to be performing a series of moves with the goal of dominating Indian consumer spending, of which this expansion is the latest. His campaign sees him in a rivalry, in the Indian market, with Amazon and Walmart Inc's Flipkart.

India has recently introduced new restrictions on foreign investment that have dealt blows to both the other players, so this announcement seems strategically placed to take full advantage of that. Prime Minister Narendra Modi's government changed the rules in e-commerce in December, to prevent any retailers from selling products from vendors in which they have equity, and from making deals with vendors to sell exclusively.

Ambani is Asia's richest man and he founded Reliance Retail Ltd in 2007, to transform his petroleum behemoth into a consumer-facing conglomerate, so it doesn’t come as a surprise that he is increasing his stake in retail.

Reliance Trends offers 3rd party labels and its own brands. This expansion plan should enable them to rapidly increase sales of their own products, and perhaps double the number of cities where their stores can be found. Last year, they opened over 100 new stores, so growth is certainly accelerating.

Retailers’ own brands tend to offer better margins in general than 3rd party labels, because the retailers are closer to manufacturing costs, marketing etc. Reliance has designers in India and London, who create many types of clothing. They take inspiration from global fashion, adopt it for India and make it available at Indian prices. A strategy that looks set to take the consumer business to the next level.

India has the world's largest population of people aged between 18 and 35, at a huge 440 million, which is nearly half of its total workforce. Use of the internet, and specifically mobile, has skyrocketed over recent years and e-comm businesses have used discount offers to entice shoppers to buy online more and more, for as many goods categories as possible.

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Indian fashion business