Reliance Webstore forays into handset distribution through ‘Hub-and-Spoke’

Reliance Webstore Limited, the wholly-owned subsidiary of Reliance Communications and the retail venture of Reliance ADA Group that operates a nationwide chain of Reliance World stores, has geared up its business operations for a major thrust in the handset retailing business. The company has diversified into handset distribution business in addition to its current focus of handset retailing through Reliance World and Reliance Mobile stores. As part of this strategic move, Reliance Webstore has established a new division to focus and grow its handset distribution business. Incidentally, this is the first time a retail chain is foraying into the distribution business.

Reliance Webstore will follow the ‘Hub-and-Spoke’ business model to manage its handset distribution operations. This is the first time in India that the ‘Hub-and-Spoke’ concept is being deployed by a retail chain to distribute products. This unique business model will leverage Reliance World stores to act as distribution hubs. Each store will be responsible for registering its own channel partners and handset retailers and develop its own mini-distribution network. As part of its foray into the handset distribution business, the company has already signed-up more than 1200 handset retailers and Multi-Brand Outlets (MBOs) in nearly 100 towns.

Commenting on the development, Mr Sarup Chowdhary, Director & CEO, Reliance Webstore Limited said, “We continually identify new growth opportunities by leveraging our Group’s synergies across multiple sectors and competitive advantage of Reliance Webstore’s overall retail network. Our ‘Hub-and-Spoke’ model for handset distribution is unique to India and will result in remarkable convenience and efficiencies in the distribution chain. In addition to our exclusive distribution agreement with Coolpad Communications, we have also identified other new business opportunities to leverage this model for a larger participation in the Indian telecom retail sector.”

Reliance Webstore’s distribution model is designed to ensure that each registered retailer (spoke) is within 15-30 minutes’ distance of a Reliance World store. The Reliance World store (Hub) will act as a stocking and transaction point for these retailers, offering remarkable convenience and efficiencies in meeting market response & requirements. The model is also designed to cut the flab of traditional distribution models, resulting in attractive price-points for the end-consumers. This way, Reliance Webstore’s unique business model offers a win-win proposition for all — the manufacturer, the company, the retailer and the customer.

Over the next three years, Reliance Webstore is targeting a distribution network of over 10,000 multi-brand outlets (MBO) and retailers spread across 700 Indian towns.

This “Hub and Spoke” business model is expected to accelerate Reliance Webstore’s growth trajectory of its already profitable telecom retail business. In addition to retailing handsets, airtime, accessories and providing customer service for Reliance Communications, the company’s chain of Reliance World stores will now distribute handsets to other retailers. The telecom retail business currently contributes over 50% to Reliance Webstore’s annual revenues and the distribution model is expected to further augment this share. The company has been focusing on growing this business further by entering into strategic global agreements with handset manufacturers, retailing of open market handsets and geographical expansion of its retail operations.

Reliance Webstore’s handset distribution business foray immediately follows the company’s strategic agreement with Hong-Kong listed China Wireless’ Indian joint venture, Coolpad Communications. Reliance Webstore signed a strategic distribution agreement with Coolpad Communications gaining exclusive rights to market and distribute Coolpad’s dual-mode smartphones in India. While this agreement marked China Wireless’ formal foray in the Indian market, it also opened up a new business opportunity for Reliance Webstore to diversify for a powerful presence in the Indian telecom retail sector.

Coolpad, as part of its growth outlook, plans to establish an R&D unit in India. According to Mr Sami Al-Lawati, China Wireless’ India Head and Managing Director of Coolpad Communications, “We are currently scouting various locations across India for Coolpad’s R&D centre. The R&D unit in India will be critical to our business growth in India and our expansion across the Globe.”

Coolpad is planning an investment of Rs 400 crores in India over the next three to four years. This investment will be towards the company’s capex and opex requirements. The funds will be raised through internal accruals and debt.

In order to further strengthen its relationship with Reliance ADA Group, Coolpad is establishing a dedicated R&D unit and resources in Shenzhen, China. The resources for this unit will be directly picked from the China Wireless’ R&D team. The special R&D unit will liaise with Reliance Webstore teams across India to seek customer feedback and develop differentiated products for the Indian market. Coolpad will also leverage the pan-India retail and distribution network of Reliance Webstore to enhance sales of its dual-mode smartphones in India.

“Given our unique strengths in the dual-mode and 3G segments, we envisage a major upside for Coolpad as Reliance Webstore enters the handset distribution business in the backdrop of India’s emerging 3G scenario,” said Sami Al-Lawati.

The test-marketing results and subsequent launch of Coolpad smartphones in India indicates the great potential for smartphones in India. The Coolpad smartphones are expected to contribute over 30% of the overall handset sales at Reliance World and Reliance Mobile Stores.