Reliance Retail to source CTVs from Videocon

In what could be one of the largest sourcing deals by a domestic retailer, Mukesh Ambani promoted Reliance Retail is tying up with consumer durables major Videocon Industries to source colour televisions (CTVs), glass shells and colour picture tubes (CPTs) from Videocon for its durables retail foray. As part of the agreement, which is expected to be finalised soon, Reliance will sell CTVs from Videocon through its retail outlets under the ‘Reliance’ brand name, according to sources close to the development. Reliance has planned 10,000 outlets by 2010.

Although Reliance’s requirement for CTVs and CPTs could not be ascertained, the deal will substantially boost Videocon’s overall sales of colour TVs, which currently stands at 3 million per annum, including flagship brand Videocon and sub brands like Sansui, Toshiba, Hyundai, Akai, Kenstar, Electrolux, Kelvinator. Industry leader LG Electronics India at present sells 5.5 lakh TVs per annum.

“Soon after entering into a buyer-seller agreement with Reliance Retail, Videocon will start supplying its products to the company in bulk, in a phased manner, which will be marketed through Reliance outlets as private labels. This will depend upon the number of consumer durable retailing outlets Reliance will roll out in a phased manner,” said the source.

Talks are currently on between the two companies, sources added. When contacted, a Reliance spokesperson refused to comment on the development.

Asked about how a likely tie-up between two large enterprises would impact the durables market scenario, Deepak Jassani, head - retail research, HDFC said, “Reliance will prefer positioning Videocon CTVs at the low end of the market. However, the margins that Videocon will gain through the deal may not be very exciting as Reliance is a tough negotiator.”

Suresh Khanna, secretary general, Consumer Electronics and Television Manufacturers Association (CETMA) said, “The move of Videocon entering into buyer selling agreement with Reliance will lead to further growth in the industry as well as add to Videocon’s topline. Videocon Industries has eight sub-brands under its portfolio and since Reliance is likely to roll out huge number of consumer durable retailing outlets, the move will give further scope to Videocon to spur more volumes.”

Reliance has made a foray into the retail segment by rolling out 17 ‘Reliance Fresh’ outlets in Hyderabad. While the company is eyeing 784 cities and 6,000 towns in the country for Reliance Fresh outlets, it is also planning to roll out consumer durables retailing outlets in a phased manner very soon.

Source : Financial Express