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India Inc to open operations in China

Retail industry sources say that Reliance is planning to outsource goods from China for its business, reports Sabarinath M.

india Updated: Nov 21, 2006 19:55 IST
Sabarinath M
Sabarinath M

Good news for visiting Chinese President Hu Jintao who is focusing on improving business relations with India. Big boys of India Inc are stepping up their Chinese presence.

Reliance Retail, which is planning to do a Wal-Mart in India, is set to start sourcing operations in China mainly to import large quantities of electronics and footwear products. Reliance Retail will open an office in Shanghai in the next few days.

"Right now, Reliance Retail is in the process of hiring people to manage the Chinese operations. The location for the sourcing office has already been identified," said a retail industry source.

Reliance’s Chinese sourcing team will have more local people as knowledge of language is essential in negotiations.

Wal-Mart’s Indian sourcing office in Bangalore largely has Indian employees. Reliance is also forming a sourcing team for India, which will work closely with the Chinese office.

The company is also starting a sourcing office in Hong Kong which has emerged as a hub for many international retailers. Sources said that employees from international buying houses are joining Reliance Retail’s sourcing operations in India.

As the company is keen on sourcing large volumes from China, Reliance Retail executives’ are currently meeting Chinese suppliers for long-term sourcing pacts. Reliance executives are meeting Chinese electronic goods’ makers in Mumbai and Bangalore.

Retail industry sources said that Reliance is planning to outsource goods from China for its private label business.The company is planning to market a lot of consumer durable products under the private label category.

Reliance’s move to source goods from China is in line with the strategy of many global retailers like Wal-Mart, Tesco, Carrefour and Target. Wal-Mart buys 30% of its total products from China, according to global retail industry estimates. In fact, Wal-Mart’s founder Sam Walton started the Chinese connection in the mid-80”s by importing sun glasses for cheaper prices.

While Indian retailers like Pantaloon Retail India are importing products from China through the buying agents, Reliance’s strategy is mainly aimed at saving costs through direct sourcing. This is exactly what the global retailers have done in India.

After purchasing through local agents for years, retailers like Wal-Mart and Tesco have opened sourcing offices India post 2000. Wal-Mart now has 100 people working for its sourcing office in Bangalore.

Global retailers have been poaching executives from rival companies. For instance, another global retailer Target had earlier hired Wal-Mart’s sourcing head P Jagannathan to head its Indian operations.

First Published: Nov 21, 2006 19:55 IST