5 reasons Reliance's success

1. Employing the Best in business and emphasis on Training

Employing the best and laying emphasis on training, Reliance petroleum's downstream business is stewarded by the very best in business. Reliance realised early enough that the key to success would lie in recruiting the best talent from the oil industry. Since the industry was the sole domain of the public sector companies, Reliance had to dangle the carrot of an extremely attractive remuneration package to the best talent available in BPCL, IOC and HPCL.

Top managers of PSUs were offered salaries and perks that were almost five times the salaries these managers earned in PSUs. The best brains that existed in PSUs today occupy all top positions in Reliance.

Reliance also decided that middle-level and junior level positions would have to be filled by the managers outside the oil industry. So the RIL headhunters went out to recruit the best junior and middle-level officers of HLL, Shell India, Telco and other similarly successful companies. The officers from non-oil industry were given an information-packed course in petroleum business by the retired 'Dronacharyas' of oil industry.

All nuances of oil business were taught to the newcomers. Reliance spent a fortune on training its people. It is this basic philosophy of Reliance which puts premium on recruiting, training and retaining outstanding talent, that is key to Reliance' success.

The training function is taken so seriously that no petrol station attendant, called the 'driveway salesman,' joins a station without undergoing a formal and extensive training from the master trainers.

2. Meticulous Planning

The think-tank of Reliance knew that high speed diesel was the most dominant fuel accounting for roughly 40 per cent of all petroleum business in India. The company commissioned an exhaustive study of the sales pattern across all high selling trading areas in India.

It then identified the most attractive trading areas which put together accounted for more than 60 per cent of HSD sales. Having identified the trading area by way of known statistics gathered from PSU and revalidating them by carrying out first hand survey, Reliance identified the markets, it wanted to dominate.

3. Dominating markets by new approach

Identifying markets is one thing and putting a plan to dominate the market is quite another. Reliance realised that the biggest obstacle to its success was the high cost of land in the biggest diesel markets.

Reliance's research showed that the truck drivers were the key decision makers in choosing the station for buying diesel. It also realised that if the truck drivers could be won over, then the battle was half over already! Reliance then decided to build what it calls the 'Truck Stops,' which would cater to the needs to the truck drivers and make them loyal to these stations.

Today, Reliance has more than 125 'Truck Stops' spread all over the major national highways of India. These truck stops (spread over 2.5 acre to 7 acres of land) offer the most essential facilities a truck driver craves for- secured parking area and an inexpensive place to rest, eat and recuperate.

Reliance has a 'Truck Stop' at every 200-300 km in all major highways and in between these truck stops it has smaller stations which ensure Reliance's presence all across the major roads and highways of India.

In all Reliance has more than 1,200 stations operating in the country and each station is a part of well laid-out strategy. There is no station without a solid, financially viable game plan. Each station is supposed to have a payback period of not more than 4-5 years.

4. Cutting edge technology

Reliance has invested in multi-product dispensers that dispense fuel and its managers can monitor each transaction. It has invested in auto tank-gauging equipment at all stations so that an alarm goes off at the supply location, thousands of miles away, if the station's stock goes below the minimum desired level.

It has introduced fibre-reinforced-plastic (FRP) tanks to ensure longer life of the storage tanks and also to ensure that there is no leakage that could lead to an environmental hazard.

5. Company owned company operated stations (COCOs)

Reliance wants to be seen as the best fuel retailer in the country and hence it wants to establish a brand identity, which signifies quality that is visible and is consistent.

It realised that unless it had its own people manning the most vital stations, it would not be possible to establish the brand that it wants to build. Today, Reliance has 350-plus COCOs all over the country and at least 60 more are in the pipeline.

COCOs can ensure 100 per cent compliance of company's marketing programmes that Reliance wants to roll out for the truck drivers and the transporters.

Most COCOs are operated by retired army officers who run the station like a tight ship and ensure that discipline and decorum are maintained 24 by 7.

The journey ahead

Reliance has already emerged as a force to be reckoned with and may even stake a claim to the Number 1 slot in the coming years. It may be the last kid off the block but it is this fact that has given it several advantages over PSUs.

To start with, it is not saddled with the baggage of old dealers, the likes of which exist in PSUs and who have been the bane of their parent companies.

PSUs have to live with their dealers as they are not really free to sack some of the poor performers. In PSUs, the dealerships of even company owned sites are transferable as a matter of right from the dealer to his children.

For Reliance, this is not so. It has started with a clean slate and can choose its dealers with care. No pressure from the ministry to allocate a station to someone!

Another discomfort that PSUs face is that their stations are old and are difficult to remodel unless they are knocked down and rebuilt. The size of the station is also fixed with little scope for expansion. Reliance has chosen its land sites with care and has taken into consideration the future expansion that may be needed to accommodate the business needs of tomorrow.

There, however, are some challenges that Reliance has to surmount speedily in the near future.

Subsidies denied to Reliance

The first challenge is in the form of subsidies that PSUs enjoy and is being denied to Reliance. This off-now, on-now stance of the government on level playing field in the area of subsidies will continue to discomfort Reliance.

Reliance sales had gone down drastically when the price difference between its stations and those of PSUs was considerable. This means that price would continue to play a dominant role in sales of fuels, brand value notwithstanding. The only way forward for Reliance is then to keep the pressure on the government for subsidy as is applicable to IOC, BPCL and HPCL.

Bettering the supply and distribution setup

Another challenge that Reliance must take head-on is its poor supply plan for stations in the North and East. It is generally believed that due to Reliance not having adequate terminals and depots, the stations suffer from frequent dry-outs, partial or total.

It is about time that Reliance came out with either a product-sharing agreement with the PSU depots or it built depots of its own. If Reliance wants the third option of having depots on wheels, then it needs to augment its fleet of trucks on the road so that the stations don't suffer from product outage.

Managing DODOs

Reliance also needs to careful with its Dealer Owned Dealer Operated stations (DODOs). It has done well by giving them higher margins of petrol and diesel than PSUs. It also needs to ensure that these DODOs are treated at par with the COCOs when it comes to supply of products and maintenance of standard operating procedures.

Minimising operational losses

Reliance also seems to be grappling with high evaporation and handling losses at its COCOs, a fact that could impact its bottom line. High volumes of sales, if accompanied with disproportionately high operational losses can lead to COCOs becoming sick units. COCOs have given so much delight to the customers by way of high level of customer
service that they have come to become the key differentiators in the way public perceives Reliance as being different from others.

Reliance has changed the face of retail stations in a matter of three years. With more than 1,200 stations open to public and with sales more than three times the industry average sales per station, it has shown that it is possible to change the way business is conducted, if only there is will to do so.