Walking down one of the lanes of Matunga in suburban Mumbai, it is hard to miss the new store that has come up.

To be sure, the state-owned Sahakari Bhandar (co-operative store) has been there for ages. But the rundown place has given way to a spanking new air-conditioned store with a glass facade, courtesy Reliance [Get Quote], which has used the store to soft launch its retail operations.

Reliance has reached an understanding with the Sahakari Bhandar to manage the supply chain for the latter's 23 stores in the city. Sources close to the development indicate the arrangement is likely to be upgraded into a franchise agreement later.

A buyout is unlikely since it is partly owned by the government. Another possibility is scaling up the total store presence across the city once it has finished renovating the existing stores.

Sahakari Bhandar has over the years built its brand on affordability, offering marginal discounts on branded products.

The unbranded commodities for which the store is popular on account of its competitive prices, have been put under another label, SB Home.

To drive home this USP, the store's long history (since 1968) is visible at various touch points, along with a new tagline, "Sahi Quality Sahi Price".

While sections like kitchen appliances and jewellery are missing in the new format store, there have been additions like a pharmacy, bakery, music and DVD counter along with a fresh fruit and vegetables section.

The tie up with Sahakari Bhandar works well for Reliance, which is betting big on retail, as it provides a presence in some of the choicest locations in the city without the hassles of finding the correct property.