Reliance expands retail footprint by 50% in non-food and general merchandise, targeting higher margins, ET Retail

New Delhi: Reliance Retail, the country’s largest retailer, has increased the retail space for non-food and general merchandise items in its grocery stores by almost 50 per cent to improve margins.

The move is also likely to boost the retailer’s local growth aspirations through its Jiomart e-commerce platform, through which it is connecting its Smart and Smart Bazaar stores, giving customers a wider choice, according to an industry insider.

As a result, Reliance Retail intends to reshape its store footprint by allocating larger retail areas to non-food and consumer goods, a segment that offers higher margins than other segments such as grocery and apparel.

The larger retail space would not only allow Reliance Retail to offer a full range of products for a given segment, but would also fill gaps in the offering, the source said.

The aim of large stores such as SmartBazaar is to participate in the total consumption basket of a family.

Different categories have different margins and sales speeds. But both combined, margin per square foot is the true measure of retail sales, the source added.

Each category, from fresh produce to toys to luggage, plays a distinct role. The design of the category mix also depends on the context of each store—mall, high street, or neighborhood—in addition to the economic and ethnic profile of each catchment area.

In the last quarter of June, Reliance Retail’s EBITDA margin from operations stood at 8.2 per cent, up 30 basis points year-on-year. In FY23-24, the EBITDA margin stood at 8.5 per cent, improving by 70 basis points year-on-year.

An email sent to Reliance Retail seeking comment on the investment remained unanswered till the time of filing this article.

In addition, the company will be able to compete with emerging e-commerce platforms with its “hyperlocal model” under the Jiomart brand, investing in improvements to its technology platform, supply chain capabilities and distribution capabilities.

Reliance Retail, which aims to double its business in the next 3-4 years, is looking to improve its margins. It is increasing its activity in the premium segment as it believes that with the rise in disposable income in the country, demand for goods and services is growing rapidly.

During the recent press conference on June quarter financial results, Reliance management said the company was “streamlining its operations which is contributing to improved margins.”

Even in its latest annual report, Reliance Retail said its focus on expanding its assortment in non-food categories remains a “key priority”.

Reliance Retail said its stores saw steady growth in non-food sales, led by general merchandise and household and personal care products.

At its annual general meeting, Reliance Retail announced plans to enter the “luxury jewellery segment” with a curated, design-focused product offering and is also exploring the fashion jewellery and accessories segment.

As of June 30, 2024, Reliance Retail operated 18,918 stores across the country with a total retail area of ​​81.3 million square feet under its management. Reliance Retail opened 1,840 new stores in fiscal 2024 and is already among the top five global retailers by number of stores.

The company also ranks in the top ten global retailers by market capitalization and in the top thirty by revenue.

Reliance Retail’s gross revenue for fiscal 2024 stood at Rs 3.06 lakh crore ($36.8 billion). The company’s stores had over a billion footfalls and transactions across channels exceeded 1.25 billion.