Reliance Retail bets big on new commerce for growth

On the new commerce front – which the firm terms as digital and offline stores (kirana, electronic and chemist among others) – merchant base was up 3 times over last year, and in the fashion category. The company also continues to add more labels, even as it launched four own brands in the value segment.

The move gains importance following the cancellation of the Future Retail (FRL) deal by parent Reliance Industries (RIL), which would have bolstered its retail and e-commerce presence across the country.
The move gains importance following the cancellation of the Future Retail (FRL) deal by parent Reliance Industries (RIL), which would have bolstered its retail and e-commerce presence across the country.

Reliance Retail is betting big on new commerce for growth, which now contributes about 19% of its total sales, with the firm now scaling up presence across the cities. The move gains importance following the cancellation of the Future Retail (FRL) deal by parent Reliance Industries (RIL), which would have bolstered its retail and e-commerce presence across the country.

On the new commerce front – which the firm terms as digital and offline stores (kirana, electronic and chemist among others) – merchant base was up 3 times over last year, and in the fashion category. The company also continues to add more labels, even as it launched four own brands in the value segment.

“This business growth has been strong. Now digital, including AJio, Reliance Digital.in, Trends and JioMart, which collectively are digital channels, comprises 19% of the core retailing revenues, versus 10-11% in the last financial year. This comes at a time when core retailing has been growing, tell us about the scale of the company,” Harsh Dole, vice president at IIFL said.

“The efficiency of the supply chain is best leveraged when companies have omni-channels. This is because of the convenience that a customer gets, and leveraging mobile technology firms such as Reliance can get to customers 24X7,” Dole added.

Aiming to become one of Asia’s top 10 retailers, Reliance Retail is scouting for acquisitions and partnerships to build a portfolio of brands and service capabilities, Gaurav Jain, Head (Strategy and Business Development) at Reliance Retail said in a post earnings analysts’ call.

“Our efforts in scaling up digital commerce and new commerce businesses are on track, and we continue to make new highs quarter after quarter,” Jain added, but did not specify a time-frame for becoming one of Asia’s top retailers.

The company has been entering into partnerships and acquisitions, with it acquiring 89% stake in Purple Panda Fashions for 950 crore and investing in Abraham & Thakore Exports in lieu of a majority stake.

In FY22, Reliance Retail added about 2,566 stores, taking the total to 15,000. During the year, the company also expanded to about 8 million sq ft of operating space, the highest-ever, taking its total retail space to 42 million sq ft. The company also doubled warehousing space to 22.7 million sq ft from the start of the year. The company’s digital orders were up 2.5 times, merchant base up 3 times over the course of the year.

Retail growth to sustain

According to an estimate by ICICI Securities, the company’s growth is expected to sustain over the next 2-3 years. The brokerage firm expects revenue and EBITDA from the retail segment will continue to grow by 17% and 30% per annum over FY22-FY24.

This would be driven by the platform is already in place, delta from the omni-channel momentum, new acquisitions and the continued build-out of the offline infrastructure. “Additionally, even if we conservatively assume a miniscule 1% of the unorganised retail market moving to RIL, that alone can add Rs 40 crore to revenues,” it said.

Consummation of the Future Retail deal would have given Reliance Retail 24 million sq ft of offline retail space, with an estimated Rs 30,000 crore to Rs 32,000 crore of revenues, it said, adding the silver lining is the recent decision to take over the lease of 800 stores.

At present, Reliance Retail is India’s largest retailer with 15,196 stores that include digital and Jio stores, covering 41.6 million sq ft. The company also added 1.50 lakh jobs during the year, increasing its total employee base to more than 3.61 lakh personnel.

Recent deals/JVs

* May 9, 2022: Reliance Brands enters into franchise agreement with the Italian luxury lifestyle brand Tod’s
* March 20, 2022: Reliance Retail Ventures acquires 89% stake in Purple Panda Fashions for Rs 950 crore
* March 1, 2022:  Reliance Retail Ventures invests in Abraham & Thakore Exports
* January 31, 2022: Reliance Brands and Rahul Mishra enter a JV to launch a new ready-to-wear brand

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