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Reliance Retail bets big on new commerce for growth

Reliance Retail is betting big on new commerce for growth, which contributes about 19% of its total sales, with the firm now scaling up its presence across 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 describes as digital and offline stores (kirana, electronic and chemist among others) – the merchant base was up three times over last year. The company also continues to add more labels, even as it launched four of its brands in the value segment.

“This business growth has been strong. Now digital, including AJio, Reliance, Trends and JioMart, which collectively are digital channels, comprise 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,” said Harsh Dole, vice-president at IIFL.

“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 said 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 buying an 89% stake in Purple Panda Fashions for Rs 950 crore and investing in Abraham & Thakore Exports instead 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. Reliance Retail also doubled warehousing space to 22.7 million sq ft from the start of the year and its digital orders were up 2.5 times, merchant base rose three times over the year.

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

This would be driven by the platform is already in place, delta from the omnichannel 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. Financial Express

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