Reliance Expands Trading Area by 50% for Non-Food & General Merchandise Chasing Higher Margins

Reliance Retail, the country's largest retailer, has increased the trading area for non-food and general merchandise by almost 50 per cent in its grocery stores in a bid to improve margins.

The move is also likely to bolster the retailer's hyper-local aspirations through its e-commerce platform Jiomart, through which it is connecting its Smart and Smart Bazaar stores providing a wider variety to consumers, according to a senior industry executive.

As part of that Reliance Retail is now going for space revision at its stores, allocating higher trading areas for non-food and general merchandise items, a segment which offers higher margins than other segments such as grocery and apparel.

The extended retail space would not only allow Reliance Retail to offer a complete range of products for a segment but also fill in the gaps in its offerings, the source said.

The purpose of big box formats like SmartBazaar is to participate in the total consumption basket of the family.

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

All categories, from Fresh Produce to Toys & Luggage have a distinct role to play. The category mix design also depends on the context of each store - mall, high street or neighbourhood, apart from economic and ethnic profile of each catchment.

In the latest June quarter, Reliance Retail's EBITDA margin from operations was 8.2 per cent, which was up 30 basis points on a Y-o-Y basis. For FY 2023-24, its EBITDA margin was 8.5 per cent, improving by 70 bps on Y-o-Y.

An e-mail sent to Reliance Retail seeking comments on the development remained unanswered by the time of filing the story.

Besides, it will also help compete with the growing quick-commerce platforms through its "hyper-local model under Jio mart, where it is investing in enhancements to the technology platform, supply chain capabilities and distribution capabilities.

Reliance Retail, which aims to double its business in the next 3-4 years, is trying to improve its margins. It is enhancing its play in the premium space as it believes that with the increase in disposable income in the country, demand for goods and services is expanding rapidly.

During its latest June quarter earnings calls, Reliance management said it is "streamlining operations which is driving the margin improvement".

Even in its latest annual report, Reliance Retail had said focus on range expansion across non-food categories remains a "key priority".

Its stores witnessed continued growth in the non-food category led by General Merchandise and Home & Personal Care categories, Reliance Retail has said.

In the AGM, Reliance Retail announced plans to enter the "luxury jewellery segment" with a curated, design-led experience and is exploring the fashion jewellery and accessories segment.

As of June 30, 2024, Reliance Retail was operating 18,918 stores spread across the country with a total retail area of 81.3 million sq. ft operated by the company. Reliance Retail opened 1,840 new stores in FY24 and is already among the Top-5 global retailers in terms of number of stores.

Beides, it is among the top 10 global retailers by market cap and among the top 30 by revenues.

Reliance Retail's gross revenue was at Rs 3.06 lakh crore ($36.8 billion) for FY24. Its stores witnessed over a billion footfalls and reported more than 1.25 billion transactions across its channels.