Reliance Retail, the retail arm of Reliance Industries Limited (RIL), will increase the number of its cash-and-carry stores branded under the name, Reliance Market. The retail company plans to reach to an annual turn-over of Rs 40,000- Rs 50,000 crore in the coming two years.
Cash-and-carry stores have proved to be strong drivers for growth of Reliance Retail. The first store of Reliance Market was started in September 2011 in Ahmedabad, Gujarat. This store has become a game-changer since its inception. These kinds of stores provide raw materials and products to grocery vendors, caterers, hotels and other business establishments. The company has now started such stores in Bangalore, Mumbai, Anand, Faridabad, Chennai and Guntur. In the financial year of 2011-12, the annual turnover of the retail chain was Rs 7,600 crore that reached Rs 10,800 crore in the year 2012-13. There are chances of 12 to 15 more stores coming up by the end of the current financial year. Another key factor in this cash- and-carry business is that it has a higher return on capital ratio. These stores prove to be highly efficient as there are major requirements for stock keeping units. It also stimulates better supplier management and good sourcing power. “Retail is a business that is best judged on return on capital instead of the margins, which could be as low as two to three percent,” says Arvind K Singhal, Chairman of consultancy firm Technopark Advisors.
RIL’s retail chain has several formats of stores under value, digital, lifestyle, jewellery and super markets. It has become the second largest retailer in the country. However, Reliance Retail is the first Indian retailer to enter cash-and-carry businesses which is generally dominated by multinationals like WalMart, Metro and Carrefour.
Last year, about 56 percent of its revenue of Rs 10,800 crore came from its value and other grocery chains.
At the recently held Reliance’s Annual General Meeting , Mukesh Ambani had rolled out his plans for Reliance Retail over the next three to four years to achieve a target of Rs 40,000- 50,000 crore annual turnover. The expansion of the retail chain and its various verticals segmented as Reliance Retail 1.0, 2.0, 3.0 and 4.0, was also on the cards.
The digital segment of the retail chain, Reliance Digital, will also be expanded. The company will invest Rs 5,500 crore in the next three years for its expansion. In the last year, the digital segment with 139 stores accounted for 20 percent of the revenue at Rs 2,100 crore for RIL.
“Every two to three years, we have had to review growth parameters and get ready, but whenever we entered into a new phase we could anticipate what would happen and anticipate what should be our next move,” said a senior executive of Reliance Retail.
At the AGM, RIL has announced a magnanimous investment of Rs 150,000 crore to be used across all its verticals. The expansion of its cash and carry segment is though an evident part of this larger plan.