Reliance Retail upbeat on future growth

Its been a decade that retail has been booming.m And relance’s contribution is far beyond denial.
“We have learnt our lessons during the downturn. We have changed direction. Now, we are focusing equally on
specialty and value formats for our next stage of growth. We are trying to reduce cost of intermediaries in value
format food products,” Bijou Kurien, chief executive - lifestyle business segment of Reliance Retail, told Financial
Chronicle.

Reliance Retail’s value formats include Reliance Fresh, a neighbourhood retail concept, Reliance Mart, an all-under-
one-roof supermarket concept, and Reliance Super, a mini-mart concept. The value formats offer a wide range and
assortment of products required for daily household needs. Its specialty formats include Reliance Digital, a consumer
durables and information technology concept, Reliance Trends, an apparel and accessories concept, and iStore by
Reliance Digital, an exclusive Apple products stores. Other specialty formats include Reliance Footprint for footwear,
Reliance Jewels, and Reliance Living, a home wear, furniture, modular kitchens and furnishings concept.

Reliance Retail plans to double its stores across all formats within next five years. At present, it has 1,050 stores and
a pan-India presence. Of these, 650 are value format stores, while 400 are specialty stores. The plan is to increase
the number of value format stores. The contribution of value retailing in Reliance Retail’s total revenue has dropped
to 50 per cent from 65 per cent in the last two years due to expansion of the specialty formats. “We will only look at
the top eight cities for expansion and then look at tier II cities after exhausting the former,” said Kurien.

Food items, that accounted for around 35 per cent of total sales from a store till 2009-10, now account for almost 50
per cent of sales. By the end of this fiscal, Reliance Retail plans to add around 150 value stores across the country.
Till December 2010, the company had set up 200 such outlets. On an average, a Reliance Retail value store is
spread over 2,000 to 3,000 sq ft and has over 6,000 stock-keeping units. The cost of setting up a value store is Rs 1
crore.

The food and groceries business accounts for 65 per cent of Reliance Retail’s overall business, while non-food
business or specialty retail accounts for the rest through 300 stores. The specialty business has 18 formats of which
50 per cent are break-even plus.

“Lifestyle is already a deeply penetrated category whereas value retail is under-penetrated in India. Organised value
retail is just 1 per cent of the total pie. There is a lot of headroom for growth for both the formats,” said Amitabh Mall,
principal, Boston Consulting Group.

A revamp was necessitated after India’s most valuable corporate group was forced to eat humble pie when it was
unable to roll out stores as initially planned and continued to lose money despite investing close to $1 billion in this
business. The company ran into a political storm in the Hindi heartland over its Reliance Fresh format following
opposition from unorganised retail shops. This forced the closure of several Reliance Fresh outlets.

“Now, our challenge mainly lies in getting the right real estate at right prices, and build and streamline processes and
supply chain. Retaining employees at the front end is also a challenge,” said Kurien.