Even as the likes of Bharti-Walmart and Metro put the brakes on their expansion plans with regard to the 'high-investment, low-maintenance' cash-and-carry format, the Mukesh Ambani-led Reliance Industries is keen to expand its footprint in the sector. Reliance Market, a division of Reliance Fresh which houses the large-format cash-and-carry stores, plans to add more than 20 such stores by the end of the fiscal and at least 60 more in the next three years.
“Our expansion is going faster than what we had earlier planned and we’ll be looking to maintain this pace,” a key company official said on condition of anonymity.
At present the company has seven stores running, in Ahmedabad, Bangalore, Anand, Faridabad, Guntur, Chennai and Mumbai. The existing stores are spread over between 50,000 and 1,20,000 sq ft. “We are scouting for locations and have committed resources for them,” said official.
According to Pinaki Ranjan Mishra, partner and national leader, retail, EY, gross margins for cash-and-carry businesses in India are typically around 11-12%.
“This is close to twice the level of margins seen globally,” Mishra said Addressing shareholders in June, RIL chairman Mukesh Ambani spoke about seeing the company’s retail business becoming a significant growth engine over the next few years with an ambitious revenue target of Rs 40,000 crore to Rs 50,000 crore. The company’s retail business clocked revenues of over Rs 10,000 crore in 2012-13, and a cash break-even with earnings before depreciation, finance cost and tax expense (EBDIT) of Rs 78 crore.
Foreign retailers operating in the cash-and-carry space include Germany’s Metro, Carrefour of France and the world’s largest retailer, the Arkansas-based Wal-Mart in partnership with Bharti. There are no restrictions on sourcing for this business unlike for multi-brand retail. Reliance Market is positioned as a cash-and-carry wholesale format, catering to the trading and business community to provide them with an alternative channel for products that they need for their businesses.