Mukesh Ambani, Isha Ambani bring tough new rule for performances of…., set to affect…

Reliance Retail, one of India’s largest retail companies, is now taking a stricter approach toward the performance of its stores. The company has set a clear rule: any new store must reach break-even i.e. it will cover its operating costs—within 6 to 12 months. If it fails to do so, the store will either be shut down or converted into a different retail format. This marks a significant shift in strategy. Earlier, Reliance Retail used to give its new stores up to two years to prove their performance. But now, with a sharper focus on profits and margins, especially as it prepares for its Initial Public Offering (IPO), the company is tightening its timelines.

Fewer new stores every year

According to a report in The Economic Times, the company plans to open about 500 to 550 new stores annually going forward—down from over 1,000 stores per year previously. In FY23 alone, Reliance Retail opened more than 3,300 outlets. However, in the last three years, it has also closed around 3,650 stores that weren’t profitable.

Reliance operates across various categories like electronics, groceries, fashion, footwear, beauty, jewellery, pharmaceuticals, and handicrafts. It does this through its well-known brands such as Reliance Fresh, Reliance Digital, Trends, and MyJio.

Focus on premium and targeted expansion

Reliance Retail is now shifting its focus towards premium segments. Its high-end grocery formats like Freshpik and GoFresh have received a positive response in upscale areas, and the company is planning to expand these formats further.

At the same time, it’s revamping its popular fashion chain Trends with a fresh, tech-enabled design aimed at younger consumers. The goal is to bring it in line with more premium formats like Azorte, offering a more elevated shopping experience.

According to Reliance Retail CFO Dinesh Taluja, the company has implemented several operational improvements over the past two years. As a result, its EBITDA margin has risen from 6.2 per cent in 2022 to 8.3 per cent projected for 2024-25, indicating stronger profitability.

E-commerce with profit in mind

Reliance also has its eyes set on profitable growth in the fast-paced e-commerce segment. It’s working on a 30-minute delivery model that uses existing retail stores for dispatch, eliminating the need to invest in separate dark stores.

Reliance Retail is clearly adopting a “perform or perish” approach. Instead of expanding store count blindly, the company is now laser-focused on unit economics and profitability. This shift is aimed at strengthening its valuation ahead of its upcoming IPO.

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