Reliance Retail is focusing investments on expanding its digital commerce, including dark stores. The company expects this strategy to improve margins and cash generation within two years, viewing current margin pressure as a deliberate move for scale.
Reliance Retail is prioritising investments to expand its digital commerce business, including dark stores and hyperlocal delivery infrastructure, with the company expecting these investments to improve margins and cash generation over the next two years, according to management’s comments during Reliance Industries’ post-earnings analyst call.
A Deliberate Strategy for Digital Scale
The management said the pressure on retail margins during the June quarter was a deliberate outcome of its strategy to scale digital commerce rather than a sign of weakness in the business.
“We continue to invest in technology and infrastructure for dark stores to enable online commerce… As we increase the growth of digital revenues, margins have come down. It is a function of that. And that is a consistent trend over the last three quarters,” Reliance Retail Chief Financial Officer and Head of Corporate Development Dinesh Taluja said during the analyst call.
Future Returns and Disciplined Expansion
He said FY27 would be focused on building scale in the online business while maintaining financial discipline. “We are looking at growing our online businesses pretty rapidly during this year. So we will expand dark stores, we will grow our omni-channel platforms, we will grow JioMart… market by market, we are looking at expansion from a unit economics perspective,” he said.
According to the company, the investments being made today are expected to deliver better returns over time. “What we believe is with the scale that will come in this year, the benefit of that scale will convert into value in terms of margins and cash generation over the next two years,” Taluja said.
He added that the company would closely monitor profitability at the market level and expand only where there is a clear path to positive unit economics. “Growth will be quite disciplined… the growth will be funded from existing profits,” he said, adding that the company would focus on customer acquisition, operational excellence, commercial performance and financial contribution while scaling the business.
Digital Business Sees Strong Momentum
Reliance Retail also highlighted strong momentum in its digital business during the quarter. The company said grocery digital orders increased 116 per cent year-on-year, while the contribution of digital commerce continued to rise across consumption categories.
It also said omni-channel customers spent significantly more than customers shopping only through physical stores, underscoring the growing importance of its online strategy. The management said the redesigned JioMart app has received positive customer response, with higher conversions and improving average order values, as the company continues to focus on improving repeat purchases, order density and delivery costs while expanding its online presence. (ANI)
(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)