Spencer’s Retail Ltd, a part of the RP-Sanjiv Goenka Group, is looking to optimise product mix in the non-food segment including apparel and general merchandise and grow omni-channel business to scale up profitability.
The company’s strategic pillars during financial year 2021-22 revolved around optimising product mix in the non-food segment, driving efficiencies across the ‘Out-Of-Store’ business (growing omni-channel business) and providing customers healthy food and premiumisation with the shopping experience.
Spencer’s non-food mix grew by 185 bps from 14.4 per cent in 2020-21 to 16.3 per cent in FY-22 and it is constantly working on various initiatives to increase the share of the non-food mix.
Introduction of various SOR (Sale or Return Basis) brands in its general merchandise and apparel portfolio is one such initiative which will help the company enhance the product portfolio and manage its working capital requirements. Its SOR sales mix has touched nearly 11 per cent for apparel and general merchandise, the company said in its latest annual report (2022).
Its omni-channel business witnessed 1.8x growth year-on-year, reaching nearly 17 per cent of the overall Spencer’s standalone sales mix with a GMV of ₹329 crore in 2021-22.
According to Sanjiv Goenka, Chairman, Spencer’s, the company has been witnessing increased demand for its digital retail formats, and it intends to continue investing in the omni-channel business in the future.
Logistics will play a transformative role in the retail environment, and Spencer’s has invested in upgrading warehouse facilities to improve inventory movement efficiency, thereby expanding its digital reach across the country while achieving an optimal product mix.
“We continue to prioritise the expansion of high-margin categories i.e. non-food sales mix through better assortments and the introduction of SOR (Sales or Return) brands in general merchandise and apparel,” Goenka said in the annual report.
The company is planning to add 1,00,000 to 1,50,000 sq. ft. area by setting up more stores to its current capacity. It is also planning to allocate more trading space for apparel and general merchandise with the intention of greater sales per sq. ft.
With a clear focus on its e-commerce platform, Spencer’s invested in scaling up the phone ordering system and omni-channel distribution during the year. Its omni-channel sales grew 10 times from 1.6 per cent pre-pandemic levels to 16.5 per cent during 2021-22.
“We are one of the only retailers at nearly breakeven levels in online and delivering sustainable business growth both on a QoQ and YoY basis,” Devendra Chawla, CEO & Managing Director, Spencer’s, said in the report.
The company has worked on its Out-Of-Store business by improving its mobile app, developed chatbots, and created a time-bound delivery plan to provide a differentiated consumer experience.
Potential for growth
With increasing consumerism and growing market access driven by technology and infrastructure, the Indian retail sector is expected to grow exponentially in the coming years. The market is projected to expand for both value and experience-based retail formats.
The food and grocery sector is expected to witness a CAGR of 13 per cent to $1,119 billion by FY2030 of which the organised retail market is expected to record a CAGR of 20-25 per cent per year, Goenka said.
The overall retail industry in India was impacted during the first quarter of 2021-22 owing to the Covid-induced lockdown.
Spencer’s saw a decline in turnover during 2021-22 as a result of lower store footfall and sales of non-food categories. Its consolidated revenues was at around ₹2,300 crore as of March 31, 2022 and gross margins during the year improved by 30 basis points and stood at 20.7 per cent. EBITDA during the year grew from ₹61 crore in 2020-21 to ₹101 crore in 2021-22. Its reported loss improved from ₹164 crore to ₹122 crore in 2021-22.
The company undertook cost rationalisation and optimisation strategies to improve profitability during the year. Going forward, it anticipates a strong increase in retail footfall traffic alongside higher profitability, driven by prudence, enhanced strategies and higher efficiencies.
“We have restructured various contracts, renegotiated costs and worked on various cost savings initiatives. Some of the resultant benefit shall continue to reflect in near term,” Goenka said.