Mukesh Ambani-owned Reliance Retail Ltd wants to aggressively expand non-food retail as consumer confidence returns, said Bijou Kurien, president and chief executive of its lifestyle business segment.

The non-food retail formats, such as Reliance Digital, Reliance TimeOut, Reliance Home Kitchen, Reliance Jewels, Reliance Trends, are spread over around 300 stores and clubbed under the speciality business.

“Each of these speciality retail chains, barring, maybe, the single-brand luxury retail brands, will cross 100 stores in the next three years,” Kurien said.

This business will expand at a faster pace than the food and grocery segment, branded Reliance Fresh, Reliance Super and Reliance Mart.

Relatively higher-end offerings by Marks and Spencer Reliance India Pvt. Ltd, a joint venture with UK retailer Marks and Spencer Plc, would have its own pace of growth.

A few speciality retail chains such as Reliance Vision Express are expected to cross 100 stores this year itself, Kurian added.

Overall, Reliance Retail, which clocked Rs4,500 crore in fiscal 2010, has at least 1,000 stores.

At Reliance Industries Ltd’s (RIL) annual general meeting in June, chairman Ambani had told shareholders that the turnover of the retail business would grow 10 times to Rs45,000 crore in the next five years.

In fiscal 2010, Ambani had brought in a new senior management team to head the value business, led by Gwyn Sundhagul as chief executive officer. He came from Lotus Tesco, Thailand.

With the new team taking over, the focus in value retail has also changed. In an earlier interview in May, Sundhagul spoke about the business focusing on big-box retail or hyper markets for growth.

Sundhagul has also initiated a revamp across the value formats and is in the process of creating standardized templates for the business.

“We will be a lot more aggressive in the coming years, compared to what we have been doing in the past,” said Kurien. “This time it will be profitable expansion. Profitability at the store level is the key.”

The decision for aggressive growth in the speciality business follows an exhaustive study done by the group between December and April. The study looked at the macro- economic environment and outlined projections for growth of modern trade versus traditional retail across cities, and estimated the size of the different markets such as gold, apparel, accessories and their growth potential.

Kurien, however, declined to share specific details of the study undertaken by external consultants.

Internally, the company has set up benchmarks for growth and laid out goals for each individual retail network in terms of scope of business, development, cities that the retail network will cover, number of stores and revenue expectations for each format.

Organized retail accounts for just 4% of the $450 billion (around Rs21 trillion) retail trade in India. “There is under-penetration of organized retail in the country. It is easier to create large businesses in the speciality formats as the margins are better. Food and grocery retail is a difficult business with lower gross margins and higher competition from the corner shop (traditional) retail trade,” said Pankaj Jaju, executive director of Enam Securities Ltd.

“The value formats like (Reliance) Fresh have had a headstart. We are now ramping up (the speciality division),” said Kurien. According to him, from being 30% of the overall business, the speciality division’s share will account rise to 40-45% in the next five years.

“Food and grocery retail accounts for 30-35% of the overall $22 billion organized retail trade, followed by apparel retail,” said Arvind Singhal, chairman of Technopak Advisors Pvt. Ltd, a retail consultancy. The mix of revenues for speciality retail at 45% is high, he said.

“We are seeing similar traction across our fashion, and food and groceries business. The food and groceries has lower margins, but return per sq. ft is higher due to faster stock turn, whereas fashion has higher margins,” said Damodar Mall, chief executive (innovation and incubation) at Future Group, the parent of Pantaloon Retail (India) Ltd.

Mall expects the composition of revenues from fashion, food and groceries and other retail to remain one-third for each of its businesses even as it grows.

In the March quarter, consumer confidence in India rebounded to reach its highest level since the third quarter of 2007, providing the most definitive sign that the country is fast recovering from the economic downturn, according to the latest edition of the Nielsen Global Consumer Confidence Index. During the economic slowdown, Reliance Retail opened 400 stores even as it closed some unprofitable formats or tweaked them.

India ranked No. 1 in the survey, followed by Indonesia and Norway in a survey of 55 countries. Consumer confidence hit an all-time low in early 2009, in the wake of the global credit crunch.