Ajio, the online fashion arm of Reliance Retail, is set to become profitable this month, marking it as the first online venture within the country’s largest retail group to achieve this milestone, as stated by two senior industry executives familiar with the matter.
According to the executives, Ajio is anticipated to report earnings before interest, tax, depreciation, and amortization (EBITDA) in the range of INR 6-8 crore for the month of December.
The company’s attainment of profitability can be attributed to several factors. The prevailing premiumization trend in the market, coupled with Reliance’s extensive international brand portfolio, contributed to an enhancement in the average billing value. Additionally, the strategic approach of fulfilling a significant portion of orders from physical stores in close proximity to the delivery point helped reduce logistic costs. This approach also contributed to a decrease in return rates, further bolstering the company’s financial performance.
“Reliance wanted profitability in Ajio by this fiscal year and it is achieving it in December itself. The focus going forward will be on profitable growth since Reliance doesn’t want to burn money when the business has achieved scale,” one of the executives said.
As of the time of publication, there was no response to an email seeking comment from Reliance Retail.
Reliance launched Ajio in 2017.
Ajio streamlined its marketing expenses by implementing five distinct storefronts tailored for each consumer class. The company established 4,000 stock points to facilitate last-mile fulfillment, utilizing Reliance Retail’s nearby stores for delivery and thereby lowering operational logistic costs. This strategic approach not only improved efficiency but also contributed to a reduction in return rates, dropping from the earlier range of 35-36% to approximately 28% of orders.
Ajio has achieved an annual gross merchandise value of $2 billion, with 51% of its revenue attributed to the Reliance Retail portfolio and the remaining 49% generated from its proprietary and exclusive brands. In the online fashion sector, Ajio competes with Myntra, Amazon, and Flipkart.
Around 15 million people shop for fashion online, while another 30 million make purchases from both online and offline stores.
