Spencers Retail Ltd (NSE: SPENCER) Q3 2026 Earnings Call dated Feb. 09, 2026
Corporate Participants:
Anuj Singh — Chief Executive Office And Managing Director
Analysts:
Sunny Bhadra — Analyst
Anita Bajaj — Analyst
Sidharth Negandhi — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to Spencer’s Retail Limited Q3 FY26 earnings conference call hosted by MK Global Financial Services Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing10.0 on your Touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sunny Badra from MK Global Financial Services Limited. Thank you. And over to you sir.
Sunny Bhadra — Analyst
Thank you. Palak. Good evening everyone. I would like to welcome the management and thank them for this opportunity we have with us today Mr. Anuj Singh, CEO and MD Mr. Manjir Basu, CFO Mr. Anand Kumar, Group Head Investor Relations and Mr. Pankaj Keria, Executive Director Investor Relations. I will now hand over the call to Mr. Anuj Singh. The opening remarks over to you sir.
Anuj Singh — Chief Executive Office And Managing Director
Thank you very much and good evening everyone and welcome to Spencer Retail Limited’s quarter three results call. I’d just like to start by giving you a brief commentary. I’m sure you guys would have had a time to go through the results which were announced post our board meeting on Friday at around 3:15pm so look overall quarter three this year quarter three is actually a true like for like comparison when it comes to sensors retail, especially the sensors part of the business because as you would be aware that in quarter two of last year we had done the optimization and the exit from certain regions in south and in ncr.
So up till then the competitive was not like for like but quarter three onwards it’s a like for like comparison because we were operating with our current footprint in quarter three of last year as well. However, having said that, the only difference this time in quarter three is that the festive season which for us is a combination of Durga Puja and Diwali was split between September and October. So the goodness of the festive season which last year was fully baked into 1/4, quarter 3 this time was split between quarter 3 and quarter 2. So therefore it’s not really a like for like.
But having said that, let me give you some color on the overall. So overall if you look at the sensors consolidated performance for quarter three I would term it as a very solid performance. We saw good quarter on quarter growth obviously compared to quarter two there was good growth, 13% quarter on quarter growth. Even comparing it with quarter three of last year there was notwithstanding the split festive season There was a marginal growth of 2.7%. We’ve done a good job in terms of sustaining the gross margins and this was despite a bit of a blip in margins as far as nature’s basket is concerned.
Anuj Singh — Chief Executive Office And Managing Director
So Spencer’s has delivered strongly as far as the margins are concerned. Our operating expenses for the quarter were slightly higher than both for the previous quarter as well as year on year. This was owing to a one time provision arising from the new labor code requirements. So there’s a marginal impact there. EBITDA, which is the post inds EBITDA was 8 crores for the quarter at a console level compared to 0 in the previous quarter and compared to 15 crores in the quarter 3 of last year overall. I’ll just get into now talking a little bit about Spencer’s separately in Nature’s basket separately because those two are following a different course of action and we’ve also seen slightly different results.
So when it comes to Spencers again I would term it a very solid performance for the quarter. Quarter on quarter compared to last quarter, almost a 12% increase. You know, if you look at comparison versus quarter three of last year it’s only about 10 crores down and which is actually the impact of not just the split festive between September and October but also due to a certain accounting treatment wherein the membership, the cash back which we give to our members for the membership program is netted off from the overall sales. So if I were to actually take that out and I think the good indicators look at say September, October, November, December of this year versus September, October, November, December of last year, which to me is the true comparative to how the festival was, we were in marginal growth.
So I think that’s very reassuring to see that in Spencers we are entering into a growth kind of a trajectory after a very long time. And this is driven largely by both the offline decline being stemmed by what I would say very good traction in our membership program as well as the continued growth in the online, if you look at, you know, the online numbers which were there online in quarter three for us has grown compared to quarter three of last year has grown by 27%. So we delivered close to 54 crores in sales on Jiffy, which is the online platform.
Anuj Singh — Chief Executive Office And Managing Director
Now this could have been higher but we took a, we took a very conscious call to also limit our bond and therefore focus on a good quality organic recruitment as opposed to extensive inorganic customer acquisition. Our number of orders in quarter three of this year were close, were 235,000 orders per month at an average our AOV continues to be strong at 775. It’s amongst the highest amongst quick comp players. And what is really heartening to notice that not just our in full KPIs at 93.5% our cancellations are also within. They’ve come down from 6% in the previous quarter to less than 3%.
Our on time delivery continues to be around 92% and our delivery time frame is under 30 minutes. So 9 out of 10 orders for us are delivered within 30 minutes which is good I think on GC. The other good part is on E commerce is that our unit economics is positive in quarter three and when I say unit economics it’s if you look at your RGM per order and the fulfillment cost of an order, net of that are you making money? And for the first time in quarter three we have been able to have positive unit economics.
So we make roughly about 100 plus as far as our RGM per order is concerned and our fulfillment cost is 94 so we make about 6 rupees. Now obviously this is at a contribution margin one but then again below that you have your marketing tech and people costs which we’re still able not able to absorb fully because of the cost. So I think on online good progress, 27% year on year growth on the offline business, like I said, good momentum in the last four months overall we’ve been able to sond, I would say we’ve netted off at a slight growth versus last year.
Anuj Singh — Chief Executive Office And Managing Director
What’s really working for us in offline are two things. One is despite I would say, you know, constraint working capital, we’ve done a good job in terms of inventory optimization not just from you know, days on hand optimization which has resulted in better availability but we focus on what we call our quick selling items and got higher level of availability which has translated into good level of sales. So I think good work done there. Like I said, the membership program for us which we launched in July of 2025 has started giving us good results if I give you a slight sense of the scale at which we are operating right now.
So we exited port of three with more than 70,000 members who have registered and paid for this membership which is roughly about 10 11% of our active monthly customer base. What’s heartening to note for this program is that the behavior, the consumer buying behavior for these members is remarkably different from non members. So if I look at it in terms of three metrics, one is the N1 return which is a measure of somebody buying this month, coming back and buying next month. That N plus 1 retention rate or the return rate for members is 80% plus.
The second KPI around members is if you compare the average monthly spends which a member does as opposed to a non member, the average monthly spend is about three times that. So it’s about 7,500 per month is what members spend. And the third and the most critical one is that the frequency of shopping in a month for the members is 2x. So it’s more than four times a month. So you know, directionally this membership program is really working well. This is helping us to, you know, stop the erosion in footfalls, nobs and therefore sales offline.
Anuj Singh — Chief Executive Office And Managing Director
So while online continues to grow, I think offline we have kind of, I would say arrested the degrowth to a significant amount. As far as the last four months is concerned. If I look at the other salient part in Spencer’s performances, if you look at the gross margins, so gross margins have been at 20% which I think is a very nice high number given the fact that our fashion and GM mix is not very high. From a pure food fresh and non food FMCG point, 20% margin is I think a creditable job. Compared to last quarter where we were 19.6 40 basis point up.
And compared to last year’s again 30 basis point up. Operating expenses just a little bit, you know, more in terms of from the previous quarter largely on account of the labor code, but still lower than last year. And we’ve been able to deliver an EBITDA which is post inds EBITDA of 15 crores versus last quarter of 13 crores and the previous year of 17. So if I were to kind of, you know, kind of adjust for three things. One is the split festive season, the accounting treatment for the cash back on our membership purchase and for the new labor code expenses, I would say in quarter three we would have seen growth, we would have seen good margins, we would have seen operating expenses controlled and therefore slight, I would say improvement in the ebitda.
If I look at a nine month picture for Spencers, I think that will be a good one because in the last year, in the first six months we were operating in all regions and in the last three months we were in quarter three we were in optimized regions. So even if I look at it from a nine month period, you know, the important thing is if you look at from an EBITDA level, we are and this is again I’m talking about Post INDS EBITDA EBITDA is flat. But that, that kind of takes into fact into account the fact as you know last year there was some exceptional other income on account of store closures.
Anuj Singh — Chief Executive Office And Managing Director
Last year quarter three we had 65 crores of other income. This year in quarter three it was 11.7 and despite this close to 53 crores of lower other income our EBITDA financial EBITDA is flat which is a good measure of operational efficiency. We don’t break out the pre INDS numbers but I can tell you that the pre INDS EBITDA which is, which is purely the, I would say, you know, operational EBITDA on the offline business suspensers we have in the nine months compared to last year we have now operating at half the level of EBITDA losses which we were last year at an operating EBITDA level.
So I think that’s all in all it augurs well. We are quite confident that the Spencers part of the business from a growth perspective is driven by online offline is stabilized and will come back into growth definitely in quarter four and both of them are coming at decent expenses online. Of course there’s some investment but we will see a tapering of that as well. And we are quite confident that we are moving in the right direction towards a true EBITDA breakeven operational EBITDA breakeven for sensors I would say in two quarters from now. So that’s at the EBITDA level.
I think on Nature’s Basket we did see an improvement quarter on quarter obviously the festive quarter. So if you look at it it’s 81 crores versus 68 crores in September quarter yny a drop. Again this is owing to two things. One is the split festive season plus also the fact that you know last year we had the gifting part of the business was with Nature’s Basket but as a, you know, the gifting studio was part of Nature’s Basket and now had been hyped up last year so that sales is not coming. So net accounting to that I would say it was a flat quarter for NB.
The only blip for Nature’s Basket was the 300 basis point. I would say reduction in margin versus quarter three of last year. And again that’s, you know, that’s something which is largely internal. It’s got to do a little bit with you know, not so much a change in the mix but, but certain terms and negotiations with suppliers. We are quite confident that this is something which we will fix because the true margins of this business have to be and in the past we have delivered in the region of 29, 30%. You know I think Spencer’s can get to 19.7 20%.
Anuj Singh — Chief Executive Office And Managing Director
There’s no reason why Nature Basket should not be delivering close to 30% and which is what it’s, you know it has missed in this quarter. But we are quite confident that come back on the operating expenses side. You know good work done on Nature’s Basket in terms of controlling costs and therefore at an EBITDA level, financial EBITDA level a slight EBITDA of 1 crore versus flat in last year quarter three. So overall I would say look it’s a strong quarter on quarter performance Y and Y excluding the impact of split festive. You know we are getting back to growth as far as Spencer is concerned.
You know we have, you know they’ve been in quarter three they’ve been you know, months of growth, you know, December. We’ve also kind of done operational EBITDA break even in the month of December. Offline is coming back online, is growing but we’re trying to control the losses here. The rip and online losses, what 12 crores in September quarter last of this, of this year we brought it down to nine. You know with focus on retention, focus on organic acquisition of our offline customers, you know and not burning too much of money in terms of expensive new customer acquisition.
We are quite confident that we will do quarter four as well at the same level if not higher but with a much lower level of ebitda. So overall I remain quite confident in terms of how the journey has been progressing on Spencers. We have, we took some tough calls in quarter two last year. Quarter three was good for us. Quarter four, you know I can give some guidance that on the sensors part of the business we are looking at good growth. We will get to I would say mid single digit growth as far as sensors is concerned on top line it will still not be enough for us to kind of get into EBITDA break even.
But I think as you will all know generating momentum in businesses is tough. And now that we’ve been able to do that in the last four months, we have every intention of continuing that and accelerating that in quarter four and then even further into quarter one and quarter two of next year. So overall I think if I were to summarize good strong performance. Q and Q. I think we’re doing the right things in terms of keeping the eye on the ball as far as operational efficiency is concerned. Our gross Margins, despite a little bit of a blip in Nature’s basket have been commendable.
Anuj Singh — Chief Executive Office And Managing Director
21.2% gross margin, consolidated level, Spencer’s at 20%. We intend to see how we keep that at that level. I think going above this level of gross margins is not, is neither sustainable nor is it the right thing. I think we need to look at how we drive a much greater level of throughput and therefore maximize RGM by keeping the percentage margin at this level on operating expenses. We don’t see any more one off provisions on account of the new labor code. They’ve been largely baked in quarter three. So we will come back to the true operating costs in quarter four which should be able to help us in terms of delivering decent EBITDA margins as far as the growth levers for the business are concerned.
There are largely three growth weavers, number one, both on Spencer’s and Asia’s basket. It is about driving the membership program. We’ve seen that membership program creates the right level of skin in the game for our customers. Customers, you know, make full use of it to come back and shop more often and shop for a higher amount. And that helps us to kind of manage our offline business. So that will be driven even higher. We are hoping to exit this year which is at the end of quarter four with about 100,000 members for the membership program which is, I think in nine months is good progress and the intention is to see how we can double that in the year going forward.
We are sharply focusing our limited marketing budgets on a very, very focused CRM towards these members because these members do drive a significant portion of our sales. Just to give you a color, I mean these members account for close to 25% of overall sales and 15 to 16% of total number of bills in a month. So as this base becomes stronger for us, this ensures that we have solid performance as far as the offline business is concerned. So that will be one key growth driver continuing in quarter 4. And for next fiscal, the second pillar will be online again both for Spencer’s and Nation’s basket.
Anuj Singh — Chief Executive Office And Managing Director
We have said that our out of store business, which is a combination of the phone delivery and the E commerce business, should be at around 20% of the overall mix. We are today at making progress around 16, 17% and we expect to get to that level, if not at the end of quarter four, by early quarter one of next year. Online, like I said for us is an important part of the proposition as an omnichannel provider. But we are again very Cognizant. Neither do we want to nor can our PNL afford to burn a big hole just to scale up that business.
I think we see good organic growth. We will exit this financial year with close to 200 crores coming from our E commerce business alone. Phone deliveries extra. And I think that that’s, that’s a good jump from where we were last year. We are maintaining our proposition of responsibly delivered which is delivered within 30 minutes and we are you know kind of looking at continuing to keep our unit economics positive as far as the online business is concerned. So really membership across both segments. Nature’s Basket and Spencer’s will continue to be a growth driver online. Again both on Nature’s Basket and Spencer’s will continue to be the second growth driver and the third is of course you know, being very, very, continuing to be very mindful of how we operate with our inventories.
I think we’ve done some good work on Spencers. We’re going to replicate the same thing in Nature’s Basket this quarter and optimize. I think our level of stockholding is a bit high in Nation’s basket and therefore we need to look at how do we have a good sell through and I think that’ll also come back to improve our margins. So operational efficiencies in terms of discipline on cost lines and on optimal inventory holding and looking at you know, fast liquidation of old aging inventory will help us to improve our profitability. Gross margins will, will, will continue to be at that level of what we have delivered in quarter three and impact ytd.
So yeah, that’s, that’s the brief commentary from my side. I would now just take a pause and open it up for any questions.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may please press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue you may press Star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Anita Bajaj, an individual investor. Please go ahead.
Anita Bajaj
Thank you very much for the opportunity. Congratulations on good setup design. Just a couple of questions from my side. Firstly, I want you to understand with Q1Q growth picking up which parts of the business are showing the strongest momentum as we move into Q4.
Anuj Singh
Okay so thank you. When you just, just want to understand a little bit of you saying, when you say which parts of the Business. Are you referring to, you know, the channels, the categories or between Nature’s Basket, Spencers and Spencers Offline online or is it a combination of everything?
Anuj Singh
A combination of everything and particularly categories. Okay, so look, like I said, you know, what we’ve seen is quarter on quarter of course is historically, you know, quarter three is historically better than quarter two and quarter three is even better than quarter four. But therefore, you know, I mean that’s, I would not look at just quarter to quarter. I’ll also look at year on year and I think on year on year where I see good, you know, momentum and where I see growth, you know, witnessing growth is actually if I look across the three business segments, it is online which is growing for us.
It is parts of our offline business which is growing in the Spencer’s part and Nature’s Basket has a bit of catch up to do as far as growth is concerned. If I look at it from a category point of view, what is really firing growth for us is staples and firing growth for us is staples Fresh which are important ones because they are the monthly planned shopping basket and we are getting a higher share of that which is, which is good. So I think that’s, that’s showing good growth. You know we are on FMCG on certain parts like beverages we are doing better.
You know, non food fmcg, you know, home care does and personal care are doing better than what Beauty Portfolio is doing beauty. And I think that’s a function of how consumers are shopping between offline and online. You know we are you know being again very pragmatic as well as I would say I won’t call it aggressive but very mindful of, of our price index versus both offline competition and online competition. And you know we are using that to make Spencer the destination for monthly purchase for most of the categories but particularly so for Staples Fresh and for processed food and beverages.
Anuj Singh
And we see the results of that coming in. It’s heartening to see that growth coming through. In terms of our geographies for us, Eastern up has done I would say relatively better in terms of growth both Q1, Q&Y and Y compared to east as far as Spencer’s is concerned and for Nature’s Basket in a Bombay West Bombay Invest has done slightly better than South. South we do have, we’ve had some internal challenges as far as operations are concerned with the Nature Basket operation in Bangalore which we are fixing and I’m sure that this comeback. So I think between channels, categories and geographies I’ve been able to tell you where we are seeing good momentum, where we are seeing good traction and we are quite confident that this will continue into Q4.
We are. I won’t call out and saying that we have discovered or rediscovered our growth mojo but we have certainly built some momentum in some parts of the business, in some channels, in some categories and we don’t intend to losing on that momentum but building on that momentum to see how we can fire the other categories as well. So for us, staples, fresh processed food, beverages continue to be what will drive our growth. We are a grocery food first retailer and we’re seeing that. And it will be both offline as well as online which will drive our growth.
And geographies, we don’t intend to have any particular geography which is lagging behind. So both east and east up will be in growth in quarter four. Spencers and for nations basket will be both west and South. So yeah, that’s, that’s how we are looking at growth. You know, I’ll preempt the question in terms of, you know, what are our plans for new store openings, etc. Look, we had, we have a few stores in the pipeline but we are not actively looking at adding because so far we believe that we have a footprint from where we can use more sales.
We are not close to, I would say the ceiling as far as productivity per store is concerned as measured in spsf. Our spss though have kind of improved compared to last year. So at a console level we are at about 1800 rupees a square foot per month. But I think there is opportunity for us to grow that. We are where you will see new stores will be largely a few where there’s the relocation from existing stores which you will shut down because of locational, you know, underperformance or underperformance of the store. As you can appreciate as a city develops, you know, there are certain parts which, you know, because of whatever construction flyovers, you know, re development kind of, you know, sees a change and therefore we will not, you know, we will, we will relocate those stores.
So you will see a couple of relocations. We will do a couple of relocations in Lucknow, we’ll do a couple of relocations in east as well. But we are not going to add on too many new stores. At least in quarter four and quarter one. We believe we have the playbook, we have the levers to drive growth from our base of stores which are currently there and drive the online and out of store business from our network of gray stores which is basically fulfillment zones within the stores. So that’s what our growth would be. I hope I’ve answered your question.
It was a bit of a comprehensive answer.
Anita Bajaj
Yes, yes, that was quite detailed and helpful. Just a follow up question around margin. You have maintained margin discipline while driving the growth. Which efficiency initiatives are delivering the most impact right now?
Anita Bajaj
Sorry, I didn’t get your question. Can you repeat on margin.
Anita Bajaj
Since we have maintained the margin? Visiting by guiding the growth, which efficiency initiatives are delivering the most impact right now? No.
Anuj Singh
So I think, look from a margin point of view, it is, it’s ongoing. We have, for a grocery retailer, I think we have, I would say, you know, I would try to be modest but I’d say we have best in class gross margins. And for us, you know, that’s something which we take a lot of pride and we kind of focus, work through it. I think as we start seeing growth. Because if we see growth, then our brand partners will also see growth in our format and therefore investments in the right things will happen. So I think from here onwards it’s not just margin expansion by working with new suppliers or listing new brands.
I think it is about delivering growth. And once growth starts happening in the business, we see the same level of, I would say cooperation, collaboration, commitment and investments coming in from our supplier partners. So I think this will continue. I don’t foresee, nor do I want to push further expansion in margins. What I want to push is continued growth. You know, if I get sales growth at the same level of margins, I will get RGM growth. And at the end of the day, what helps us or what covers the costs is absolute rupee gross margin and not percentage margins.
So the intention is to keep driving the RGM and we will make those calls in terms of, you know, being competitive and driving the right level of sales.
Anita Bajaj
Yeah, yeah, yeah, understood. Just one more question. What are your growth targets for JP in FY27?
Anuj Singh
Look, I’m not going to, you know, call out my FY27 growth this thing. I think on quarter we’re looking at a quarter by quarter. Like I mentioned, you know, it is, it’s possible to drive much higher level of growth than what we are doing. But like I said, it comes with a certain level of investment which is in terms of customer acquisition, higher level of marketing activity. And unlike other large quick commerce players which have much, much higher scale but also have much, much higher burn and losses, our P and L does not allow for that.
Our model is quite unique. We do our fulfillment through largely a network of our own stores. And that also helps us in terms of sweating our assets better and, and we want to continue on that journey. You know, our contribution margins are positive. We just need to get, increase our number of orders. We, we need to get to a level of close to, you know, 100,000 plus, you know, sorry, 300,000 orders a month. We are currently at around 240. So I think that will be the level I would measure myself more in terms of can I go from 240,000 orders a month to 300,000 orders a month without disturbing the unit economics? And obviously there’s no question of adding more dark stores, continuing to use our current infrastructure service.
So that will be this thing. Now whether that growth is 25%, 30%, I’ll take it. Because we can’t afford to burn too much of money on our online business. The way I look at it, we have a very good chance of. Not chance, but we have a very good visibility and a path to breaking even at an EBITDA level in the offline business in FY27. And we don’t intend to burn too much of money on the online business. So that, you know, our EBITDA losses for next year would be largely on account of whatever little investments we’re doing on online.
So online will be a measured growth. It’ll definitely be growth, but it will not be growth at any cost or growth by incurring a huge loss. Yeah, yeah.
Anita Bajaj
Okay. So very clear. That’s it from my side. Thank you. And all the best.
Anuj Singh
Thank you.
operator
Thank you, ma’. Am. Ladies and gentlemen, to ask a question, please press star and 1. Now participants who wish to ask questions may please press star and one at this time. The next question is from the line of Siddharth Negandi from cwc. Please go ahead.
Sidharth Negandhi
Hi, thanks. Thanks for the opportunity. Just wanted to understand in terms of the improvement that you’ve seen on a sales per square feet basis, are you seeing this improvement happen across sort of town classes? How are you seeing the impact of, of online grocery shopping happening across town classes? And if you could sort of split that between, say metros, tier one cities and below that was question one. Question two was in terms of, you know, behavior that you’re seeing on your members, which you called out with a critical growth lever, are you seeing members sort of also shop both online and offline, or are you seeing that set being, being a little more mutually exclusive? Yeah, those are my two questions.
Anuj Singh
Yeah, well, thank you. I think very good questions. So I think, look, you Know this, this whole thing on online consumer behavior, this is as you guys know it better and as you guys are also consumers. It’s not a fad, it is a trend and I think it will only continue. But this trend is more pronounced in, I would say large metro cities and it is more characterized in households where, you know, there are nuclear families and where probably both, you know, husband, wife are working. So it’s for those time starved, you know, I would say unplanned right through the month kind of shopping trips.
And that will continue to be a phenomena. And we see that is, that is reflecting when I look at our performance of offline and online between the larger cities where we operate versus the not so large cities. So for example, if I look at West Bengal and I split it between Calcutta and upcountry, West Bengal, my offline is a lot more resilient and you know, growing, still growing with good footfalls in the upcountry, non Calcutta locations. And my online is correspondingly getting better traction and does bulk of my business when it comes to Calcutta as compared to upcountry.
I think when it comes to places like Lucknow, Banaras, Allahabad, Gorakhpur in eastern UP where we operate there, again offline does well. And I don’t see such a big impact of online. Yes, what tends to happen is that, you know, we still do have people who come in regularly and do the pantry loading or the, or the trolley loading or the basket filling at the beginning of the month. But as the month goes their, you know, replenishment or stocking up or refilling shopping missions are more online. And that is why we want to offer in all our places we want to offer both the offline and the online.
Anuj Singh
So yeah, there is a bit of a different performance of offline and online when it comes to the larger cities as well and the upcountry. Your second question was on our members, our membership program and whether we see other membership or these members, their behavior and their signups being a lot more pronounced in one channel offline versus online. That’s actually true. And I think that’s got to do with the fact that again, it goes back to the hypothesis that an online consumer is largely looking for convenience and it’s an unplanned or a top up where it is about you need it and therefore they are maybe less price sensitive.
I’m not saying they’re not price sensitive. All Indian consumers are value seekers. So they will still look at between online what is the cheapest option at Least, I think. But they’re more convenience seeking, whereas the offline guys are people who are coming in, you call it out of habit, out of the fact that they want to see experience and buy. And we’ve seen that both by design, we have driven this program more in the offline part of it than online, because online we’re already giving, you know, a customer the convenience, you know, and our pricing is the same between online and offline.
So this, this membership program, by design, has been given to the offline consumer. Now, it doesn’t mean that if I’m an offline consumer and I have registered for this program and if I do an online purchase, I will not be eligible for this. No, you are eligible. But the active recruitment pushing is happening more in our offline business and we don’t see a big overlap today between our offline, between the members offline purchase and online purchase. So most of our members are buying this in the stores and the offline.
Sidharth Negandhi
Okay, yeah, that is my question to understand whether, you know, offline consumers were also sort of offline members, but also then subsequently purchasing online or not, or is that more a mutually exclusive side? So that’s, that’s clear. This, this point was interesting that you mentioned on, you know, sort of metros versus non metros in the east. If you could give us some color in terms of whether that, that sort of is a thing across India in say Nature’s basket in west or you know, Spencer’s in, in north, in, in NCR with whatever limited sort of, you know, presence that’s there.
But are you seeing sort of, if I may, you’re seeing a 5% sales per square feet growth on a year, on year basis. Could you give us a sense of, you know, how much of that at what index would metros be versus 5% and what index would say non metros be?
Anuj Singh
Yeah, see, first of all, I think for Spencer’s, we don’t operate in the south, we don’t operate in the west, we don’t operate in ncr. So I think I’ve given you those things for nature’s basket. You know, online still is, I mean, nature’s basket. The whole proposition is gourmet, you know, curated assortment. And therefore so far we have not seen too much of online, you know, consumer buying in those categories. Though, having said that, in places like Bangalore, there are a few online startups which are focusing on gourmet, but that’s not been the case. So I, I don’t think on that part of the business, the impact Is there.
Most of our business of Spencer of Nature Basket is concentrated in Bombay and Bangalore which are the metro cities where quick commerce is also quite prevalent. I think given the assortment, given the uniqueness and the whole experiential buying, I don’t think, you know, the impact of quick commerce would be that high. Now having said that we, we, we are also, you know, strengthening our e commerce proposition for Nature’s Basket. So in quarter two we had, you know, revamped the, the app for Nature’s Basket. You know, as you know, for Spencer, we had made a native app and given the fact that Jiffy had performed very well from a tech stack point of view and was able to seamlessly cater to, you know, 250,000 plus orders, you know, we felt that that same tech stack can be applied on Nature’s Basket.
So we’ve done that migration or upgradation of the Nature Basket app to the Jiffy’s backbone and that has been completed at the end of quarter two and we will see growth. So I don’t see a big impact of quick commerce in the Nature Basket gourmet segment. But having said that, you know I’m, I’m. We’re not going to be under prepared and we are consciously building that option for consumers to also order their refill through the month on Nature’s Basket through the online app as well.
Sidharth Negandhi
Got it. That’s helpful. Thanks. Thank you. And all the best.
operator
Thank you. Thank you. Sir, the next question is from the line of Sunny Badra from MK Global Financial Services Ltd. Please go ahead.
Sunny Bhadra
Yeah, thank you. Thanks for the opportunity. Sir. Sir, I just wanted to check on the competitive intensity. Intensity in the delivery space. So large quickcom players are seeing strong Nov growth trends. Have you seen any impact on our business and what are the initiatives the company is taking to gain or protect the market share in this space?
Anuj Singh
You’re talking specifically competition in the online.
Sunny Bhadra
Yeah, Delivery space. On the comp players, they are seeing strong growth trends. I just wanted your thoughts on that part, sir.
Anuj Singh
Yeah, so look, I mean, you know, we are not in the same league as the other quick comp players which you’re talking about. They have a much higher scale. They have a slightly different business model both in terms of acquisition of customers in fulfillment and in terms of their ability to sustain losses of far higher magnitude. So we are not, we are not in a race with them to either compete on that scale or on that business model of opening thousands of dark stores or losing hundreds of crores per quarter on that. So we’re not in that game.
Our model is very different. Our model is to. To offer our Spencer’s customer an online option and also acquire customers who are, you know, loyal to, to us and who are familiar with the Spencer’s ecosystem. And we are doing this in a, in a manner where we are utilizing our store footprint because, you know, in cities like Calcutta, we have stores which have a coverage of at least 99% of the PIN codes and we are able to deliver within the radius of 4-5 km, which is what it is. So our model is very different. You know, what, what competition is doing is, is keeping the, the relevance of the need for instant delivery convenience high.
And therefore, you know, for us also, we have to be cognizant that we need to have some proposition which gives consumers a convenience. We. Our model is built around brick and mortar, but we also want to give an online lesson. So I’m not, I’m not getting into, into a fight with the big boys because I can’t get into a fight with the big boys. They have a different model, they have a different scale, and they have a different P L funding, you know, means which I don’t have.
Sunny Bhadra
I got your point. Thank you. Explanation. I wanted to check since they’re expanding now into smaller tier of cities as well. Right. Big time. So maybe if you could help us better understand what is the hooking point of your format? Right. So as in what brings the consumers back and back to your format, even if these formats are sort of offering unmatchable convenience. Right. So within 10 minutes you are getting everything that you want at your place. Then what is our format offering for the consumer to sort of move from his house to our stores from that perspective?
Anuj Singh
Yeah. So I think, you know, if I look at, you know, our proposition for the offline business is that we give a wide assortment, we give good quality. And where we are able to create that differentiation is from our fresh, you know, assortment. Fresh is what keeps people coming back to the stores. I think that’s also still a category which is relatively higher on touch and feel as opposed to, let’s say dry packaged grocery. You know, also what comes, what, what is driving people back to our stores is the value perception which they see when they come back, which is further being enhanced through our membership program where we are, you know, giving as much as 6% cash back on annual or not on, not annual, but 6% cash back on our monthly spends.
So I think, you know, a combination of the fresh piece, the assortment, the value is what is driving is continuing to hold on to consumers in that. Now having said that, you know it is. I’m not saying we are immune to competition from online. You know I think that is, that’s, that’s, that’s only going to get more and more but I think there will be some level of sanity which will come in. You know I. And I think as you go into smaller towns and all it’s, it’s, you know there’s this 10 minute requirement is not a requirement, you know everywhere and especially when people start seeing that, you know with that 10 minute you have to pay a small card fee of 30 rupees, a delivery fee of 20 rupees and a platform fee of 5 rupees.
It all does add up over there where you know when commutes in smaller town commute to the store is not a big deal. Parking is not a big deal. Right. People have relatively more time because they’re not spending time in traveling towards to work. So I think you know there will be a level of sanity which will think now for those consumers in those towns who are still looking for online, I mean they do have the option if they shop offline. For us we do give an online option as well as a phone delivery option.
So that’s our way of saying that look, we are not, we are not in, in a crazy market share listing. We want to grow our business, you know with our model and what works for our PNLs.
Sunny Bhadra
Fair enough sir. Lastly, if you could just back this by some data points. You must be having access to lot of data crunching that you must be doing. Right? So maybe some of your royal customers, loyal customers that were that have been shopping with you. Are you noticing the same consistent trends in terms of spends per month, visits per month by these consumers or at least maybe the top ups that used to be there towards the later half of the month at least that is now going to online through. But the loading pantry loading is still happening at our stores.
Maybe some color from that perspective. Are you noticing any change?
Anuj Singh
Yeah, so like I said, look, I mean I mentioned this when I was talking about the membership program in my initial opening commentary. You know what we have seen in our. What the members are. You know I, if I said if I kind of demarcate or if I look at the difference in behavior between people who have become members versus people who shop from us and not members, I see a, a big difference in the frequency. The frequency of people who have become members of our program is five plus largely offline. Right. Their Average monthly spends is in excess of 7,500 plus.
So I think this is, this is, this is a, a good indicator that you know, you give people a reason and that reason could be a combination of assortment, you know, that assurance of consistent pricing. I’m not saying it’s the cheapest but you know, people don’t want to see too much of high low. People want to see consistent pricing. They want to see value pricing when it comes to categories like staples. So whether it’s rice or atta or oil or masalas. So if you give them the right assortment, you give them fair value and you give them some added incentive for repeat transactions.
You will see people coming and we are seeing people coming back and sticking with the offline mistakes. So I think that’s, to me that’s the best indicator of consumer behavior.
Sunny Bhadra
Fresh and value pricing are the key differentiators. I just wanted to just. Last question from my end. Maybe from a market perspective, definitely the growth rates are very hard to digest for Quick Commerce Place, right? So maybe this market is segmented across say modern retail chains like Spencer’s. Then there are ecosystems, Commerce place like Amazon Flipkart, then there are Quick Commerce Place and then there is this general trade, right? So from your outlook and commentary, it seems that the modern trade organizations are not at that big a loss. Right. So they have a good proposition for customers to come in.
So is quick commerce sort of taking share from general trade and online maybe is that a right assignment assessment to make or what’s your view on this?
Anuj Singh
Look, I never said that we are not impacted by online. I think that’s the thing. I think the point is that, you know, India is a very large market. Grocery retail is a large market still. Kiranas, you know, do contribute to, you know, upward of 80% of the overall, you know, FMCG spend. I think, you know, we’ve seen this phenomena. You know, when modern trade came into India everyone said oh look what’s going to happen to Giranas. I think while there is channel share shift which happens, but what also tends to happen is the overall pie becomes larger.
Now having said that, I am not for one saying or suggesting and not just me, the data also doesn’t suggest that online is not growing. Online is growing at the expense of both modern trade as well as Kiranas. I think what the Kirana need to do and what we need to do as modern trade is everyone needs to figure out what is their playbook. So if you know my numbers, if you look at it for the Last six quarters does indicate the impact of this trend where we are losing business. But my numbers for the last four months are suggesting that we have figured out what would be our path and our path is not just going and completely pivoting to online.
You know, it is building an omnichannel proposition where we not just build online but we also make sure how do we make offline resilient. And I think there are enough and more levers and whatever initiatives we have done in the last five, six months, whether it be strengthening our assortment, whether it be strengthening our continuous availability, whether it be strengthening our price proposition by being consistent pricing and fair pricing, I think these are enough. And then of course introducing membership, loyalty, reward program. I think all of these four are levers which are you know, helping us bring back this business.
And I’m sure similarly Kiranas are also responding by upping their level of personalized service delivery, pricing, credit, etc. So yes, I mean there will be some, some shift but I think it’s a large market and ultimately players who respond, who adjust and who kind of, you know, discover new muscles are the one who will be able to ride this out. So I think that’s the way I would look at it.
Sunny Bhadra
Yeah, just a small follow up sir. How far are we from reaching a steady state here as in will online continue 1 to 2 years take share from oriented or is it like now more of an equilibrium now? All of them should grow at respective paces.
Anuj Singh
Look, I’m not an expert, you know, prophecy thing in terms of what is going to happen to online. I think online will look again. Like I said, it is going to go, it is going to continue to grow. I can’t comment whether it grow at the same rate as the base starts becoming larger and larger, you know you will see some of those growth rates coming down. I think also you know the pressures on the PNL would be, would come into things especially as players start becoming moving from you know, being private players to becoming more in the public market after their IPOs.
You know. So I think look there will be some level of, you know, sanity. I think both, both the leading quick Commerce players have in their last quarterly comments have talked about I don’t know exactly the term but it said something like irrational competition. Right, right, right. So I think you know they will, they will, they’ll realize that you know there has to be some level of, you know, pragmatism in terms of how long and how much can you afford to. So I think businesses will need to be over long term Built sustainably and with sustainable levels of margin, with sustainable level of cost and with sustainable level of profitability.
So far, you know, across the world, we haven’t seen a profitable online grocer. Right. Yeah, name it. But we have seen profitable offline grocery retail chains across the world. So I think, look, I mean, I mean, that’s, that, that says it all. Growth at any cost is, you know, is good at the startup phase, might be still doable for a company which has access to deep private capital. But once you’re in, in the public market, once you’re a publicly listed company, I think there are different pressures and you need to kind of do it. So I think there would be some moderation, which will definitely happen.
Sunny Bhadra
So you mentioned assortment, availability, pricing, all of these are great attributes for business. Right. So, but anything on private labels, are you thinking on those lines? As in across categories, that can also be a key differentiator. Right, so are you thinking on those lines?
Anuj Singh
Yes. So when I say assortment, it means that, you know, in the assortment you need to have a good mix of, you know, what we call good, better, best, a good mix of national brands, regional brands, local brands, and private brands. So I think that’s all encompassed when I talked about assortment. It’s not that we don’t have a private label business. We do have a pretty strong private label mix. Our mix of private label is more pronounced and is stronger. As far as Staples is concerned, close to 35% of our staples category is accounted for by private label.
So, you know, yes, private label is an integral part. But again, we have to be pragmatic enough to see which are the categories which lend themselves to private label better than certain other categories. So typically for retailers, Staples is highly indexed on private label. It is some parts of cleaning. So whether it is, you know, floor cleaning, toilet cleaning, those are the kind of, you know, categories. And then of course you have fashion and apparel. Packaged food also to some extent. Yes, so, so we do that. But we are, we are, we are strong as far as Staples and a bit of packaged food is concerned.
We are not, you know, expanding into others. But private tables is an important part.
Sunny Bhadra
Yeah, the non foods, FMCG and apparels are a bit on a lower end. But Staples foods as well as packaged is a, is a high component of your private label.
Anuj Singh
Yeah, and I think the other way to look at it is, you know, it is, you know, again, I don’t want to preach, but. And I don’t want to see a sound a bit, I would say arrogant, but you know, I don’t think the issue on Spencer is on the margins. I think the margins are 21.2% for the quarter. And you know, YTD margins, expenses close to 20%. 19.6%. I think they’re healthy. You know, I don’t think we should in this business. I keep saying this. It’s not about the percentage margins. It is about your rupee gross margin.
You know, I would love to trade off, you know, and I’m not saying I’m doing this, so please don’t get me wrong, but I would love to trade a 20% margin for a 19% margin if I can get, you know, 10% sales growth and if my SPSF can be 2500 rupees a square foot. I think that’s where magic happens in retail. You know, you, you get, you can look at the most successful grocery retailer in the country and go and look at the SPSF figures and go and look at their gross margin figures. Their gross margins are not more than 14 and a half percent.
Sunny Bhadra
So you look at their SPF is. 35,000 rupees per square feet. Right.
Anuj Singh
So that’s what I’m saying. So, you know, at some point of time this obsession with just high margins, percentage margins has to be replaced with more of a top line driving, you know, your SPSF and driving a far higher share of this thing. You know, 20% of 119 of thousand. You can do the maths, which gives you a higher rgm. And what helps and what helps you absorb cost is not percentages. All our other costs are not in percentages. Rent, salaries, operating expenses are all in absolute amount. So I think, yeah, I mean, you know, the focus is on driving rgm.
And of course, you know, I’m not saying we will sacrifice margins, but we’ll be pragmatic about how much we can push percentage margins and how much we can push our top line and drive absolute rupee margin growth. Thank you very much.
Sunny Bhadra
Yes, sir. Thank you so much.
operator
Thank you, sir. Ladies and gentlemen, that was the last question for today on behalf of MK Global Financial Services Limited that concludes this conference call call. Thank you for joining us and you may now disconnect your lines.
Anuj Singh
Thank you so much. Thank you for hosting and listening in. It.