DMart shuts two Mumbai stores to take on Reliance in e-commerce space

The company has also attracted global investor interest, raising Rs 37,710 crore from marquee players in eight rounds.
Avenue Supermarts, which runs the DMart chain of stores in the country, has shut two outlets in the Mumbai region, one at Mira Road and the other at Kalyan, as it seeks to ramp up its e-commerce operations. The stores had been converted into online fulfillment centres, the company said, implying no offline retail activity would be carried out at these locations.

While Neville Noronha, chief executive officer and managing director, Avenue Supermarts, was quick to defend the move, saying that there were alternate stores within a four-km radius at these locations, analysts view the development in the context of the evolving retail landscape in the country.

Competition from rival Reliance Retail has grown significantly since it acquired the retail assets of Future group in August. The consolidation has seen Reliance Retail corner a third of the organised retail market in India, with the firm using a combination of online and offline retail tactics to increase its hold on the market.

The company has also attracted global investor interest, raising Rs 37,710 crore from marquee players in eight rounds. Reliance Retail has so far offloaded close to 8.5 per cent stake as part of its divestment programme and may look at inducting a strategic investor in the future as it seeks to scale up its online operations and manage its supply-chain better.

At Reliance Industries' annual general meeting in July, chairman Mukesh Ambani had said that the retail company was embarking on a journey to transform traditional retail through its new commerce venture JioMart, aimed at putting in place a robust omnichannel network.

"Our large scale and rapid execution has been the major driver of robust growth in the retail market and we will continue with this approach," Ambani said.

To combat Reliance's growing dominance, sector experts said that DMart had been quietly stitching up a strategy that involved setting up more stores, increasing its e-commerce operations and pushing its value proposition even more aggressively among consumers.

In the September quarter, the company set up six new stores, taking its total footprint to 220 outlets. Revenue for the quarter declined 12.3 per cent from a year ago to touch Rs 5,218 crore, while profit after tax fell nearly 37 per cent to Rs 211 crore versus last year.

Noronha had indicated in a recent call with analysts that the company would accelerate the pace of its store launches over the next two years as it adjusted to market realities.

Most analysts admit that DMart has been a laggard in the online grocery market, choosing to be cautious every step of the way. This is linked in part to mounting losses of its ecommerce venture, something that DMart has been looking to curb. While DMart Ready, its online platform, more than doubled its FY20 revenue to Rs 354 crore versus Rs 144 crore reported the previous year, net loss widened to Rs 80 crore from Rs 51 crore a year earlier. Analysts estimate that DMart's online revenues could cross the Rs 500-crore-mark in FY21, though losses will continue to grow.

Himanshu Nayyar, lead analyst at brokerage YES Securities said that DMart was gradually increasing its e-commerce footprint and that the business would take time to stabilise. "The company has increased its operations in the Mumbai metropolitan region and expanded its reach to Pune in the second quarter (of FY21). The conversion of the Mira Road and Kalyan stores into online fulfillment centre will help serve consumers better in these regions," he said.

As such DMart uses a model called 'click-and-pick' for its online operations, which is predicated on consumers going to nearby DMart Ready stores to pick up products ordered by them online. Home deliveries are done for a fee at certain time slots.

A recent Kotak research report said that with most online players including Reliance, Amazon and Flipkart-Walmart tying up with kirana stores as part of their overall digitisation programme, corner shops could fast become competitive than DMart, offering more convenience and the best price.

DMart clearly has its hands full for now.

 



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