Here’s what a retail consultant told me a year ago: “The next battle of e-commerce will be fought over food and grocery.” His words proved prophetic. With 6 146 million invested in China’s Alibaba BigBasket, $ 500 million for Amazon Food Retail, and, most recently, the US giant Walmart’s $ 16 billion Flipkart purchase, online grocery war is no secret.
In the shadow of these big-ticket moves, a dark horse moves. For the past 18 months, Avenue Supermarkets, which promoted RK Damani, has been experimenting wisely with the e-retail space. The company, which focuses primarily on food and grocery, is seen as the newest addition to the crowded online grocery sector. It is relatively under the radar, a company that operates a solid-de-mart supermarket chain, the largest Indian retailer by market capitalization. Its approximately 90,000 crore ($ 13.2 billion) market cap is three times more than its closest rival, Future Retail.
Although D-Mart was incorporated in all respects in 2000, the Mumbai-based company has been the town’s toast since the stock exchange opened in March 2017. In a trading debut not seen in years, Avenue Supermarkets opened at Rs.604.40 ($ 8.89) on the Bombay Stock Exchange, more than double its offer price of Rs.299 ($ 4.40). Since then, it has grown, and its shares have more than quadrupled in value. This meteoric success lies in the innovative business model of its D-Mart chain. Unlike rivals that offer promotional discounts, D-Mart uses a “daily low cost, daily low cost” strategy. This is consistent with what Walmart does globally and consistently retails for lower prices. D-Mart keeps its prices low by reducing its operating costs. For example,
Avenue entered e-commerce in December 2016 with a special arm called Avenue E-Commerce Limited under the D-Mart Ready brand. Now, the company wants to scale the D-Mart Ready. Obviously, this is not alone. There are other offline food and grocery retailers, such as Future Group, Reliance Retail and Spencer Retail, who are also hovering over e-commerce.
While various players compete for online grocery pies, this segment is probably the most dangerous in the e-commerce business. With every single venture in the online food and grocery business losing money, what are the prospects of D-Mart? Like many people before this, is it even shrinking?
Grocery: A game of convenience
First, some industry updates. At the same time that D-Mart Ready existed, Grofers, an online grocery delivery platform powered by SoftBank, had to completely change its business model. It would be a waste to experiment or pivot. The company made the switch as it struggled to keep the ship stable in the face of rising losses. Launched in December 2013, Grofers has previously adopted the Hyperlocal Delivery model, where it partners with local retailers to source fresh products and launch fast delivery. It has since become a list-led strategy in which products are sourced and stored in its own warehouses.
After switching to the listing model, our revenues tripled in the year ended March 2018. However, the losses were similar to last year.
Albinder Dhindsa, CEO and Co-Founder, Grofers
Its biggest and biggest rival, BigBasket, made the same switch a few years ago. However, the company will be delivering its hyperlocal model for Express service within hours.
“Everyone is trying to figure out what works. There is no model that is different from everything else,” said Dewangshu Dutta, CEO of consulting firm Third Eyesight.
Future Group is an excellent example of this. They shot first in e-commerce with Future Bazaar, and later with Big Bazaar Direct. Both ventures were eventually closed due to rising losses. Fingers crossed, Future Group CEO Kishore Biyani announced last year a third and more measured effort in the sector. Called Retail 3.0, it’s the EasyDay Store Club, which allows subscribers to subscribe to just 2,000 customers per store. Members use an app to order their groceries online. They also have the option of picking up groceries from their nearest Eazyday or distributing them.