Reliance wants to go solo in its fight with Blinkit, Zepto and others; CFO says: It is difficult to ...
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According to a report in Economic Times, Reliance Industries said that based on an analysis of the cost structures of some of the players in the Quick Commerce market, acquisition does not make sense.
In the past one year, India's Quick Commerce sector emerged as the biggest retail success story. The industry has scaled rapidly into a $10 billion gross merchandise value market with 30 million monthly users. The quick commerce sector accounted for over two-thirds of all e-grocery orders last year.
"The dramatic rise of quick commerce (i.e., delivery in less than 30 minutes) has been one of the most defining hallmarks of India's e-retail market over the last two years," according to a report by consultancy firm Bain and e-commerce giant Flipkart.
However, so far, metros drive 80% of the total sales. Also, despite large players in ecommerce including
JioMart
, Flipkart and Amazon; the quick commerce space so far is largely dominated by Zepto, Blinkit and Instamart.
Reliance Retail CFO: Planning no acquisition and will only open Dark Stores where it has no stores
Reliance Retail said that the company's own stores will be the backbone of its quick service model and dark stores will supplement and help fill the gaps. Initially, Reliance was focusing on the next day delivery, however, the company realized that customers want convenience and more quicker delivery.
During post-earnings all, Dinesh Taluja, CFO at Reliance Retail, said, "We do not want to leave any pocket where we are not competitive.
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Organic versus inorganic is an interesting one. It is very difficult to integrate somebody with your existing network. We have been focusing on building our network organically. And we have a big customer base which is already there with us." He further added that the company only sets up dark stores where there is enough order volume, but its stores are not able to support it, or have no presence.
"So, economics is much better for me because I am able to leverage existing infrastructure.
And most of my dark stores are in places where the order volumes are high and dark stores are a positive contribution margin from day one," he said.
During the quarter ended June, Reliance said its daily orders in the quick hyperlocal commerce grew 68% quarter-on-quarter and 175% from a year ago.
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After groceries and electronics, fashion is the next quick-commerce battleground
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India's quick commerce market has grown 150% year-on-year, reaching $10 billion in gross merchandise value and a monthly run rate of $900-950 million, according to Redseer estimates. However, it still accounts for only 15% of the e-commerce market, estimated at $70 billion, with significant headroom to grow. Retailers have started by offering select and high-selling fashion items through quick commerce. Ajio's Rush has seen an encouraging response in its initial days, with customers placing high-value orders and initiating fewer returns, according to a senior company executive. Launched in the June quarter, Rush offers 130,000 products that can be delivered in four hours, leveraging Reliance Retail's existing store network for deliveries. "We launched Ajio Rush—the equivalent of a quick commerce service—in the top six cities. We have carved out space in our stores, and we are delivering from those stores where the promise is within four hours. That is live in six cities with 130,000-plus options," said Dinesh Taluja, chief financial officer atReliance Retail Ventures Ltd (RRVL), during the company's post-earnings call Friday evening. "These are curated options in those stores because we have a lot of data for those pincodes in terms of what's selling, and what we see are initial signs; it's still relatively young." RRVL, a subsidiary of Mukesh Ambani-owned Reliance Industries Ltd, owns e-commerce platforms Ajio and JioMart. Ajio sells brands such as Gap, M&S, H&M, and Asos. Of these, RRVL holds rights to Gap, M&S, and Asos in India. Fewer returns, larger bill sizes Taluja said orders placed via this offering lead to fewer returns and larger bill sizes. 'Average bill value is 50 to 60% higher compared to a normal transaction. 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Growth is primarily led by grocery, beauty, general merchandise, and small-ticket electronics, while traction for fashion, appliances, and furniture remains limited. And demand is largely limited to large metro cities. Queries emailed to Zepto and Instamart, India's two largest quick-commerce platforms, remained unanswered. Also read | Reliance Retail's AJIO launches D2C-focused interactive e-com platform AJIOGRAM Analysts said the move makes little commercial sense and that heightened competition is why companies are willing to tweak their business models to adapt to this change in consumer behaviour. 'At the end of the day, if consumers are willing to pay for it and companies are willing to fund this (by cash burn), then there will always be demand even if not urgent," said Harminder Sahni, managing director and partner at consulting firm Wazir Advisors. 'However, it doesn't add up or make commercial sense bringing more products on a quick service platform." Sahni said the labour arbitrage or low-cost labour in India enables newer players to enter the market and offer such services. Experiment in faster deliveries Still, Ethnic fashion retailer Libas has also rolled out its own small dark stores as an experiment to ramp up faster deliveries. It recently launched a campaign with Zepto to roll out a select range of clothing such as kurtas and leggings pan-India. "We're scaling that up. It's about cracking what products are required," said Sidhant Keshwani, founder and CEO, Libas. A few years ago, two-day delivery was the norm, but today it is seen as a curse, highlighting the consumer shift underway, he said. Also read | Ajio accounts for 25% of Reliance Retail's apparel biz 'We're setting up our own dark stores, and are pushing and convincing all the (quick commerce) partners to pick up stock from our dark stores," Keshwani said. 'We have convinced Myntra, and our pilot went live in June. 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