Representative imageAsia’s richest man, Mukesh Ambani, is emulating the strategy of popular Indian supermarket startups to dramatically change the way his retail empire operates: from home deliveries that can take a day or two, his company is now aiming for a 10- to 30-minute service .
Fast commerce has changed the way Indians shop as Zomato, SoftBank-backed Swiggy and Zepto now promise deliveries from their neighborhood warehouses within 10 minutes, even beating Amazon. These multi-billion-dollar express companies, while making losses, have disrupted mom-and-pop and supermarket sales as people opt for quick deliveries of everything from milk and chocolates to Apple iPhones.
The sector has grown too fast and too fast to be ignored by Ambani’s Reliance, even as experts say the late entry will face challenges, including a lack of small-scale warehouses and running the business from supermarkets that focus on walk-in customers.
Datum Intelligence estimates that rapid commercial sales will reach $6 billion this year, up from just $100 million in 2020.
Reliance plans to leverage its 3,000 supermarkets in 1,150 cities for fast deliveries by deploying small teams operating from dedicated indoor kiosks, according to three people familiar with the strategy and Reuters visits to outlets near Mumbai , where the service launched this month.
The sources provided previously unreported details on order volume targets, delivery plans and links to Reliance Retail’s much-anticipated IPO.
Reliance’s bet is fueled by changing retail trends. A recent Datum survey of 3,000 Indian quick-commerce shoppers found that 36% had reduced their purchases at supermarkets and 46% had cut back on purchases at regular stores.
“Reliance is entering the market as fast commerce is already impacting modern retail and also Reliance stores,” said Satish Meena, consultant at Datum.
Reliance is targeting a delivery time of 10 to 30 minutes as it does not believe customers need orders within 10 minutes and the longer time frame will ensure the business can be sustainable, the first person said.
Ambani wants to ensure that high-speed trading can strengthen his business ahead of an initial public offering of Reliance Retail, which was valued at $100 billion last year and has backing from the likes of KKR, two sources said.
Reliance runs the largest brick-and-mortar retailer in India’s $600 billion grocery market, though it is still catching up to Amazon in e-commerce.
Reliance did not respond to Reuters’ questions.
Challenges
Reliance is betting that a broader product portfolio at its supermarkets – some of which stock more than 10,000 items – will help differentiate its offering from smaller rivals, although it has decided not to add new warehouses, the sources said.
Reliance, which will expand nationwide in the coming months, expects fast trading to help take daily orders on the JioMart app to about 500,000 from about 200,000 now, the second person said.
As with mobile data offerings, Ambani has a strong track record of using cutthroat pricing to disrupt the businesses he enters. But it won’t be easy to pull off a quick trade.
Rahul Malhotra, a senior analyst at Bernstein, said fast trading requires neighborhood warehouses for fast deliveries under 10 minutes. So any major retailer will have to offer superior product selection and cheaper prices to ensure that customers are willing to wait up to 30 minutes.
Mihir Rale, Chief Regional Counsel at Disney Star, is likely to resign amid the $8.5 billion merger between Reliance and Disney’s Indian media operations, sources told ET Online. The merger will create India’s largest media conglomerate and consolidate live sports streaming on Disney+ Hotstar.
A former Reliance executive who asked not to be named for fear of reprisals said many stores have multiple floors and items are widely spaced on shelves, making quick packing difficult, a task made more complicated by the rush in the shops.
At two Reliance stores in Navi Mumbai, Reuters found that separate ‘Q-Commerce’ areas have been created to store frequently ordered items such as noodles, dairy products and chocolates. Riders outside waited for app notifications to pick up orders.
Reliance store manager Ajit Karande said an eight-member team had been tasked to “focus completely on fast trading”, adding: “We have to invoice and pack the items within 10 minutes.”
Earlier visits to the warehouses of Swiggy’s Instamart and Zomato’s Blinkit at the IPO exchange by Reuters showed that workers there are tasked to pack orders in less than two minutes.
Top rider, bottom rider
The rapid, rapid growth of trade appears to be hitting the supermarket sector.
Reliance Retail, which does not break out its revenue from supermarkets, fashion, electronics and telecoms, reported its first quarterly sales decline in at least three years in October, down 1.1% in sales in July and September to $9 billion.
Zomato’s Blinkit’s revenue rose 122% to $730 million in the period and recorded an average growth of 103% over the past six quarters, while Reliance Retail’s average was 13%, Bernstein said. But Reliance has been reporting profits for years, while Blinkit is still loss-making.
While Reliance has not commented on the rapid trading stress, its rival DMart, which has 377 supermarkets, said this month that it “can clearly see the impact of online grocery formats” on its stores in major cities but has declined to budge on that front. compete, leading to Several analysts have decided to downgrade the stock.
Reliance’s ‘Hyperlocal’ shopping service has started in a handful of Navi Mumbai and Bengaluru stores and will subsequently be launched in cities such as New Delhi and Chennai, a fourth source said, adding that there was a plan to boost delivery drivers with weekly bonuses to the company.
The company also plans to tap fast delivery startup Dunzo, in which it has a nearly 26% stake, to further expand its delivery fleet, a fifth source said. Dunzo declined comment.
To lure customers and outdo rivals, Ambani is using free delivery.
In Mumbai, customers can use Reliance’s JioMart app to get a 40 rupee ($0.48) can of Coca-Cola delivered for free. Rivals are imposing charges such as “small cart fee” and “high demand surge” of up to Rs 65 on such an order.
At the Reliance store in Belapur, near Mumbai, riders are tracked down to the minute. A whiteboard named “Top Picker” and “Top Rider” to emphasize efficiency, and “Bottom Picker” and “Bottom Rider” for slow work.
A “customer order should be delivered within 30 minutes,” said Supriya Naik, a JioMart delivery person.
“I have to run around a lot.”
