Reliance Retail targets quick commerce market, challenging Blinkit, Swiggy’s Instamart

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October 7, 2024

Writankar Mukherjee, Economic Times
7 October 2024

Reliance Retail has initiated efforts to enter the thriving quick commerce market in a move that is set to escalate competition for Zomato-owned Blinkit, Swiggy Instamart and BigBasket, among others. The country’s largest retailer has started offering quick commerce services in select areas in Navi Mumbai and Bengaluru through its ecommerce platform JioMart since last weekend.

It will initially sell grocery items from its retail stores totalling about 3,000 nationwide, eventually adding value fashion and small electronic products such as smartphones, laptops and speakers, a senior executive said. All orders will be fulfilled from its own network of stores including Reliance Digital and Trends.

The retail arm of Reliance Industries plans to rapidly scale up its quick commerce venture pan-India by this month-end with the aim to deliver most orders in 10-15 minutes and the rest within 30 minutes, the executive said. The company will use its acquired logistics service Grab for the fulfilment.

Reliance, however, doesn’t have any plan to set up dark stores or neighbourhood warehouses, unlike other quick commerce operators, the executive said. Analysts said this may become a challenge in delivering orders within 30 minutes in large cities where traffic is high during peak hours.

To entice customers, Reliance won’t charge any delivery fee, platform fee or surge fee irrespective of the order value, and keep a major focus on untapped smaller cities and towns where quick commerce operators like Blinkit are yet to enter, the executive said. Other platforms have a delivery fee and platform fee.

Reliance plans to offer a wider choice of products of 10,000-12,000 stock keeping units by linking its entire store inventory to the quick commerce business, which too is much more than rivals.

Eventually, the company aims to cover 1,150 cities spanning 5,000 pin codes where it runs grocery stores. The executive said the company would target a bigger share of business from towns and smaller cities hitherto untapped by quick commerce firms.

“Reliance has reworked the way orders are delivered for JioMart. Earlier, orders had a scheduled delivery taking 1-2 days by small trucks who would take multiple orders and deliver them one by one. Now, all grocery orders will be quick commerce where one delivery bike or cycle will deliver one order. Each grocery store will cover a 3 KM radius,” the executive said.

Earlier this year, the company tried to reduce JioMart delivery timings to a few hours or at least the same day under its hyperlocal initiative. It has fine-tuned the process further to 10-30 minute delivery. “This has become a top-of-the-kind requirement in the market right now,” the executive said.

A spokesperson for Reliance Retail didn’t respond to ET’s queries.

Devangshu Dutta, chief executive at consulting firm Third Eyesight, said Reliance can ultimately use a blended approach of quick commerce deliveries in areas near its stores and scheduled deliveries a bit far away.

“Since they are in a market share acquisition mode in quick commerce, charging no transaction fees and offering higher discounts on products is a given. There is significant scope for deep-pocketed players like Reliance to strengthen presence in quick commerce. They have aggressively backed other experiments in the retail business once they worked, and may do it again,” said Dutta.

For fast-moving consumer goods companies, quick commerce is the fastest growing channel, accounting for 30-35% of total online sales.

(Published in Economic Times)

Why Piyush Goyal is concerned about India’s e-commerce boom

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August 31, 2024

MG Arun, India Today
Aug 31, 2024

Nearly five years after the Centre brought in norms to rein in multinational e-commerce companies operating in India, Union commerce minister Piyush Goyal sparked fresh controversy by raising concerns over the rapid expansion of e-commerce. He also drew attention to the pricing strategies used by some e-commerce firms, questioning what he termed “predatory pricing”.

“Are we going to cause huge, social disruption with this massive growth of e-commerce? I don’t see it as a matter of pride that half our market may become part of the e-commerce network 10 years from now; it is a matter of concern,” Goyal said at an event in New Delhi last week.

His comments come at a time when the ecommerce business in India is growing exponentially. Estimated at $83 billion (around Rs 7 lakh crore) as of FY22, the market is expected to grow to $150 billion (Rs 12.6 lakh crore) by FY26. The growth will be due to multiple levers: a growing middle class, rising internet penetration, the proliferation of smartphones, convenience of online shopping and increasing digitisation of payments. The overall Indian retail market was pegged at $820 billion (Rs 69 lakh crore) in 2023, according to a report published by the Boston Consulting Group and the Retailers Association of India. E-commerce still comprises only about 7 per cent of that, as per Invest India.

The Indian e-commerce market is dominated by global giants, including Amazon and Walmart (which took over Flipkart in 2018). They, along with domestic players, offer huge discounted prices compared to retail prices, which drives online sales significantly. In FY23, Amazon Seller Services and Flipkart posted Rs 4,854 crore and Rs 4,891 crore losses, respectively. Goyal’s argument is that these losses are due to their predatory pricing.

“Is predatory pricing policy good for the country?” Goyal asked, while stressing the need for a balanced evaluation of e-commerce’s effects, particularly on traditional retailers such as restaurants, pharmacies and local stores. “I’m not wishing away ecommerce—it’s there to stay,” he said. Later, he said e-commerce uses technology that aids convenience. But there are 100 million small retailers whose livelihood depends on their businesses.

The Centre has specific laws that permit foreign direct investment (FDI) in e-commerce exclusively for business-to-business (B2B) transactions. However, according to Goyal, these laws have not been followed entirely in letter and spirit. Currently, India does not allow FDI in the inventory-based model of e-commerce, where e-commerce entities own and directly sell goods and services to consumers (B2C). FDI is permitted only in firms operating through a marketplace model, where an e-commerce entity provides a platform on a digital or electronic network to facilitate transactions between buyers and sellers (B2B).

The country’s laws also stipulate that in marketplace models, e-commerce entities cannot ‘directly or indirectly influence the sale price of goods or services’ and must maintain a ‘level playing field’. Entities in the marketplace model re allowed to transact with sellers registered on their platform on a B2B basis. However, each seller or its group company is not permitted to sell more than 25 per cent of the total sales of the marketplace model entity.

Goyal said certain structures have been created to suit large e-commerce players with “deep pockets”. Algorithms have been used to drive consumer choice and preference. For instance, several pharmacies have disappeared, he said, and a few large chains are dominating the retail space. He invoked the importance of platforms like the Open Network for Digital Commerce where small businesses can sell their products.

E-commerce firms counter the argument on predatory pricing. “It is the sellers’ discretion as to what price they should sell at,” says an industry source. The e-commerce player who provides the platform seldom has a role in it, he explains. “Sellers could be doing clearance sales or liquidation of old products at cheaper prices. Some sellers also source products at manufacturing cost and park it with e-commerce firms instead of involving warehousing agents. This helps cut their overhead costs and allows them to offer lower prices on the platform,” he adds.

Some experts are of the view that the government should not step in with controls and allow the market forces to play their role in determining prices. Price controls may lead to shortages, inferior product quality and the rise of illegal markets. Moreover, the Competition Commission of India (CCI), which is mandated to act against monopolies, may be given more teeth. It is ironical that, on the one hand, the Centre wants more FDI to flow in, but places more and more controls on foreign players on the other hand. At the core are the interests of small traders and retailers, a key section of the electorate.

Others argue that the government has a role to ensure that there is fair competition. “It is not just small retailers the government would be speaking for, but for large domestic players too,” says Devangshu Dutta, founder of consultancy firm Third Eyesight, emphasising that the government’s role should be to establish laws and practices that promote fairness.

According to him, it is no secret that e-commerce has grown through discounts. “For large e-commerce firms, market acquisition happens by acquiring a share of the consumer’s mind and through pricing. When a large sum is spent on advertisements, it is for acquiring the mind share of the consumer,” he says. “Pricing matters in a big way too. Whether you call it predatory pricing or market acquisition pricing depends on which side of the fence you are.”

(This article was originally published in the India Today edition dated September 9, 2024)

D2C – Founders v Investors (video; panel discussion)

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August 30, 2024

In a startup world, founders are typically creators first while investors see themselves as the monitors. Therefore, conflicts between the two are almost a default feature of a relationship that in effect funds a dream. From ‘off’ chemistry to differences of opinion to what some founders see as shackles on entrepreneurial freedom, the reasons could be any or a mix of all. Watch this discussion, with a mega-panel of intense start-up founders on the one hand and investors with VC funds on the other, addressing the pain points on Cash, Control, Creativity, Chemistry and Culture in a supercharged encounter. Session Anchor, Devangshu Dutta (Founder, Third Eyesight) reflected, “Those who have heard classical music jugalbandi or witnessed jazz musicians jamming will appreciate the creative tension, the give and take that was the thread throughout this discussion, reflecting the reality of the relationship between entrepreneurs and VCs.”

Watch the video

INVESTORS:
Ankita Balotia, VP, Fireside Ventures
Aashish Vanigota, Principal – Investments, IvyCap Ventures Advisors Private Limited
Bhawna Bhatnagar, Co-founder, We Founder Circle
Nitya Agarwal, VP-Investments, 3one4 Capital
Harmanpreet Singh, Founder & Managing Partner, Prath Ventures
Vamshi Reddy, Partner, Kalaari Capital
Zoeb Ali Khan, Vice President, Sauce.vc

D2C FOUNDERS:
Abdus Samad, Founder, Sam & Marshall Eyewear
Akshay Mahendru, Co-Founder & CEO, The Pet Point & Nootie
Malvika Jain, Founder, SEREKO
Nitin Jain, Founder, Indigifts
Puneet Tyagi, Egoss Shoes
Radhika Dang, CEO & Founder, The Good Karma Company
Rahul Aggarwal, Coffeeza
Udit Toshniwal, Founder & Director, The Pant Project
Vaani Chugh, Co-founder & Director, D’chica
Yash Kotak, Co-founder, Bombay Hemp Co.
Yashesh Mukhi, Co-founder, Chupps

Big retailers, Reliance to Titan, slash jobs by 52,000 in FY24

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August 19, 2024

Sagar Malviya & Faizan Haidar, Economic Times
19 August 2024, Mumbai/New Delhi

About a dozen listed lifestyle, grocery retailers and quick-service restaurants (QSRs) reduced their employee count by nearly 26,000 in FY24, retreating from the hiring spree of the past two financial years after they slowed down store expansion rate amid weakening demand.

According to their latest annual reports, the reduction was completely led by five retailers – Reliance Industries’ retail arm, Titan, Raymond, Page and Spencers – which saw their combined workforce decline 17% or by 52,000 people. The staff count was across permanent and contractual employees and adjusted for attrition in the retail segment, the second largest employer after agriculture. These retailers had a combined workforce of 429,000 people in FY24 compared to 455,000 employees a year ago.

“There is a shortage of talent and we are trying to tie up with universities so that the industry has the option to hire. Some companies might have reduced staff due to shutting of some business, but companies like Shoppers Stop and Trent continue to expand and will require staff,” said Kumar Rajagopalan, CEO of Retailers Association of India that represents organised retailers in the country.

Consumers had started reducing non-essential spending such as that on apparel, lifestyle products, electronics and dining out since Diwali 2022 due to inflation, increase in interest rates, job losses in sectors like startups and IT, and an overall slowdown in the economy. India’s retail sales expansion slowed to 4% last year after a surge in spending across segments-from clothes to cars-in the post-pandemic period, triggered by revenge shopping.

RIL in its annual report said the overall voluntary separations in FY24 were lower than FY23 and the retail industry typically has a high employee turnover rate, especially in store operations.

“Store productivity usually happens in cycles and we have seen consumers unleash their spending post pandemic, which led to retailers expanding their network or square footage. However, if some of the stores are unviable, then management teams are now highly objective, even ruthless, and will shut stores,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “In addition, any company planning to list would like to have healthy and lean operations, although we cannot pin-point it to Reliance in this case.”

Weak sales saw these retailers having the slowest pace of store expansions in at least five years at 9%. The retail sector took 7.1 million square feet of space across top eight cities in 2023, which is expected to dip to 6-6.5 million sq ft in 2024, according to commercial real estate services firm CBRE.

“There’s an enormous management bandwidth requirement to just get this entire ship running in the right trajectory, right direction, and with the relevant speed. We are thinking about what this company will be 10 years from now. And hence, if you want to reach there in a nice way without too much damage or bruises, then what is the kind of talent we need to have today in the next 2 years, in the next 3 years?” Avenue Supermarts CEO & MD Neville Noronha asked investors.

(Published in Economic Times)

Uniqlo India profit jumps 25%, sales growth declines

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August 10, 2024

Faizan Haidar, Economic Times
10 Aug 2024, New Delhi

Japanese apparel major Uniqlo’s sales growth in India slipped by more than half to a still-strong 32% last fiscal year while its net profit expanded by 25%.

The Indian unit of Asia’s biggest clothing brand posted a net profit of ₹85.1 crore for the year ended March 2024 with net revenues of ₹824 crore, according to its latest filing with the Registrar of Companies (RoC). Uniqlo India had posted a profit of ₹68.1 crore with sales of ₹625 crore in the previous year. Its on-year revenue growth was 69% in FY23 and 64% in FY22.

Uniqlo opened its first door in the country in September 2019, but lockdowns and other constraints during the Covid-19 pandemic delayed its store expansion plans. At present, it has about 13 outlets in the country. Overall retail sales growth rate across segments such as apparel, footwear and quick service restaurants (QSR) fell year-on-year every month in FY24, reflecting comparatively weaker consumer sentiment.

Last fiscal’s comparatively slower 4-7% growth rate sustained this year as well, with May and June seeing a 3% and 5% rise each, Retailers Association of India (RAI) recently said after a survey of top 100 retailers.

“The market was sluggish for the industry as a whole last year, and that will reflect in practice every brand P&L, whether Indian or international,” said Devangshu Dutta, chief executive of retail sector consultancy Third Eyesight. “However, any brand that is committed to the Indian market as a strategic market for its future growth will take the ups and downs in its stride,” he said.

“Uniqlo’s expansion plans now include store sizes that would be smaller both in the cities it is already present in and in newer cities, which should help it tap into the demand at operating costs that are appropriate to each location,” Dutta said. Inditex Trent, Spanish fast-fashion major Zara’s joint venture with Tata that runs 23 stores in the country, saw its revenue rise 8% to ₹2,775 crore last fiscal, significantly down from 40% growth a year earlier, according to Trent’s annual report. Its net profit fell 8% on year to ₹244 crore.

Over the past decade, global brands Zara and H&M have become market leaders in the fast fashion segment in India.

Uniqlo has said India is one of the most priority markets where consumers are increasingly shifting from ‘fast fashion’ to long-lasting essentials and functional wear. As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.

Uniqlo is globally popular for functional basics like T-shirts, jeans and woollen wear, unlike fast-fashion rivals which are associated with designs that move quickly from the catwalk to the showroom.

(Published in Economic Times)