29

Amidst the present global economic slowdown triggered by the pandemic, retail chain D-Mart has said that it has recovered 80% of its pre-lockdown business in stores that can function unhindered. The news that the grocery retail chain could bounce back after a few weeks of uncertainty and poor sales is a rare sign of hope and optimism in the otherwise gloomy business environment.

Though the quarterly result had not much to cheer about, the fact that the company was able to post a decent revenue and net profit was itself a big compliment. But the biggest push to the grocery retail business came from the country’s biggest business house, Reliance Industries, which said it was going to take on board some strategic investors in Reliance Retail. This will intensify the competition between Reliance Retail-JioMart and entities like D-Mart.

Avenue Supermarts that runs the D-Mart retail chain reported an 87.6% decline in net profit at Rs 40.08 crore in the June 2020 quarter. Its revenue dropped to Rs 3,883 crore in the first quarter of the current financial year as compared to Rs 5,815 crore in the corresponding quarter of last year.

The company has launched its online service in Mumbai and is slated to scale it up. It has also started home delivery of orders placed through its D-Mart Ready App. The service has now been discontinued due to the lockdown in many of the cities where the scheme was launched. 

After the quarterly results, the stock of Avenue Supermarts has reduced by 7.6% (July 11-14). The sliding of stock prices has a significant meaning as the company is currently valued at over 80 times its estimated FY21 earnings.

Investor sentiment towards Avenue Supermarts got another assault from Reliance Industries (RIL), which said it has received proposals from strategic investors for its retail business (Reliance Retail) which also runs the online grocery line JioMart. This was announced by the Chairman of RIL, who stated this at the company’s AGM early this month. He also made it clear that he would take some of these strategic investors on board.

Recently, RIL had announced a tie-up with WhatsApp and ‘kirana’ stores in its bid to give its online grocery platform JioMart a firm ground as the competition heats up for a larger share of the country’s retail business. JioMart is positioned to take on large, listed, and organised grocery retailers like Avenue Supermarts. Though Reliance Retail has ambitious plans for its grocery segment, it is currently more focused on the electronics business. In FY20, Reliance Retail posted Rs 1600 billion in revenues and Rs 9654 crore in operating profit, making it the country’s largest and most profitable retailer. The company is on track to double its operating profit to `18,400 crore in three years. The strong financials and sourcing efficiency that Reliance Retail and JioMart has together is hard to ignore or match. They also have a large client base and technological solutions at play.

Given their strong position, it’s interesting to see how JioMart and Reliance Retail execute their strategies and profitability. Their strong financials and unique positioning because of Jio connectivity puts them in a league of their own. As of now, Reliance Retail sources 80% of fresh fruits and vegetables directly from the farmers while JioMart is receiving 250,000 orders daily in about 200 cities that it operates in.

The effects of the pandemic on the supply chain on one hand and sales on the other, have left the retail market in a fix but because of its business model that keeps the prices competitive at its stores and customers rushing in, D-Mart is no easy pushover even if faced with the combined might of Reliance Retail and JioMart. In the increasingly competitive grocery retail market, D-Mart will not only have to redraw its strategies but will also have to be more ambitious with expansion plans to stay in the competition.