While Avenue's revenue from its online channel, DMart Ready, grew 21.5% year-on-year, it's not enough to compete with the aggressive pricing and speed of q-commerce players. In December, a comparison of grocery prices revealed that q-commerce platforms like Flipkart Minutes and Zepto were offering better deals than DMart Ready. For the first time, DMart Ready wasn’t the cheapest option, which has hurt its reputation for offering low prices.
This shift has impacted Avenue’s business, especially in urban markets, where it acknowledged that sales could drop by at least 2%. In FY24, DMart Ready brought in only Rs 2,899 crore, or just 6% of the company’s total revenue of Rs 50,788 crore.
Despite DMart stores still being competitively priced, consumers now prefer quick delivery, and DMart’s price advantage is more noticeable for large purchases, which means people still have to visit the store. However, the challenge lies in its e-commerce strategy. DMart Ready’s pick-up points haven’t kept up with the growth of q-commerce, which now offers up to 20,000 SKUs compared to just 2,000 two years ago.
To catch up, Avenue is planning to reduce its pick-up points from 340 to 250, but they need to ramp up home delivery services, which currently are only available in a few towns. The home delivery business is already growing faster than pick-up points.
However, Avenue still has a long way to go. Zepto, one of the top q-commerce players, recently said it could overtake Avenue’s sales within two years if it continues to grow at its current pace. Zepto’s revenue doubled to Rs 4,454 crore in FY24, and Blinkit’s revenue tripled to Rs 2,301 crore.
Experts believe that q-commerce companies are getting stronger, and while it’s uncertain whether the current prices will last, they could still hurt demand for DMart products in the short term. Blinkit’s gross merchandise value (GMV) already accounts for 42% of DMart’s revenue.
Q-commerce companies are also expanding their offerings and building “dark stores” near wealthy neighborhoods, giving them a competitive edge. These companies are able to sell at prices that match those of traditional retailers like DMart, while also offering quick deliveries, which makes them even more attractive to customers.
The growth of q-commerce is expected to continue, with estimates saying the sector could reach $50 billion by FY30, serving 60 million customers. With big players like Flipkart and Amazon entering the market, this shift could take a larger share of the e-commerce market, leaving traditional retailers like DMart in a more challenging position.
Although Avenue has low operational costs, the increasing discounting by q-commerce players like Flipkart Minutes is hurting their margins. Avenue already offers an average discount of 21% on groceries and FMCG products, and with more discounting happening in the market, it could impact the company’s profits.
To stay competitive, Avenue needs to act fast. Developing a strong and fast home delivery system is crucial for the company to maintain its growth, especially in metro cities. If Amazon’s upcoming Amazon Tez service competes effectively in the q-commerce space, it could pose even more of a threat to traditional retailers.
In conclusion, the rise of q-commerce is something Avenue Supermarts needs to address urgently. Quick delivery is becoming a basic expectation for consumers, and Avenue must catch up quickly to stay relevant in the fast-changing retail landscape.
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