QC’s biggest dependency is cheap labour costs. As far as I am aware, this is why it has been successful in EMs but not in DMs.
As a country, we have two paths ahead: we will make productive use of our demographic dividend and get richer per capita or risk falling into the middle-income trap.
In the former, the labour force should flow into more lucrative manufacturing jobs and there might not be enough cheap labour for QC. The burgeoning middle class should expand consumption for all products and the terminal value factored in D2C business shall be realised.
In the latter case, where we stagnate, while cheap labour remains available for service, the consumption could stagnate and the terminal value of D2C businesses evaporate.
If drone delivery materializes based on regulations, and costs, this could help boost QCs and will be a further detriment to the physical retail model.
GMV per sq. ft. INR 46,682 for DMart vs INR 89,756 for Blinkit, Both are leaders in their field. Dmart may be at pick of his store level GMV efficiency whereas B can able to improve further. Also note that GMV of B includes part of high value electronics like iphone, PSP where as that may be lower for D.
Though QC is efficient can be concluded.
Total Retail Space 14.2 million sq. ft. for Dmart vs 1.6 million sq. ft. for blinkit
Disc: Invested in Zomato and views are biased towards Zomato
IMO its unfair to compare the two business models…although good to know as information on the potential of QC for incumbents, as and when they decide to enter it, if they enter it.
It is better to compare both as this brings out the pros and cons of both the business models.
Dmart was standing out exceptionally in retail segment when compared to big bazaar, reliance retail, more, etc due to its unique business acumen. Now in the same space someone else is coming in with a different model.
No As per me. Let’s think,
Data doesn’t include warehouses area.
As per me, it’s fair comparision, in case of Dmart, people come to store for purchase, whereas in QC delivery man are in dark store for purchase. Both have same function, no?
Wondering, if we can compare different models of business.
Qcom operates on franchise model which is asset light. D Mart is majorly having its own land /stores. The former will thrive on building it’s faithful network ready to pay delivery charges vs the latter capitalising on margins with a mix of products ( branded FMCG vs their in house private labels ). Q com need to develop expertise in staples ( major contributor in the kitchen) still , which is a Dmart forte.
Geographical footprints for both differ significantly and the consumer for both differs big in the profile, hence both business demanding separate approach to bind the customers.
Customer care in Blinkit has a long distant runway while it comes to win the trust of its buyer’s while in D Mart , you have easy access to the customer care. Q com has least control to affirm is quality. Online fraud ( a recent one like gm issue in a gold coin delivery by Blinkit ) is detrimental for the growth beyond a limit.
Both to co exist since convenience and value can’t supersede each other
IMO , and again I can be wrong, but quick commerce is no retail for me….it is rather data & technology and use of cheap labour. They are hugely dependent on ability of consumers to shell out the extra buck because of convenience rather than on retail models and strategy.
They are banking on the bucks of investors and affluent consumers…
While the likes of dmart are honing their skills for the long term….
I must give credit to QC companies for their technology and apps…something to adapt and learn…but tech can always be first quickly outsourced and then learnt…
Hence it’s important to understand the QC model but comparing the technicalities apple to apple with likes of dmart may present an unrealistic extremely gloomy picture for the incumbents….
QC companies are thriving today also because incumbents chose to stay away….in a country like India, how many people would graduate to from buying a local Kirana to a local dmart vs from a dmart to a QC app paying extra buck is something to keep track….I am sure dmart management is doing that closely….
Disc. Invested biased & transactions this month as well. Not a buy sell recommendation
I agree. But labour cost was not a deterrent for qc even in developed countries like USA. So many qc companies in USA for a country with less population while India has a good population and per capita income is rising leading to people giving more importance to convenience, time saving over cost.
I do not know about other QC companies, will try to read about them and the article …but uber is an aggregator while likes of blinkit are selling someone else’s products (fmcg companies) hence labour cost management would be more critical for blinkit than an uber…for uber, an increase in labour cost would mean lesser margins but for blinkit it may mean survival….
I believe it’s not fair to compare DMart with Quick commerce companies. I see QC more like a logistics provider with wafer thin margins and no entry barrier, Moat. For that matter DMart, JIO or any other brick and mortar store can easily enter this space if more customers lean towards online shopping or leverage Dunzo like services.
DMart will survive as long as the Costcos, Walmarts and IKEA draws customers who are inclined towards in shop experience
I think everyone’s getting caught up in a wrong discussion of whether to compare qcomm with DMart or not. Just using first principles - retail is a game of customers purchasing some goods. How does it matter whether goods come via kirana store or supermarkets or ecommerce or quick commerce? The bottom-line is if a customer buys from one channel, the other channel is bound to get hurt unless customers are making incremental purchases. IMHO, the convenience of quick commerce is definitely hurting kiranas and stores
Recently visited my hometown and saw Shubham K Mart just next to DMart. Just to check the difference, walked into the store and felt prices are same for most the product. DMart has much larger store with more SKU for home appliances, clothes etc.
But I felt K-Mart is much better lit than most DMart’s are. Also, they were expanding the store so probably will have more options in my next visit. They have more stores across Chhattisgarh.
It will be interesting to see if DMart is able to fight this competition in local level. If there is a choice in terms of available SKU with same prices. There is no reason to pick DMart specifically over any other local player. Also, competitors will just have to copy the Avenue Supermarts playbook.
It will be fun to see if Avenue Supermart is able to manage competition in local level with incoming competition from Jio mart etc. to justify rich valuations.
This article gives the impression that DMart Ready faces an existential threat. I don’t know why users would pay higher prices for next day delivery when there are at least two competitors who deliver within minutes at lower prices.
Does anyone know what the approximate price difference is between DMart stores and DMart Ready?
Disc: I was invested in DMart until a few years ago and currently holding competitor Zomato
In my case, we often find that there is price difference on some products these days. Typically ₹10-15 difference especially on some larger items (e.g. 2L liquid detergent). I get the impression that about 75% of the product prices are same.
Are these Quick delivery services cash burning business or really profit maker ? If yes, Can they continue to make profit as long as cheap delivery agents are available ?
As far as I can tell, quick-commerce services make profit at a certain AOV. Blinkit became EBITDA positive earlier this year at an AOV between 600-650.
Zepto’s Super Saver option says minimum cart value is 999 to place an order. So for discounted prices (where DMart competes in), the sweet spot for profitability would be at an AOV of 1000+.
Quick-commerce has proven to be viable in other countries. In South Korea, major supermarket chains are all into quick-commerce. DMart’s reluctance in fully embracing e-commerce, forget about quick-commerce, has been perplexing.
