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Reliance catches up to ride India’s fast-moving business wave
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Reliance catches up to ride India’s fast-moving business wave

Reliance catches up to ride India's fast-moving business wave

A Reliance delivery boy leaves to make a delivery in Navi Mumbai | Credit: Reuters/Francis Mascarenhas

Asia’s richest man, Mukesh Ambani, is imitating the strategy of popular Indian grocery startups to radically change the way his retail empire works: home deliveries that can take a day or two, his The company is now aiming for a service of 10 to 30 minutes.

Fast commerce has reshaped the way Indians shop as SoftBank-backed Zomato, Swiggy and Zepto now promise deliveries from their neighborhood warehouses within 10 minutes, beating even Amazon. These multibillion-dollar fast-trading companies, although loss-making, have disrupted sales at mom-and-pop stores and supermarkets, with people opting for quick deliveries of everything from milk and chocolates to Apple iPhones.

The sector has become too dynamic, too fast for Ambani’s Reliance to ignore, although experts say its late entry will face challenges, including lack of small-scale warehouses and management of business from supermarkets focused 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 tap its 3,000 supermarkets in 1,150 cities for rapid deliveries by deploying small teams operating from dedicated kiosks indoors, according to three people familiar with its strategy and Reuters’ visits to outlets near Mumbai, where the service launched this month.

The sources provided previously unseen details on order volume targets, delivery plans and links to Reliance Retail’s long-awaited IPO.

Reliance’s bet is driven by changing purchasing trends. A recent Datum survey of 3,000 Indian fast-food shoppers showed that 36% had reduced their purchases at supermarkets and 46% had reduced their purchases at mom-and-pop stores.

“Reliance is entering because fast commerce is already impacting modern retail and will impact Reliance stores as well,” said Satish Meena, advisor at Datum.

Reliance is aiming for a delivery time of 10 to 30 minutes because it doesn’t think customers will need orders within 10 minutes and a longer time will help ensure the sustainability of the business, the first person said.

Ambani wants to ensure that fast trading helps strengthen his business ahead of the IPO of Reliance Retail, which was valued last year at $100 billion and whose backers include KKR, two of the sources.

Reliance runs the largest brick-and-mortar retailer in India’s $600 billion food market, even as it continues to catch up with Amazon in e-commerce.

Reliance did not respond to Reuters’ questions.

Reliance is betting that a broader product portfolio in its supermarkets – some of which stock more than 10,000 items – will help distinguish its offering from smaller rivals, even though it has decided not to add new warehouses, said the sources.

Once expanded nationwide in the coming months, Reliance expects fast commerce to help take daily orders on its JioMart app from around 200,000 now to around 500,000, the second person said .

As he did with mobile data deals, Ambani has a reputation for using cutthroat pricing to disrupt the businesses he enters. But it won’t be easy to set up a quick trade.

Rahul Malhotra, senior analyst at Bernstein, said fast-paced commerce needs proximity warehouses for fast deliveries in less than 10 minutes. Therefore, any large retailer will need to offer superior product selection and cheaper prices to ensure customers are willing to wait up to 30 minutes.

A former Reliance executive, who declined to be named for fear of reprisals, said many stores are multi-story and items are far apart on shelves, making it difficult to pack quickly , a task further complicated by the crowds in the stores.

At two Reliance stores in Navi Mumbai, Reuters found that separate ‘Q-Commerce’ zones had been created to stock frequently ordered items such as noodles, dairy products and chocolates. Passengers outside waited for app alerts to collect orders.

Ajit Karande, Reliance store manager, said an eight-member team had been tasked with “completely focusing on fast commerce”, adding “we have to invoice and pack the items within 10 minutes”.

Earlier visits by Reuters to Swiggy’s Instamart and Zomato’s Blinkit warehouses en route to the IPO showed workers are tasked with packing orders in less than two minutes.

“Upper runner”, “Lower runner”

Rapid growth in trade appears to be affecting the supermarket sector.

Reliance Retail, which does not break out its revenues in the grocery, fashion, electronics and telecommunications sectors, in October announced its first quarterly decline in revenue in at least three years – a drop of 1 .1% of sales from July to September at $9 billion.

Zomato’s Blinkit sales jumped 122% to $730 million during this period and averaged 103% growth over the past six quarters, compared to Reliance Retail’s average of 13 “, Bernstein said. But Reliance has been profitable for years, while Blinkit remains in deficit.

Although Reliance has not commented on the rapid trade tension, its rival DMart, which has 377 supermarkets, said this month that it could “clearly see the impact of online grocery formats” on its stores in the major cities, but refused to compete in this area, leading several analysts to downgrade the stock.

Reliance’s “hyperlocal” grocery service has started in a handful of Navi Mumbai and Bengaluru stores and will later be launched in cities like New Delhi and Chennai, a fourth source said, adding that there are plans to incentivize its delivery drivers with weekly bonuses to boost the business.

The company also plans to tap fast delivery startup Dunzo, in which it has a nearly 26% stake, to further strengthen its delivery fleet, a fifth source said. Dunzo declined to comment.

To attract customers and win over competitors, Ambani uses free shipping.

In Mumbai, customers can use Reliance’s JioMart app to get a 40-rupee ($0.48) can of Coca-Cola delivered for free. Competitors impose levies such as ‘small cart fees’ and ‘high demand surge’ of up to Rs 65 on such an order.

At the Reliance store in Belapur, near Mumbai, riders are monitored down to the minute. A whiteboard inside names “Top Picker” and “Top Rider” to recognize efficiency, and “Bottom Picker” and “Bottom Rider” for slow work.

“A customer order needs to be delivered within 30 minutes,” said Supriya Naik, head of delivery at JioMart.

“I need to run a lot.”