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India quick commerce boom forces Ambani to change tack

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Retail unit valued at over $100 billion, plans fast

deliveries

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Ambani aims to deploy new business model at 3,000

supermarkets

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Analysts say not easy to run business from customer-facing

shops

By Dhwani Pandya and Aditya Kalra

NAVI MUMBAI, India, Oct 30 (Reuters) - Asia's richest

man Mukesh Ambani is mimicking the strategy of popular Indian

grocery startups to drastically change how his retail empire

operates: from home deliveries that can take a day or two, his

business is now targeting a 10-30 minute service.

Quick commerce has reshaped how Indians shop as Zomato,

SoftBank-backed Swiggy and Zepto now promise deliveries from

their neighbourhood warehouses within 10 minutes, even beating

Amazon ( AMZN ). These multi-billion-dollar quick commerce

businesses, though loss-making, have disrupted sales of

mom-and-pop stores and supermarkets as people opt for quick

deliveries of everything from milk and chocolates to Apple ( AAPL )

iPhones.

The sector has become too hot, too fast for Ambani's

Reliance to ignore, even though experts say its late

entry will face challenges including a lack of small-scale

warehouses and running the business from supermarkets focused on

walk-in customers.

Datum Intelligence estimates quick commerce sales will hit

$6 billion this year, up from just $100 million in 2020.

Reliance plans to leverage its 3,000 supermarkets in 1,150

cities for quick deliveries by deploying small teams operating

from dedicated kiosks inside, according to three people familiar

with its strategy and Reuters' visits to outlets near Mumbai,

where the service was launched this month.

The sources provided previously unreported details of order

volume targets, delivery plans and links to Reliance Retail's

long-awaited IPO.

Reliance's bet is sparked by changing shopping trends. A

recent Datum survey of 3,000 Indian quick commerce shoppers

showed 36% had reduced shopping at supermarkets and 46% cut back

purchases from mom-and-pop stores.

"Reliance is making an entry as quick commerce is already

impacting modern retail and will also impact Reliance stores,"

said Satish Meena, an adviser at Datum.

Reliance is aiming for a 10-30 minute delivery window

because it does not believe customers need orders within 10

minutes and the longer timeframe will help ensure the business

is sustainable, said the first person.

Ambani wants to ensure quick commerce helps bolster its

business ahead of an IPO of Reliance Retail, which was last year

valued at $100 billion, has backers including KKR, two

of the sources said.

Reliance runs the biggest brick-and-mortar retailer in

India's $600 billion grocery market, though it still plays

catch-up with Amazon ( AMZN ) in e-commerce.

Reliance did not respond to Reuters' queries.

CHALLENGES

Reliance is betting a wider product portfolio at its

supermarkets - some of which stock more than 10,000 items - will

help distinguish its offering from smaller rivals, though it has

decided not to add any new warehouses, the sources said.

Once expanded nationwide in coming months, Reliance expects

quick commerce to help take daily orders on its JioMart app from

around 200,000 now to roughly 500,000, said the second person.

Like he did with mobile data offerings, Ambani has a strong

reputation of using cutthroat pricing to disrupt businesses he

enters. But cracking quick commerce will not be easy.

Rahul Malhotra, a senior analyst at Bernstein, said quick

commerce needs neighbourhood warehouses for fast deliveries

under 10 minutes, so any large retailer will need to offer

superior product selection and cheaper pricing to ensure

customers are willing to wait for up to 30 minutes.

A former Reliance executive who declined to be named for

fear of reprisal said many stores are multi-storied and items

are located far from each other on shelves, making quick

packaging difficult, a task further complicated by in-store

crowds.

Inside two Reliance stores in Navi Mumbai, Reuters found

distinct "Q-Commerce" areas have been created for stocking

frequently ordered items such as noodles, dairy products and

chocolates. Riders outside waited for app alerts to pick up

orders.

Ajit Karande, a Reliance store manager, said an eight-member

team had been tasked to "completely focus on quick commerce",

adding "we need to bill and pack the items within 10 minutes."

Earlier visits to IPO-bound Swiggy's Instamart and

Zomato's Blinkit warehouses by Reuters showed workers

there are mandated to pack orders in under two minutes.

'TOP RIDER', 'BOTTOM RIDER'

The rapid quick commerce growth appears to be hitting the

supermarket business.

Reliance Retail, which does not break down its grocery,

fashion, electronics and telecom revenue, in October reported

its first quarterly revenue decline in at least three years - a

1.1% fall in July-September sales to $9 billion.

Zomato's Blinkit sales surged 122% to $730 million in that

period and recorded average growth of 103% in the last six

quarters, when Reliance Retail's average stood at 13%, Bernstein

said. But Reliance has reported profits for years, while Blinkit

remains loss-making.

While Reliance has not commented on quick commerce stress,

its rival DMart, which has 377 supermarkets, said this

month it can "clearly see the impact of online grocery formats"

on its big-city stores but has declined to compete in that area,

leading several analysts to downgrade the stock.

Reliance's "Hyperlocal" grocery service has begun in a

handful of Navi Mumbai and Bengaluru stores and will next be

launched in cities like New Delhi and Chennai, a fourth source

said, adding there was a plan to incentivise its delivery

drivers with weekly bonuses to boost the business.

The company also plans to rope in quick delivery startup

Dunzo, in which it holds a near 26% stake, to further beef up

its delivery fleet, said a fifth source. Dunzo declined comment.

To lure customers and trump rivals, Ambani is using free

delivery.

In Mumbai, customers can use Reliance's JioMart app to get a

40 rupees ($0.48) can of Coca-Cola delivered free. Rivals impose

levies such as "small cart fee" and "high demand surge" of up to

65 rupees on such an order.

At the Reliance store in Belapur near Mumbai, riders are

tracked by the minute. A whiteboard inside names "Top Picker"

and "Top Rider" to acknowledge efficiency, and "Bottom Picker"

and "Bottom Rider" for slow work.

A "customer order has to be delivered in 30 minutes," said

Supriya Naik, a JioMart delivery executive.

"I need to run around a lot."

($1 = 84.0610 Indian rupees)