Pitted against JioMart, Amazon and others, Radhakishan Damani’s DMart has opted for “controlled acceleration” in e-commerce

• DMart’s growth in e-commerce still doesn’t seem as bullish as its competitors.
• DMart in its third quarter earnings said that it’s still going slow with e-commerce with ‘controlled acceleration.”
• The Radhakishan Damani-led company managed to post profits worth ₹470 crore, accounting for a year-on-year growth of 19.3%.

One of India’s biggest retail players, DMart, has posted a strong show in its third quarter earnings, but a big part of the investors’ focus was on how India’s second richest man, Radhakishan Damani, geared up for competition from the likes of JioMart, Amazon and Flipkart.

While most brokerages seemed content with the progress made by DMart Ready (the e-commerce vertical), the company itself called it ‘controlled acceleration.”

DMart Ready – still going ahead with soft launches

By the end of October, 2020, DMart finally gave in to the needs of e-commerce and geared up to take on the next phase of growth with small steps in its online retail offering – DMart Ready.

Neville Noronha, CEO & Managing Director of Avenue Supermarts said that in the third quarter the company continued with the soft launch of DMart Ready in select pin codes of Ahmedabad, Bangalore and Hyderabad. Within their brick and mortar stores, they have also leased space for Avenue E-Commerce Limited (AEL).

But DMart’s growth in e-commerce still doesn’t seem as bullish as its competitors. “Post Covid-19 environment is creating opportunities to launch DMart Ready in more cities. However, we will continue with our approach of small trials, reviews and controlled acceleration for DMart Ready,” he said.

Earlier in the second quarter of FY21, the company had said that it would be shutting down two stores in Mumbai and turning them into fulfillment centers for its e-commerce operations. "One each in Mira Road and Kalyan. Both these locations have an alternate DMart store within 4 km," Noronha had said in a statement.

Analysts too pointed out the slow growth in e-commerce. "Over the long-term, we like the soft launch of ecommerce operations in some cities, however, focus continues to be brick and mortar stores and e-commerce ramp up will be a slow process, in our view," said a report by ICICI Securities.

However, analysts also believe that it’s e-commerce steps could make for a substantial long-term growth. “We believe the aggression on e-commerce along with potential market share gains in modern trade channels bodes well for long-term growth sustenance,” said a report by Edelweiss.

The report also mentioned competition from heavyweights like India’s richest man Mukesh Ambani’s e-commerce debut JioMart, Walmart-owned Flipkart and global e-commerce giant Amazon as one of the key risks for Avenue Supermarts.“We expect a period of consolidation in the stock with investors waiting to see the impact of aggressive online competition in the grocery space,” said a report by YES Securities.

This has further boosted its share price on Monday morning to ₹3,007 (as of 11.15 am). DMart’s stock has already run-up nearly 30% in the last six months and its market cap is nearing ₹2 trillion.

Third quarter earnings boost: Brokerages have raised the target price


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