- With
Reliance Retail acquiring FutureRetail ,DMart is the only remaining major competitor. - While
Mukesh Ambani is India’s richest man, he is followed by DMart ownerRadhakishan Damani . - Here’s how the two businesses function very differently in retail.
The Indian retail industry, which is worth $635 billion, will now see competition grow between Ambani with Reliance Retail and Damani with DMart. While Ambani has size, scale and technology on his side, he has a weaker foothold in the grocery segment that is literally emerging as the ‘bread and butter’ segment for all retail chains.
Even though Damani might have seen a fast rise to take the second richest spot in India, Ambani’s wealth is five times more than his.
DMart’s rise was credited to its ability to outbid kirana stores with heavy discounts — powered by smart sourcing— it wooed middle class Indians into organised retail. But now, Ambani with his deep pockets and the recent acquisition of Big Bazaar will pose bigger problems for DMart.
Ambani sells many more products in many more places whereas Damani has made a name in daily essentials in some parts of the country
While Ambani sailed through the lockdown phase, Damani’s single channel approach could also be the reason why the company’s profits took a major hit during the first three months of the current financial year.
Dmart continues to rely heavily on grocery for its revenue but the lockdown has tested his strengths – being an entrenched player with a focussed approach. DMart’s growth plan is based on a cluster based expansion model.
While DMart relies on customer visits and its 24*7 stores, having made a tryst with online by accepting orders from housing societies through WhatsApp during the coronavirus lockdown, Reliance has been making strides in ensuring a wide footprint across channels.
The lockdown has already tested the immunity of Damani’s model. “Higher exposure to some of the most impacted Indian districts and store closures in Apr (50% of network closed in Apr) manifested into a severe footfall loss, ergo revenue loss for D-MART,” said a report by HDFC Securities.
Reliance Retail along with its thousands of stores across tier-I, tier-II and tier-III cities has also established its online venture with JioMart. Having started with a pilot run in Navi Mumbai in December 2019, JioMart sprung into action during the lockdown and expanded its offerings to over 200 cities.
And Reliance Retail, whose revenue is currently driven by consumer electronics, will see a boost with Future Retail’s strong presence in grocery and fashion.
As a whole company, the variety in Reliance Retail’s offerings will also expose it to the cyclical nature of demand. For instance, some of the luxury products like the Hamley’s Toys or its partnership with global brands of apparel – Burberry, Armani, Steve Madden, Superdry – may take time to recover from the COVID-19 crisis.
So, Ambani has placed his cards on the moneybag of the future – the grocery segment, as according to a Goldman Sachs report, Ambani’s e-commerce bet JioMart is poised to sell half of all online grocery in India, which is expected to see 5 million orders every day by 2024.
And now, the $635 billion industry will now see a fight for dominance and will test whether Damani’s focus and resilience will be able to withstand the money power of Ambani.
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