Dmart’s e-commerce bet has become outdated, not intuitive

Good morning (%first_name |Dear Reader%),

A few weeks ago, my friend Aakriti wrote a provocative plot on quick-commerce firm Zepto’s latest fundraise. She argued that despite being smaller than Zomato’s Blinkit and Swiggy Instamart, Zepto has managed to catch the attention of both VCs and stock investors.

Hence this headline I love: Zepto is a bronze medalist who wins medals quickly and behaves like a gold medalist

Further evidence of this came last week when Zepto co-founder and CEO Aadit Palicha he said that sooner or later his company will be bigger than Dmart.

“Dmart is a $30 billion company, and their sales are only 4.5 times ours. If we continue to do well, we will grow 2-3 times every year. And potentially overtake them in the next 18-24 months.”

I wouldn’t be surprised if that gave you pause. I was certainly a little confused.

Dmart is no ordinary grocery chain; it is India’s most valued listed retailer, as well as the country’s second-largest supermarket operator. In fact, Dmart makes even the global retail giants seem ordinary, like me he wrote in April.

I wonder if Radhakishan Damani, the legendary investor and astute entrepreneur who founded Dmart two decades ago, read this story and said to himself, “I want the same thing this guy is smoking.”

Damani and loyal Dmart investors have every reason to underestimate Zepto at this point. Despite its size, Dmart is yet to open stores in large parts of the country. Its only stores in Uttar Pradesh, India’s most populous state, are limited to the National Capital Region, and it doesn’t have a single outlet in either of the two other major states, Bihar and West Bengal. But for the likes of Zepto and Blinkit, there’s no market worth talking about outside the top 10 cities, at least for now. That’s why I suspect Damani isn’t losing any sleep over the growth of fast-paced retail.

But this release isn’t about Zepto. It’s not even about Dmart supermarkets. Instead, Palicha’s statements got me thinking about Dmart trying to crack e-commerce.

Dmart Ready was launched in 2017, the same year Dmart was listed to rave reviews. But it was the pandemic that really got Dmart thinking about online sales. That had a lot to do with its closest brick-and-mortar rival Reliance Retail launching its own e-commerce operation Jiomart in 2020.

This is what I he wrote in August 2021, about a year after Jiomart’s launch:

I cannot emphasize enough how counterintuitive this seemed at the time.