Avenue Supermarts, which runs the DMart retail chain, saw its online sales more than double during FY20 to Rs 354 crore despite operating only in Mumbai. The country’s most valuable retailer by market capitalisation, however, widened its net loss by 57% to Rs 80 crore in the four-year-old e-commerce subsidiary – Avenue E-Commerce.
A year ago, its online business – DMart Ready – posted sales of Rs 144 crore with a net loss of Rs 51 crore, according to the company’s latest annual report. Unlike grocery delivery startups like Amazon, BigBasket, and Grofers, which rely on the delivery-based distribution model, DMart’s online venture essentially has multiple delivery centres or pick-up points in catchment areas, where it has a store, so that customers can order online and pick up products from there.
DMart which operates over 214 stores said the current pandemic could significantly alter the new store rollout strategy for the industry that witnessed extended store closures, lower footfalls, and lean demand.
“E-Commerce has always been a focus area in the industry. The COVID-19 situation has further amplified the growing importance of this channel. Online grocery is still a relatively under-penetrated segment within e-retail, but has gained significant attention in the last few months as consumers have rapidly adopted online ordering of household grocery and other items,” the company said in its annual report.
Within the physical retail channel, DMart has better operational metrics such as cost to sales or invested capital than Aldi and Lidl, the German retailers that are often seen as benchmarks for discount retailing as they run some of the leanest retail operations globally. In fact, DMart stores generated revenue per square foot of Rs32,879, nearly three times compared to other grocery rivals in India.
According to a recent Nielsen report, e-commerce has been witnessing the fastest growth at 16% during the quarter ended June, but faced challenges of supply chain and last-mile delivery due to government regulations and movement restrictions in April that impacted last-mile deliveries badly. While online channels account for 3% of total fast-moving consumer goods sales, its contribution is over 9% in metros, said Nielsen.