Avenue Supermart: a compounding machine? (26-10-2024)
Coming back to dmart, I sometimes think what stops them from joining the quick commerce bandwagon? Any company into retail can spend some bucks and do what the quick commerce people are doing…some of them did start for a while but soon realized something and stopped. Even the big daddy, RIL started with Jiomart online and pushed the pedal but I see more focus on their premium signature stores rather than online quick commerce now. Imagine even the cash rich disrupter big daddy remained out of the quick commerce thing…did it get afraid of competetion from blinkit or instamart? I dont think so…All these players thought something and took the decision they took. I see only The Tatas as one big player with vision into probably quickcommerce via Bigbasket. This again happened via acquisition. I was naive and was not so pleased at that time that acquisition did not happen via Trent. Glad now it happened outside of Trent.
So point its, the day Dmart want to change the switch, use its dmart ready network and do a bit of quickcommerce it can do that or maybe start with a smaller player acquisition etc. but it does not want to do it. It did try the hybrid model via dmart ready which may not be serving big purpose now but it maybe giving them some idea about the data which these quickcommerce people narratives have. With the cluster based approach of dmart, they maybe as close to your house as a quickcommerce warehouse one day…
Will this strategy be detrimental over long run? Here trust factor works. Trust on management, promoters and the minds running the show…as honestly no one else knows nothing, including me 
Disc. Invested hence biased. Trent is largest hilding, Dmart in top 10. Views only for learning and not a buy/sell recommendation. I can be wrong in all my assessments.
Avenue Supermart: a compounding machine? (26-10-2024)
Generally, food business has high margins say about 30-50% for restaurants if they run successfully. Zomato/Swiggy unable to take their share in this business to be profitable.
They have found their advantage in the delivery network they established and pivoted to quick commerce to see if it works. The existing retail stores, DMart and others are unable to make more than 10% margins out of this business. How will quick commerce come out as a profitable business in this sector. If that has to happen, more than 10% of the population should be working as delivery boys struggling to meet their ends due to the high unemployment in India.
Even Amazon with its massive delivery network failed to become successful with Amazon Fresh. Do you think Amazon is able to make profits by selling only third party products on its platform? NO, they have created their own products with high margins to become profitable and sustainable.
Big Basket is operating in the grocery delivery segment for over a decade, they are able to sustain because of their own procurement products which are costly compared to the DMart prices. Hence it was never a competition threat to DMart which caters affordable segment.
So the quick commerce business cannot create their own products to compete with big FMCG companies and capture market share from retailers in a long run to become profitable and sustainable.
As Investors we should focus on understanding the business models more than the financials and ratios.
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Avenue Supermart: a compounding machine? (26-10-2024)
Indeed it looked other way. No one in public knew about Lehman collapse until it happened. So either the stars were fantastic with this acquisition or we did not know things back then. whatever maybe the case, such a big acquisition out of IPO money looked odd. But still its 2.6L cr company, for now!