So what do the numbers tell us?
1️⃣ DMart - Avenue Supermarts Ltd saw revenue growth and same-store sales growth (SSSG) fall to a multi-year low in Q2FY25, and called out the impact of online grocery formats on DMart stores in large metros as a key reason for this
2️⃣ However, in Q3FY25, DMart's revenue growth and SSSG bounced back to their usual range
3️⃣ And impressively, this happened in a quarter where QC growth *accelerated* vs the previous quarter. If we look at Q3FY25 combined figures for Blinkit and Swiggy Instamart, dark stores grew by 83% (vs 64% in Q2), and GOV grew by a dizzying 108% (vs 103% in Q2). And Zepto also grew aggressively during the quarter, from all indications; scaling up Zepto Super Saver from Bangalore to other cities
So what could have helped DMart to return to strong revenue growth?
Other than their own secret sauce, there are 2 factors which can be observed:
🟩 As a CLSA note in Jan'25 highlighted, DMart continues to have the lowest prices on FMCG products, as compared to the QC platforms. Zepto Super Saver comes close - but DMart is still the leader
🟩 Quick commerce continues to be concentrated in the top 8 metros, which account for ~80% of overall GOV - while only ~35% of DMart stores are in the top 8 metros (estimated through a manual search on Google Maps). So it's likely that over 50% of DMart's sales come from outside the top 8 metros, where QC hasn't yet gained as much traction
(That being said - an analysis of 46 new cities launched by Blinkit and Instamart over Jun'24 till date shows that nearly half of them had populations of under 5 lakh in 2011 - so clearly QC is exploring smaller towns too. How will this play out? Time will tell)
👉 But then what caused the sudden dip in DMart's revenue growth in Q2FY25 (which was attributed to online grocery formats)?
Here's my hypothesis: Jul-Sep'24 saw a significant increase in QC competitive intensity. With additional fundraises and new entrants on the horizon, the big 3 players likely stepped up user acquisition efforts and drove a significant shift of shoppers from MT to QC.
But over Oct-Dec'24, the low-hanging fruit of easy-to-switch shoppers was probably exhausted, and DMart also no doubt put the pedal to the metal to regain lost ground.
So from where we stand now - I'd say that the race is long, and it seems to only just be getting started.
Swipe through the attached deck to see charts and more details 🧐
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This is part of CausaliTea, a series where I analyze trends across FMCG, other B2C industries and macroeconomic developments, to understand the underlying drivers behind them. Tap on the hashtag or visit my profile for more like this ✏️
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