Reliance Industries, India’s largest conglomerate by market capitalization, has forayed into quick commerce amid intensifying competition in the rapidly growing sector.
The retail arm of the oil-to-internet conglomerate, Reliance Retail, has led a funding round of USD 240 million in hyperlocal services startup Dunzo, with participation from existing investors Lightbox, Lightrock, 3L Capital, and Alteria Capital, the company said on Thursday.
Of the total capital, Reliance Retail pumped USD 200 million into Dunzo for a 25.8% stake, becoming its largest shareholder. As per a report by local media Economic Times (ET), the deal has pushed Dunzo’s valuation to USD 775 million, up from USD 300 million.
Dunzo is one of the key players in the country’s soon-to-be USD 5 billion quick commerce market—wherein players promise delivery of goods in 15–30 minutes after an order is placed. Notably, Google is an existing investor in Dunzo as well as Reliance’s digital arm Jio Platforms.
Founded in 2015, Dunzo delivers groceries and essentials, fruits and vegetables, meat, pet supplies, food, and medicines in major cities. It also has a separate service to pick up and deliver packages within the same city. In August 2021, the company jumped into quick commerce by launching a new service, Dunzo Daily, to deliver essentials and household items in 19 minutes.
The startup had been looking to raise over USD 100 million to grow its business since last year and was engaged in talks with salt-to-software conglomerate Tata for the same. However, the deal came to a standstill over how much stake Tata can acquire in Dunzo.
Tata’s strategy has been to bring startups under its wings by acquiring a majority stake as it aligns with its vision to create a super app—a one-stop-shop for its consumer services. Reportedly, Kabeer Biswas, CEO and co-founder, didn’t want to cede control of the startup to the USD 103 billion conglomerate.
“The idea was to be able to work with a long-term partner in the business. We want to go ahead as an independent entity and be able to find a way to go public,” Biswas told ET in an interview.
Reliance’s foray into quick commerce
Quick commerce has been on the rise in the South Asian nation since last year, on the back of the wide adoption of internet-based services and millions of urban millennials’ willingness to pay a premium for convenience. Towards the end of 2021, competing with Dunzo Daily, rivals including food delivery giant Swiggy, Tata-owned e-grocery platform BigBasket, Zomato-backed e-grocer Grofers, and e-retailers Flipkart and Amazon ramped up their investments to grab a bigger piece of the market. Hence, it became imperative for Dunzo to choose a bigger, more powerful backer to maintain its market share in e-grocery and quick commerce space.
“With this investment from Reliance Retail, we will have a long-term partner with whom we can accelerate growth and redefine how Indians shop for their daily and weekly essentials,” said Biswas in a statement. “We’re excited by the traction and velocity that Dunzo Daily has achieved, and over the next three years, we aim to establish ourselves as one of the most reliable quick commerce providers in the country.”
The Bengaluru-based startup will use the fresh funds to expand its quick commerce business to 15 cities by the end of the year. Currently, Dunzo is present in seven cities and offers Dunzo Daily in Bengaluru. The company plans to create a network of micro warehouses to make instant deliveries. It works with about 15,000 local merchants to facilitate deliveries for its customers.
Under the investment deal, Dunzo will also enable hyperlocal logistics for retail stores operated by Reliance Retail, the two companies said in a statement.
The Mumbai-headquartered conglomerate entered the online grocery market amid the COVID-19 outbreak in April 2020 through a new e-commerce platform, JioMart. While it started as a grocery delivery platform, JioMart gradually expanded to apparel and personal care segments.
JioMart is a joint venture between Reliance Retail and Jio Platforms and leverages the supermarket chains owned by Reliance Retail as well as local kirana stores to facilitate deliveries, which usually take one to two days. With Dunzo enabling logistics for Reliance Retail, it is likely to help JioMart provide faster last-mile deliveries.
“Through our partnership with Dunzo, we will be able to provide increased convenience to Reliance Retail’s consumers and differentiated customer experience through the rapid delivery of products from Reliance Retail stores,” said Isha Ambani, director at Reliance Retail Ventures Limited. “Our merchants will get access to the hyperlocal delivery network of Dunzo to support their growth as they move their business online through JioMart.”
Aside from serving Reliance Retail, Dunzo will also power last-mile deliveries for local merchants. This will mark its entry into the B2B segment. According to Biswas, the company is aiming to take its B2B business to 50 cities.
A competitive edge for Dunzo over competitors
The handshake with Reliance will give Dunzo an upper hand over its competitors. Since last year, quick commerce has attracted almost a billion dollars in investments.
In December, Swiggy announced it would invest USD 700 million in its express grocery delivery service Instamart. The Bengaluru-headquartered company launched Instamart in Bengaluru and Gurugram in mid-2020 to deliver high-demand grocery and household goods to customers in 45 minutes. The company is now focusing on deliveries in under 15 minutes.
That same month, e-grocery firm Grofers rebranded as Blinkit to underscore its new focus on quick commerce. Until mid last year, the eight-year-old Gurugram-based platform focused on value over convenience, delivering orders in a few days. Following a USD 100 million check from Zomato in June 2020, it shifted gears and began focusing on fresh produce and grocery delivery within 10 minutes.
Aside from these established players, there is a new kid on the block. Quick commerce startup Zepto, which started in early 2021 and promises 10-minute deliveries, has raised about USD 160 million across two rounds so far. Its valuation has already shot up to USD 570 million.
Furthermore, Tata-owned BigBasket—the category leader in the country’s e-grocery segment—is reportedly in the process of launching express delivery service BB Now, which will deliver groceries to customers’ doorsteps in 10–20 minutes.
Meanwhile, Walmart-owned Flipkart, which has a 90-minute delivery service called Flipkart Quick, is reportedly aiming to make deliveries in 30–45 minutes this year. On the other hand, Amazon has sharpened its focus on grocery delivery, including fruits and veggies, in major cities since early 2021 and currently delivers essentials within 30–120 minutes under its service Amazon Fresh.