What is the purpose of Reliance Retail picking up a stake in Dunzo?
Answer
Answer
Reliance Retail Venture shas picked up a 25.8% stake in Dunzo, which is a quick commerce company. Reliance will invest $200 million or approximately equivalent to Rs.1500 crore for a 25.8% stake in Dunzo. This values Dunzo in the range of $775 million to $800 million. This is sharply higher than the $300 million valuation that Dunzo had got in its last round of funding. There are several VC funds backing Dunzo, but first a word on why Dunzo?
There is a subtle change that is happening in retail order fulfilment. Gone are the days when you would order your home needs like provisions, toiletries and food products online and then you would be willing to wait for up to 24 hours to get the delivery. The new trend in the online commerce market is “Quick Commerce”. That means, if you place the order, then your order would be delivered at your doorstep in less than 30 minutes.
What does that actually require. It must be ensured that the last mile delivery mechanism is fine tuned to such an extent in Quick Commerce. The actual delivery in less than 30 minutes but it can be achieved in large cities with a complex network of technologically connected fulfilment centres or pick-up points. That is what Dunzo does to perfection. As much as this sounds very logistically complex, that is what the market is turning to.
Once you understand the idea of quick commerce, then the RRVL deal to buy Dunzo falls in place. Dunzo specializes in Quick Commerce and has been a highly sought after business by strategic buyers as well as by private equity investors. In fact, Dunzo was also simultaneously talking to the likes of Swiggy and Tata group also for a quick commerce front end. Out of the total funding of $240 million, Reliance will bring in $200 million.
How does it fit into the Reliance Retail plan? For RRVL, Dunzo is a natural for the JioMart business. On the one hand, JioMart has an amalgam of technology and supply chain management in one single platform. However, rapid commerce was still missing. The acquisition of Dunzo will also fill up that gap as Dunzo will ensure rapid delivery across India as the front end for Reliance Retail. Quick commerce is actually seeing a big interest.