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regular-article-logo Thursday, 20 June 2024

Flipkart considering potential acquisition of Dunzo, talks with Reliance Retail in progress

A TechCrunch report said discussions had been held in recent weeks on the buyout of the hyperlocal delivery firm but the complexities in Dunzo’s ownership structure had posed challenges

Our Special Correspondent Mumbai Published 22.02.24, 09:06 AM
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Walmart-owned Flipkart is considering a potential acquisition of Dunzo, the quick commerce start-up that is backed by Reliance Retail.

A TechCrunch report said discussions had been held in recent weeks on the buyout of the hyperlocal delivery firm but the complexities in Dunzo’s ownership structure had posed challenges.

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The report added that both parties were continuing to negotiate to find a way to break the gridlock.

In January 2022, Reliance Retail Ventures Ltd (RRVL) had announced it had spearheaded a $240 million investment in Dunzo. RRVL houses the organised retail business of Reliance Industries.

Reliance Retail had said at that time that it would acquire a 25.8 per cent equity stake in the Bangalore-based firm. It also struck a business partnership under which Dunzo would provide hyperlocal logistics to Reliance group’s retail stores.

Dunzo was supposed to facilitate last-mile deliveries for JioMart’s merchant network. It was Reliance group’s second investment in this segment after acquiring Milkbasket in 2021.

Reliance group officials refused to confirm the talks. The spokesperson for Dunzo denied that talks had been held and added that the company was looking towards cash breakeven by March.

For Flipkart, which competes against Reliance Retail and Amazon among others, the potential acquisition comes at a time when instant delivery firms are facing challenges in a post-Covid era with people stepping out for purchases. The popularity of these companies had soared during the pandemic and continued for a while after.

Dunzo has also reportedly struggled to secure funding even as it faced competition from rivals such as Zepto, Swiggy and Zomato’s Blinkit.

Dunzo currently serves Bangalore, Pune, Mumbai, New Delhi, Chennai, Hyderabad and Gurgaon. It delivers food, grocery, medicine, pet supplies, fruits and vegetables, meat and fish, health and wellness products, and gifts.

A recent report from Bernstein said quick commerce now accounts for around 40 per cent of the online grocery delivery category. Blinkit is the market leader with around 40 per cent market share.

“Quick commerce has a potential TAM (total addressable market) of $45 billion (7 per cent of the grocery market of $620 billion). The serviceable market is metros/Tier 1 cities (17 per cent), mid to high income households (60 per cent), and top-up orders (70 per cent). We estimate quick-commerce GMV (gross merchandise value) to grow to $6.2 billion by 2025,” the Bernstein analysts said.

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