With IPO, Swiggy Has Big Retail In Crosshairs

The Swiggy offer consists of a fresh issue of Rs 4,499 crore and an ‘Offer for Sale’ of Rs 6,828 crore, open for three days from November 6, with share allotments scheduled for November 12. Markets are agog that big investors, including Norway’s sovereign wealth fund and Fidelity, have bid US$ 15 billion in Swiggy’s US$ 1.35 billion IPO, 25 times the reserved amount.

Apart from Swiggy, the week will also see public offers in the mainboard segment from Acme Solar Holdings, Sagility India and Niva Bupa Healthcare.

Back to Swiggy, what’s more significant than the valuation and FII interest is the lifestyle-shift it signals. With neighbourhood stores having been wrested, Swiggy and other home delivery firms are now targeting retail’s big boys like Big Bazaar, Shoppers’ Stop, Reliance Retail, Spencer’s Retail, D’Mart and a flush of others.

From Economic Pillar To Retail Giants

Retailing is one of the pillars of the economy, accounting for 10 per cent of the Gross Domestic Product (GDP). Estimated in 2022 at US$ 856 billion, India’s retail market is among the fastest-growing worldwide, servicing 1.4 billion people and expected to scale US$ 2 trillion by 2032, according to India Brand Equity Foundation and Boston Consulting Group.

While the rise of the food delivery and ‘quick commerce’ market — called so because goods are delivered in minutes — is great news for angel investors, and signals changing dynamics, it has been the worst possible development for millions of around-the-corner kirana shops. Most have shut shop, curtailed operations or branched into new fields, such as electric appliance repairs, plumbing, stationery and sale of sundry items and services.

Their sights are now trained on organised retail. It is the sheer size that makes the resultant market math difficult to comprehend, but the profitability angle is easy enough to salivate over. A sector with Rs 84 lakh crore in revenues is set to grow to Rs 200 lakh crore in seven years. In early 2023, there were 7.8 billion e-commerce transactions daily, conducted by 150 million shoppers. That number is forecast to grow to 15 billion transactions and 600 million individual shoppers by 2032, the BCG report says.

Middle-Class Leading The Transformation

It is the middle-class that is leading the charge, with urban consumers purchasing goods like apparel, cosmetics, footwear, watches, beverages, food, and even jewelry online. Leisure activities such as sports (thus, gear and equipment) and gaming (thus, screens, consoles, hardware, and accessories) are also turning into booming businesses for the people who steer the humble delivery boy and his e-bike.

The transformation began when food delivery apps quietly created home delivery armies. The guy headed to your home with burgers and fries, or dosa and sambhar, suddenly began getting your bread, butter, cauliflower, and apples as well. A new way of thinking and buying daily essentials was born. Also born was a genie who could satisfy most buying whims 24x7.

As initial quality and quantity issues were sorted out, the little genie grew up to become the carrier of your new mobile phone, mixer-grinder and watch too. And in his zest to never be called lazy, he branched into shaving razors and toilet cleaners, without letting go of the holy satchel in which he carried cough syrups, condoms, and morning-after pills.

What Are Big Retailers Doing To Stay Relevant?

In three words, they are “tightening their belts”. At its core, retail involves buying at wholesale prices and selling at a mark-up. This price difference forms the basis of their existence. Of course, traditional stores also spend on rent, utilities, salaries, marketing, and inventory management. All that is being scaled down now.

The traditional, physical retail market is expected to touch revenues of US$ 1.7 trillion by 2026, up from US$ 883 billion in 2020. The segment, which makes up 12 per cent of the total retail market, saw frenetic growth till 2019, when the pandemic hit, but the market recovered in 2021. The going was on planned lines for a year till July 2022, when the new home-delivery genie fully popped out of the bottle.

Old-school retailers have a paradoxical ace up their sleeve, that of facing the delivery brigade on its own turf. Large retailers are going online in an attempt to subjugate the genie to the status of a mere errand or delivery boy, cutting him out of a larger piece of the pie.

Bricks-and-mortar firms from Jaipur, Agra, Surat, Ahmedabad and Ludhiana have also increased focus on online sales. To complete the availability matrix, they now have warehouses and ‘dark stores’ in Hyderabad, Ghaziabad, Coimbatore, and Pune, to meet regional demand, according to the India Retail and E-Commerce Trends Report by Unicommerce and Wazir Advisors.

Big Bazaar and Reliance Fresh will not give up tamely. Rather, they have joined the fight head-on. In a nutshell, there is a battle being fought in cyberspace and inside boardrooms for every ‘Buy Now’ click Indians make on their phones.

Shift Will Come At A Huge Cost: Livelihoods

Mind you, if it happens, the shift will come at a huge cost. Apart from the contribution to GDP, India’s retail industry is the world’s fifth largest, and accounts for 8 per cent of overall national employment. In fact, even the World Bank recognised Indian retail’s deep intertwining with the larger economic picture, ranking it at #63 in its ‘Doing Business 2023’ listing.

As app-based home delivery businesses like Swiggy, Zomato, Zepto, BlinkIt and others seed new markets and buyers, they are also creating jobs for riders and spurring two-wheeler and e-bike sales. In the process, they have begun making a dent in the longevity of sales teams in large retail chains, and some will pay the ultimate price by losing their jobs. There are two sides to every coin. For now, the retail coin is standing on its head.

(The writer is a veteran journalist and communications specialist. Views expressed are personal)