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Reliance enters quick commerce by picking up 26 percent stake in Dunzo

While the funding will be used by Dunzo to branch out into other cities, what will Reliance get out of it?

Dunzo raised $240 million in its latest funding round led by Reliance Retail, which invested $200 million for a 25.8 percent stake in the quick commerce startup, a press release from Reliance revealed. This makes the oil-to-telecom conglomerate the biggest shareholder in the startup and values Dunzo at $775 million, up from about $300 million.

Dunzo started in 2014 as a hyperlocal, app-based delivery platform that picked and dropped packages but has since expanded to delivering grocery and food. The company in 2017 received funding from Google in what was the US giant’s first direct investment in a startup in India. Dunzo’s latest offering is Dunzo Daily, which launched in Bengaluru last August, and promises grocery delivery in 19 minutes.

What’s in it for Reliance?

With this investment, Reliance has officially entered the rapidly growing quick commerce segment joining players like Blinkit (formerly Grofers), Swiggy’s Instamart, Zepto, and Tata-owned Big Basket. This segment has an addressable market opportunity of $50+ billion, Reliance said.

Reliance will also leverage Dunzo’s hyperlocal logistics for delivery of products from its retail stores and JioMart merchants, the company said.

Speaking on the investment, Isha Ambani, Director, Reliance Retail Ventures Limited, said:

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“We are seeing a shift in consumption patterns to online and have been highly impressed with how Dunzo has disrupted the space. […] Through our partnership with Dunzo, we will be able to provide increased convenience to Reliance Retail’s consumers and differentiated customer experience through rapid delivery of products from Reliance Retail stores. Our merchants will get access to the hyperlocal delivery network of Dunzo to support their growth as they move their business online through Jio Mart.”

What will the funding be used for?

The funding will be used to “further Dunzo’s vision to be the largest quick commerce business,” and will focus on the startup’s two core businesses:

  1. Consumer delivery: Instant delivery of grocery and other essentials from a network of micro warehouses. Dunzo currently serves 7 metro cities in India and will use the additional capital to expand to 15 cities, the press release said. The company will increase its number of dark stores from 60 to 200 in the next 6-9 months, Kabeer Biswas, CEO and Co-Founder, told Economic Times.
  2. B2B logistics: Expanding its logistics business, which allows local businesses and merchants to use the company’s delivery fleet. The company aims to expand to 50 cities, Biswas told ET.

“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 & weekly essentials. We’re excited by the traction and velocity that Dunzo Daily has achieved and over the next 3 years, we aim to establish ourselves as one of the most reliable quick commerce providers in the country.” – Kabeer Biswas, CEO and Co-Founder, Dunzo

Why Dunzo chose Reliance over Tata?

Last year, ETtech reported that Tata Group was interested in investing in Dunzo, but the talks apparently hit a roadblock because the latter does not want to give up majority control. In an interview with Economic Times, Kabeer Biswas said that the company chose to partner with Reliance because of the independence and long-term support this partnership allows.

Biswas further indicated that Dunzo is planning to go public in the next three years and all investors are on board with this thought process.

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