Avenue Supermarts Plays the Long Game as Quick Commerce Nips at Its Heels

India’s most celebrated grocery retailer is facing its toughest test yet. Avenue Supermarts’ DMart chain has long thrived on a promise of low everyday prices delivered through disciplined operations and store ownership. But that value formula is coming under strain as India’s quick-commerce boom changes how urban consumers shop.

Players like Blinkit and BigBasket are pushing groceries to doorsteps in minutes. That speed has reshaped customer expectations and eaten into DMart’s edge in densely populated cities. Same-store sales growth, a key indicator of operational health, slipped to about 7% in the April–June period from over 8% in the prior quarter. Margins have also narrowed, with EBITDA stuck below 8% for several quarters.

The squeeze is partly self-inflicted. DMart has had to choose between boosting promotions to keep customers spending and protecting profitability. Meanwhile, quick-commerce rivals frequently undercut prices to buy loyalty, making it harder for brick-and-mortar chains to hold the line on margins.

Little wonder then that some brokerages are cautious. Morgan Stanley rates Avenue Supermarts underweight, pointing to expensive valuations and heightened competition. The company trades at a hefty premium to peers, justified in the past by enviable growth, but now harder to defend as competitive pressures mount.

Yet DMart is not passively conceding ground. Its strategy, while conservative, is not static. The company continues its methodical cluster-based expansion, opening stores in new states like Uttar Pradesh, where large populations and less saturated markets still offer growth. Owning most of its real estate gives it an edge, shielding it from rising rental costs that hurt competitors relying on leases.

It has also been quietly pushing higher-margin private-label goods in apparel and home categories, now accounting for roughly a quarter of sales. This diversification helps offset margin pressures in staples. Meanwhile, its e-commerce arm, DMart Ready, grew revenue by 20% last quarter. Losses persist there, but the approach is deliberately measured, eschewing the cash burn seen in pure-play online grocers.

The strategy is about defending what works while adapting selectively. DMart remains a favourite for bulk shopping trips, especially for households seeking value on groceries and home goods. But it is realistic enough to avoid going all-in on e-commerce without a clear path to profitability.

Investors must decide whether that discipline is worth the price. Avenue Supermarts’ shares trade at a level that implies faith in continued expansion and eventual margin recovery. Revenue for the April–June quarter grew 16% year-on-year to ₹159.32 billion, thanks largely to new stores and operating efficiencies. The company has outlined ambitions to grow its network to 500 stores by 2027.

If it can do that while nudging margins back above 8%, today’s valuation might prove justified. But there are clear risks. Quick-commerce’s aggressive pricing tactics may continue to squeeze same-store growth in urban areas. Consumers may prioritise convenience over price, challenging DMart’s traditional draw. And efforts to scale up private-label and e-commerce businesses could take time to materially lift margins.

JP Morgan calls Avenue Supermarts “an exciting play on the under-penetrated but fast-growing organised retail industry” in India. That under-penetration is the prize, even as urban battlegrounds heat up, there is plenty of space in smaller towns and emerging cities where DMart’s disciplined, ownership-driven model can thrive.

For investors, the markers to watch are clear. Success in new states such as Uttar Pradesh will signal the viability of cluster expansion in less contested regions. Improvements in private-label penetration could ease margin pressures. And any move toward breakeven in e-commerce would demonstrate that DMart can compete online without sacrificing its operational discipline.

DMart is playing a long game in a changing market. The question is whether its proven formula of efficiency and steady expansion can adapt fast enough to justify its premium price.