Project Topic: Rise of D-Mart

Point of discussion:

1. How did D-Mart rise to become an offline giant in the retail space? Why was it able to dominate
the retail space despite strong competition from its peers?
2. Will D-mart survive in the post pandemic world and the onslaught of competition especially
from online players in the coming decade?

Why we chose D-Mart?

It is one of the few brick and mortar players which grew into a profitable retail giant. To analyse
strategy adopted by D-mart which has helped it survive for 20+ years in the Indian market against stiff
competition from players such as Future group, Spencer’s retail, Aditya Birla retail, Reliance retail, Star
Bazaar and other regional chains such as Heritage, Nilgiris, Vishal mega mart etc. We will also analyse
whether D-Mart’s strategy is sustainable in the coming decade against changes in the macro-economic
environment.

Data points

1. Financial statements of D-Mart

2. Interview with Grocery Head of D-mart

3. Analyst/BCG/McKinsey reports

India Retail market:

Overall:

 Indian retail market is projected to reach approximately $2 tn by 2032 from 690 $ Bn in

2021
 India currently has the 4th Largest retail market in the world
 Indian retail market recovered from pandemic lows and grew 10% yoy from 630 $ Bn to
reach 690 $ Bn in 2021
 India ranked No. 2 in Global Retail Development Index (GRDI) in 2021.
  Growth in income will transform India from a bottom of the pyramid economy to a truly
middle-class led one, with consumer spending growing from $1.5 tn today to nearly $6
tn by 2030

10% - Contribution to India's GDP

8% - Share in India's employment
10% - Growth rate of retail sector over 2021-32
12% - Share of Organised retail of total retail market
Ecommerce:

 With 830 million users, India is currently the 2nd largest internet market
 The E-Commerce market is expected to touch $350 Bn in GMV by 2030
 India’s digital economy is expected to touch $800 Bn by 2030
 Online shoppers in India are expected to reach ~500Mn in 2030 from +150Mn in 2020
 As of 2021, there were 1.2 Million daily e-commerce transactions
 The total value of Digital transactions stood at $ 300 Billion in 2021 and is projected to
reach $ 1 Trillion by 2026

Avenue Supermarts

Avenue Supermarts Limited is an India-based company which owns and operates DMart stores.
DMart is a supermarket chain that offers customers a range of home and personal products
under one roof. Each DMart store stock home utility products including food, toiletries, beauty
products, garments, kitchenware, bed and bath linen, home appliances and others. The
company offers its products under various categories, such as bed and bath, dairy and frozen,
fruits and vegetables, crockery, toys and games, kid’s apparel, ladies’ garments, apparel for
men, home and personal care, daily essentials, grocery and staples, and DMart private label
brands. DMart has a presence in over 196 locations across Maharashtra, Gujarat, Daman,
Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu,
Punjab, and Rajasthan. The company has multiple stores in cities such as Mumbai, Ahmedabad,
Baroda, Bengaluru, Hyderabad, Pune, and Surat. In 2020, company plans to expand its business
to Delhi and widen its presence in the country.

 234 stores
 45 locations
 Total income of Rs. 23,996.10 crore (US$ 3.25 billion) in the year ended March 2021.
 Total revenue for the quarter ended June 30, 2021 stood at Rs. 5,183 crore (US$
701.07 million), as compared to Rs. 3,883 crore (US$ 525.23 million) in the same
period last year.
2021
In September 2021, DMart forayed into Haryana, opening a 94,000 sq ft store in
Faridabad
DMart closed its two retail stores in Mumbai and converted them into fulfilment
2020
centres to cater to its growing e-commerce business in the city.
The company opened stores in the National Capital Region, Rajasthan, and
2017
Daman
The company opened 21 stores, highest in any financial year. The store count of
2016
the company increased to 110
2015 The company opened stores in Madhya Pradesh and Chhattisgarh.
2014 The store count of the company increased to 75 stores.
The company was converted from a private company to a public company and
2012 the name of the company changed to Avenue Supermarts Limited. The store
count of the company crossed 50 stores.
2011 The company opened stores in Andhra Pradesh and Karnataka.
2010 The store count of the company crossed 25 stores.
2007 The company opened its first store in Gujarat.
2003 The company opened its first store in Powai, Mumbai.
2001 The company was incorporated as Avenue Supermarts Private Limited.

 D-mart stores are operational in high traffic areas and across three formats including –
Hypermarkets, that are spread across 30,000-35,000 sqft, Express format, that is spread over 7,000-
10,000 sqft and lastly, the Super Centers, that are set up at over 1 lakh sqft.

1. How did D-Mart rise to become an offline giant in the retail space? Why was it able to
dominate the retail space despite strong competition from its peers?

Founded by stock market veteran Radhakishan Damani

Background: Investor & Failed attempt in operating a franchise of Apna Bazaar

Target Customer: Middle and Low income group

 Their prices are on average 6-7% lower than many other offline retailers.
 EDLP (Everyday low price) strategy - Generate more customer loyalty and is also known to make
consumers spend more when inside the store
 High Inventory Turnover - Dmart has striven to stay away from higher value items and only
keeps everyday use items such as food and groceries. DMart strives to have an inventory
turnover that does not exceed 30 days, while competitors have an average turnaround time of
70. This means that Dmart can get their products off their shelves in less than 30 days, which
helps them save on costs to maintain unsold inventory and storage costs.
 Low Payable Days: Retail industry’s standard credit period - around 30 days; DMart – 8 -11 days.
Hence, better discounts (2-3% ) from vendors which they pass on to the customers of Dmart.

 Low operating cost: DMart not only optimizes its operations but also actively lowers its
procurement costs(buy their products in bulk and huge volumes), both of which it passes on to
its customers. They work on a low interior cost concept. They optimize their floor space
utilization by putting more products in lesser space and having fewer billing counters, which
reduces their employee costs. Unlike bigger retailers, costs are further kept low by keeping a
basic and economical layout without any high investments
These efforts have helped them reduce their bills as shown in the graph below:-
 Store ownership and location: 90% of these stores are owned directly by Dmart, they don’t pay
monthly rentals. While this is a capital expenditure for the company, it saves on the huge rental
costs, which can be a huge proportion of their revenue.
Secondly, DMart places its stores very strategically in the suburbs and in tier 2 and tier 3 cities
where operating costs will be lower. They avoid opening stores inside malls since that involves
huge Common Area Maintenance charges. This amounts for almost 6-10 % of its sales.
 Low debt and interest costs - DMart has a very low amount of debt on their balance sheet which
means they don’t have to incur huge interest costs that reduce their profits.
 Advertising : Promotions in & around store locations via hoarding and newspaper with latest
offers and schemes. There is a mega saving for DMart by not advertising on television and other
avenues as the brand is well know.

3. Will D-mart survive in the post pandemic world and the onslaught of competition especially
from online players in the coming decade?

Challenges faced due to pandemic:

 Fewer operating hours

 Lesser footfall in the store
 Stores sealed after employees tested positive for Covid.

Result of this: excess inventory and lesser revenues for the brand.

Solution:

 Investing in new retail properties and pick up points

 Expand ecommerce operations by launching DMart Ready pick up & delivery services in
numerous cities.
 Two different service options for online user. 1. order online and collect from the nearest
DMart pick up point as per customers convenience and zero service charges. (This saves
them from high investment and running cost required for home delivery service. )2. Home
delivery with nominal fee.
  Bulk Orders: Housing societies can order food items in bulk at low charge. This way sale is
done in bulk, less manpower is required and goods are delivered safely to it’s customers.

Even during this critical time, DMart was able to supply food and essential items to the masses thus
preserving the trust of it’s customers. Its online channel DMart Ready contributed less than 1% to
the parent company’s overall revenue a couple of years ago. But it’s trying to catch up. And DMart
Ready now contributes around 3% to the topline.

Porters Five Force:

1. Threats of new entrants – Medium

 Initial capital investment is high
 Fulfil strict and time consuming regulatory requirements
 Brand Loyalty
 Building distribution network.
2. Threat of Substitute - High
 Low switching cost
3. Competitive Rivalry: High
4. Bargaining Power of Suppliers – Medium
5. Bargaining Power of Buyers – High

While DMart has also recently made strides into E-commerce through DMart Ready, its offline presence
still commands the lion’s share of its revenue. Offering the widest assortment of products. The success
of DMart can clearly be attributed to its unique strategy that focuses on maximizing customer value.

Other points:

have also cut their marketing spends by 30-40 % in the last couple of years to save costs.

By 2012-13 – Dmart had soared its revenues from Rs. 260 crores in 2006-07 to Rs. 3,334 crores, making
them India’s third-largest branded retail chain.

The amazing part was that, what Future Group with 1000 stores was clocking (turnover of Rs.14,201
crores), and Reliance Retail was clocking (Rs.10,800 crores) with 1450 stores; Dmart was achieving with
just 65 stores, which weren’t PAN India. Their sales per store was somewhere close to Rs. 53 crores,
while Reliance was making around Rs. 7.45 crores per store.
 Population Statistics 2011:

Income Distribution 2011

00%
3% %
20% Poor - 19.8%
Low income - 76.9%
Middle Income - 2.6%
Upper Middle Income - 0.3%
High Income - 0.1%

77%

Ref: https://www.populationu.com/india-population