Retirement equity portfolios are best benefitted by change leaders, which are companies that are successful in changing business models to become the company of choice for the future. D-mart is definitely a change leader though it is not on the listed space.
D-mart an India home grown supermarket chain present in Central and Western part of India started small, but over a period of one and a half decades, has beaten many big retailers on the basis of revenue. The chain has managed to open 89 stores since its inception in the year 2000. The company generates highest per store revenue against its biggest rivals. As per a report in Business Standard, Avenue Super Marts Ltd (ASL), the entity that runs D-mart, clocked revenues of Rs 33.5 billion in 2012-13, which makes it the third largest retailing company in the country after Kishore Biyani’s Future Retail and Mukesh Ambani-owned Reliance Retail. But on a per store revenue basis, D-mart tops the chart by posting average per store revenue of Rs 515 million (from 65 stores in the year 2013). Since then the company has increased its stores to 89.
Is there any lesson to be learn from D-mart’s success? Yes there are many lessons that are learnt from D-mart, especially for those who run family owned Kirana stores, for them to know how to remain in tune with changing market environment. D-mart is also an example for businesses that want to step in to the retail segment in India to take the advantage of growth in the segment. India’s retail market is expected to double to USD 1 trillion by 2020 from USD 600 billion in 2015 and the growth is expected to be driven by high income, change in attitude of the consumer and urbanisation.
Food & Grocery account for nearly 70% of revenues in retail. The reason why this particular segment generates this much percentage of revenues is because of its FMCG (Fast Moving Consumer Goods) products, which brings back the consumer more frequently to the store than in any other segment. The only factor that causes worry in this segment is the bottom line, since the margins are low and that is where the big player take advantage of volume.
D-mart, which started its business as a small player way back in the year 2000, has focused on cost control since its very beginning by keeping it low-profile. The company confidently competed head on with the local kirana stores and has made the difference in its business by avoiding shopping malls and this has helped the company to reduce its expense on renting or buying huge spaces, where there are limited shoppers for daily food & grocery. Targeting local kirana stores and opening stores in a residential area or at a place which is easy to access, the company has opened itself to a huge base of shoppers.
Focus on location where there is a lack of any supermarket will play a vital role in the success of the store as it is expected that there is going to be a change in attitude of consumers, which will drive the footfall. There is an increasing population who like to do shopping under one roof for its smallest needs and if a store is easy to access, then both store and consumer will benefit.
Another important factor that D-mart has focussed, is the pricing of the products. Every product in a store has a discount, which makes consumers keen on coming and buying from D-mart. In fact, the discounts start from a low of 2% (the minimum it claims to offer) going up to as high as 50%-60% for some items. Local kirana stores rarely give any discount on Max. Retail Price, which has given an advantage for D-mart to attract footfalls, which has led to strong top line for the company.
Now many would be wondering how D-mart has manage to offer such high levels of discount. D-mart has a practice of paying its suppliers much faster than its rivals, which helps the company to build strong relations with its supplier and in turn gets supplies at a cheaper price. D-mart pay its suppliers in less than a week’s time in contrast to most of the other retailers who enjoy credit period of 30-60 days.
D-mart in its stores sells non-branded clothes as well, which are comparatively cheaper than branded clothes. This segment has also seen increasing footfalls, as every locality has a good population that are not fanatically brand conscious and always look for value for money proposition.