THE SUCCESS STORY
FOR
D-MART
(SUPPLY CHAIN
MANAGEMENT)
SUBMITTED BY: - SAIF CHUNAWALA
T.Y MBA (EVENING) (SEM-6)
OVERVIEW
DMart is a one-stop supermarket chain that aims to offer customers a wide range of basic
home and personal products under one roof. Each DMart store stocks home utility products -
including food, toiletries, beauty products, garments, kitchenware, bed and bath linen, home
appliances and more - available at competitive prices that our customers appreciate. Our core
objective is to offer customers good products at great value.
DMart was started by Mr. Radhakishan Damani and his family to address the growing needs
of the Indian family. From the launch of its first store in Powai in 2002, DMart today has a
well-established presence in 168 locations across Maharashtra, Gujarat, Andhra Pradesh,
Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab and
Rajasthan. With our mission to be the lowest priced retailer in the regions we operate, our
business continues to grow with new locations planned in more cities.
The supermarket chain of DMart stores is owned and operated by Avenue Supermarts Ltd.
(ASL). The company has its headquarters in Mumbai.
The brands D Mart, D Mart Minimax, D Mart Premia, D Homes, Dutch Harbour, etc are
brands owned by ASL
FOUNDERS
DMart is owned and operated by Avenue Supermarts Ltd. (ASL) – a company founded by
Mr. Radhakishan Damani. Mr. Radhakishan Damani is respected in the business world as an
astute investor in the Indian equity market, he has built a company that constantly strives
towards developing a deep understanding of customer needs and satisfying them with the
right products. A firm believer in core business fundamentals and strong ethical values, Mr.
Damani has built DMart into an efficient, large and profitable retail chain that is highly
respected by customers, partners and employees alike.
MISSION
At DMart, we research, identify and make available new products and categories that suit the
everyday needs of the Indian family. Our mission is to provide the best value possible for our
customers, so that every rupee they spend on shopping with us gives them more value for
money than they would get anywhere else.
CUSTOMER SERVICE PLEDGE
At DMart, we place strong emphasis on excellence in customer service. Our employees rely
on the ACT formula to get the job done, with Dedication and Determination.
Action Care Truth
Focus: To be focused Respect: To respect every Integrity: By being open,
about what I do. individual in the honest and fair in all our
organisation and provide relationships and being
Motivated: To be clear of
her/him with the dignity respectful and trustful to
achieving my goal.
and attention to make others.
Enthusiastic: To love her/him believe that
We strongly believe that
what I do. she/he makes a difference
honesty and sincerity are
to the organisation.
critical in achieving
Listen: To listen and complete customer
resolve any employee / satisfaction. We welcome
customer grievance individuals who share our
quickly and fairly. values and believe in
leading by action.
PRESENCE
In addition to Mumbai, DMart has multiple stores in cities such as Ahmedabad, Baroda,
Bengaluru, Hyderabad, Pune and Surat etc.
Maharashtra Pune, Satara, Sangli, Solapur, Thane,
Kalyan-Dombivali
Amravati, Aurangabad, Ichalkaranji,
Jalgaon, Karad, Kolhapur, Nanded, Gujarat
Mumbai, Navi Mumbai, Badlapur, Mira
Ahmedabad, Anand, Baroda, Bhuj,
Bhayander, Panvel, Raigad, Vasai-Virar,
Gandhinagar, Mehsana, Nadiad, Rajkot,
Surat, Valsad
Telangana Andhra Pradesh Karnataka
Hyderabad, Warangal Kakinada, Tirupati, Bengaluru, Belgaum
Vijayawada
Madhya Pradesh Chhattisgarh NCR
Ghaziabad
Bhopal, Indore, Ratlam, Raipur
Ujjain
Tamil Nadu Punjab Rajasthan
Chennai Chandigarh, Jalandhar, Jaipur, Ajmer
Amritsar
HISTORY
DMart was conceived by value investor Mr. Radhakishan Damani in the year 2000, operating
a single store in Maharasthra. With a mission to be the lowest priced retailer in its area of
operation, DMart has grown steadily over the years and operates 155 stores in 11 States and 1
Union Territory of India.
By the late 1990s, Company’s founder, Mr. Radhakishan Damani, was already established as
one of the more successful and well-known value investors in the Indian equity markets.
Through his investing style, he had developed a very keen understanding of the Indian
consumer sector and its psyche.
He was anxious to start a business beyond investing, which would enable him to test his
hypothesis about the Indian consumer. After a couple of years of introspection and research,
he decided to start a grocery retail chain, focusing primarily on the value segment.
Thus, DMart retail chain, was conceived by Mr. Damani in the year 2000 and DMart took
eight years to start its first ten stores.
Avenue Supermarts Limited is an emerging national supermarket chain, with a strong focus
on value-retailing.
HOW DO THEY WORK?
We would stress upon the Sales Channel of FMCG to highlight the low pricing strategy of
DMart.
Many factors like Low Advertising, less Debt and own buildings contribute to less pricing.
One major factor lies in Dmart’s Purchasing power.
Let us see how a FMCG manufacturer distributes its products in India. Look at the below
picture, I have taken an example of a Soap manufacturing company distributing its product.
Factory manufactures soaps in Batches. Then, Stockists bulk break them into dozens,
Wholesaler and retailer to packets and at last consumer buys 2 -3 packs. Stockists buy really
huge quantities; hence they have bargaining power.
For ex: A Soap priced at Rs.40 will be sold at Rs 35 to Stockist, in turn stockist sells it to 37
to wholesaler, by the time it reaches consumer it will be sold at MRP 40 or 39.50.
DMart has 110 Stores spread across Indian Cities, DMart buys products for its whole 110
stores, the sales channel is almost direct now, DMart does not need many warehouses,
Inventory is at its store and consumer picks it up, Inventory turnover is optimal which cuts
down the storage costs.
With its direct bulk purchase DMart has eliminated middleman and the commission is passed
as discounts to consumers. Well, if you think all products are cheap in DMart then you are
wrong. FMCG products are used as anchor to sell its high margin products like Toys, Fruits
& Vegetables,Grocery & Staples,Crockery & Plastic Containers. Moreover, Dmart has its
own branded products in Grocery, Home & Personal Care section which has high margins.
Recently there were some protests by wholesalers on retailers picking products from Dmart.
Now, DMart has introduced Maximum purchase quantity restrictions at its stores to
discourage retailers and ensure only end users purchase products from them.
SWOT ANALYSIS
D Mart has multiple stores at various location across India and also a fairly well spread out
distribution channel. The company registered an annual revenue of 1.86 billion USD in the
year 2016 and the business is expected to also showcase a steady growth.
Strengths
Strengths are defined as what each business does best in its gamut of operations which can
give it an upper hand over its competitors. The following are the strengths of DMart:
Focus on long-term: Damani, the founder of D Mart is an investor and thus the company has
been focused entirely on long-term gains. This has made the company maximise its returns
through a value is driven pricing strategy.
Slow scaling up: D Mart started off on a very low-key note and slowly took its time to move
up the ladder. This gave the company a better control and deeper understanding of its supply
chain and also helped them manage the bottom line better.
People-centric management style: D Mart has a very good employee policy in place and is
very transparent in its employee relations. They also have a good relationship with vendors
and suppliers and the stakeholders are happy.
Discount Policy: One factor that delineates D Mart from its competitor is its huge discount
policy. The retailer sells essential goods at a flat discount price which most competitors
cannot match and this helped them penetrate the market.
Clear price-based differentiation: D Mart never followed the trends set by other competing
retail brands but believed in setting their own trends. They captured the market through a
clear price-based differentiation and priced their goods at significantly lower prices than
competitors.
Weakness
Weaknesses are used to refer to areas where the business or the brand needs improvement.
Some of the key weaknesses of D Mart are:
Focus on certain places: Quite unlike their competitors, who are present everywhere, D
Mart has focused more on the Western States and has a very low presence in the South. This
has restricted them from gaining market prominence.
Slow growth: D Mart has established almost 16 years ago much before the retail boom set a
fire in India. However, it has not been able to capture the market even as much as many of
the later entrants primarily because of its long-term focus.
Sustainability of low pricing: The company has a zero-credit policy and thus vendors and
suppliers give them a much better price which is how the company is able to afford the low
prices that the competitors cannot imagine.
No frills: D Mart follows a no-frills approach where the focus in to cut costs wherever
possible. Their facilities are basic and lack the frills of most upmarket retailers. The
customers who come here essentially look at the low prices of products on offer. Thus, the
sustainability of this differentiator is questionable.
Opportunity
Opportunities refer to those avenues in the environment that surrounds the business on which
it can capitalize to increase its returns. Some of the opportunities include:
Technology: Technology has a lot to offer to retailers in terms of in-store experiences and
retailer can use IoT, artificial intelligence etc to create value-adding services to their
customers for which a premium can be charged.
Personalization of services: Customers are looking for personalized services for which they
are willing to pay extra. Retailers should capitalize on this propensity to pay more and
increase the quality of their services.
Threats
Threats are those factors in the environment which can be detrimental to the growth of the
business. Some of the threats include:
Online retailers: People in cities especially are highly lethargic about leaving their homes
and prefer to shop online today. Companies like Amazon and Flipkart thus become major
threats to most retailers.
Online Start-ups: The hottest trend in India are online start-ups. Many of them are
aggregators who bring together the supplier and the customer cost-effectively. These
companies are the emerging threats more so because many new brands are cropping up in the
aggregation market primarily because of lower barriers to entry.
BUSINESS MODEL
Avenue Supermarts owns all its properties which eliminates rental cost. Rental costs typically
account for three to eight percent of total expenses of its peer group retailers. In the last 15
years, Avenue Supermarts has opened 112 stores based on a cluster approach, according to its
DRHP. It opens new stores within a few kilometres’ radius of its existing stores and
distribution centres targeting densely-populated residential areas with a majority of lower-
middle, middle and aspiring upper-middle class consumers. This helps the company reduce
the distribution cost and to understand local/regional needs.
Revenue Sources
53 percent of D-Mart’s revenue comes from the foods category which includes staples,
groceries, fruits and vegetables, snacks and processed foods, dairy and frozen products,
beverages and confectionery. Non-foods fast moving consumer goods accounts for 21 percent
while general merchandise and apparels make up the rest of its revenue.
Peer Comparison
Avenue Supermarts will have to compete against established players like Future Retail Ltd.,
V-Mart Retail Ltd., Trent Ltd., Shoppers Stop Ltd., and Aditya Birla Fashion and Retail Ltd.
in the listed retail space.
The company also has other unlisted retailers like Hyper city Retail (India) Ltd. and
Spencer’s Retail Ltd. to compete with.
Higher revenue and net profit per square feet does give D-Mart an edge over its peers as the
absence of rental costs helps the company deliver higher operating margins. Spencer’s and
Hyper city had losses at operating and net profit level in the financial year 2015-16.
Avenue Supermarts revenue has grown at a compounded annual growth rate (CAGR) of 40
percent, while the net profit has grown at CAGR of 52 percent.
Avenue Supermarts balance sheet is stable with lower debt-to-equity ratio and higher return
on equity.
Owning all its properties helps the retailer have an asset turnover ratio which puts it third on
the list of peers. It also has an edge in inventory turnover ratio which is driven by higher
sales.
Asset turnover ratio indicates the efficiency with which a company is using its assets in
generating revenue while inventory turnover ratio measures how fast a company is selling its
inventory. Global Peers Wal-Mart Stores and Costco Wholesale are the largest listed retail
supermarket chains by market capitalisation. Avenue Supermarts beats the world’s two
largest listed retailers on all parameters, except for debt-to-equity.
D-Mart’s average bill value and number of bills generated have been consistently growing
over the last five years, while the sales growth from same stores has been around 24 percent.
FUTURE AIMS
Avenue Supermarts, owner of D-Mart, aims to open 30 stores annually from an average of 20
stores in the last two fiscals and not necessarily own them
India’s most valuable retailer is choosing to veer away from its time-tested business rules as
it chases growth. Avenue Supermarts Ltd, owner of D-Mart, is looking to accelerate profit
and revenue growth by opening 30 stores annually from an average of 20 stores in the last
two fiscals. For this, it is willing to compromise on certain basic tenets of its business such as
owning its stores and focusing only on brick and mortar.
“We have progressed from opening around 10 stores per annum historically to 15-20 stores.
There is an opportunity for us to at least reach 30 per annum. That much is possible," said
Neville Noronha, managing director and chief executive officer of Avenue Supermarts.
The firm, which listed in March 2017, shot into the limelight with 114% gains on listing day
as investors welcomed its rather unadventurous but highly profitable business model.
In the first nine months of this fiscal, D-Mart posted a 28% gain in revenues and a 60% jump
in net profit. Yet investors are hungry for more. The D-Mart stock is trading at 71.37 times
expected earnings for the next 12 months and has seven “sell" ratings compared to four “buy"
and “hold" ratings.
To accelerate growth, Noronha said D-Mart is willing to forgo owning its stores.
So far, the company has followed an ownership or long-lease model, which has helped cut
costs and boosted margins. Since the beginning of fiscal 2018, D-Mart has maintained gross
margins of at least 7.5%, compared to the 3-4% margins of its nearest rival, Future Retail Ltd.
The firm is best known for its “everyday low cost, everyday low price" strategy, allowing it
to extend near-permanent discounts to customers on a daily basis. This helps it to churn
inventory quickly and aids profitability.
However, challenges in acquiring land at suitable locations, getting necessary permissions
and requisite approvals has prompted the shift in strategy.
“That’s why we’ve been a little less stringent," Noronha said, adding, “if you would have
said eight years back, whether we want to do a lease, we would have downright refused.
Today... we are open to it."
D-Mart is eyeing the states of Andhra Pradesh and Telangana for its next round of expansion.
As of 31 December, the company had 141 stores. At the end of fiscal 2017, as many as 68%
of its stores were located in Maharashtra and Gujarat.
The push comes at a time when the pace of store addition hasn’t been particularly impressive.
For the nine months ended December, D-Mart added 10 stores.
“Speed of opening new stores has to improve. There is an opportunity to do better there,"
Noronha had said when the December quarter results were announced.
By compromising on the firm’s basic tenets, he has addressed analysts’ concerns.
“Slippage in store additions as seen in 9 months FY18 (and) limited ability to increase store
additions to maintain growth contribution from new stores" will constrain sales growth, wrote
IIFL analysts in a 1 February report.
D-Mart is also looking to ramp up its e-commerce presence.
In January this year, Avenue Supermarts turned its e-commerce venture, Avenue E-
commerce Ltd, from an associate company (related to the parent via promoters) to a wholly
owned subsidiary. D-Mart promoter Radhakishan Damani owns a controlling stake in this
firm.
D-Mart has also recently stepped up promotional activity, and the company is seeing more
traction at its “click and collect" kiosks.
Apart from click and collect, the company is running home delivery pilots in “D-Mart dark
areas" in Mumbai—neighbourhoods in the city where D-Marts don’t exist. The company
charges for its home deliveries and is mainly focused on groceries.
BIBLIOGRAPHY
https://www.logolynx.com/topic/d+mart
https://www.dmartindia.com/about-us
http://www.marketsguruji.com/dmart-annual-report-analysis/
https://www.quora.com/How-can-dmart-sell-items-in-much-less-price-than-others
https://www.marketing91.com/swot-analysis-d-mart/
https://www.bloombergquint.com/markets/how-d-mart-stacks-up-against-peers
https://www.livemint.com/Companies/SXKP9ZP6AAdCSkj5TbFoEJ/Chasing-growth-D-Mart-rethinks-
store-strategy.html
