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Reasons for success
While a majority of Indian retailers, both brickand-mortar and online ones, struggle to build profitable businesses, the acutely lowprofile Mumbai-based DMart has given a new lease of life to the challenging sector as it debuted on the capital markets with a bumper opening.
The supermarket chain, which has chosen to focus geographically on specific clusters of west and south of the country instead of expanding across states, has emerged as a model to emulate.
“D-Mart has been focussed on providing value to their customers. They do that by maintaining a tight and relatively small assortment.They carry only fast moving SKU's (stock keeping unit) and avoid long tail while paying suppliers on time which helps them get a huge mindshare among them. Also, owning properties helps them in their unit economics and customers love them for the value they offer,“ said Hari Menon, co-founder and CEO, BigBasket, an online grocers.
The other key differentiator for D-Mart has been its selective expansion since the time it opened its first store in Mumbai in 2002. When most big retailers during middle of 2000 rushed into big cities, the Radhakishan Damani-owned retail chain took a more conservative approach. Also, it stood out for focussing on the neighbourhood supermarket format unlike its peers like the Future Group and Reliance Retail which experimented with multiple formats and categories.
“D-Mart is very distinct from other retailers. Anybody who understands retailing would know that sticking to the basics is what works.Whether it's getting the unit economics right, having a strong supply chain and ven dor relationship, they've got the simple principles of retailing right,“ says Arvind Singhal, chairman & MD at retail consulting firm Technopak.
They work with their vendors instead of squeezing them which keeps their supply chain efficiencies high.
Shilpa Kumar, MD & CEO of ICICI Securities, which was part of the listing process, said foreign and domestic institutions flocked to Avenue Supermarkets that runs a tightly managed business with good efficiency ratio in operations, unlocking better return on investments. Analysts also said it was also a compelling combination of consumption story and smart real estate investments-the company owns all the D-Mart stores across 45 cities.
A Technopak report said that emerging national retailers such as D-Mart, Star Bazaar and SRS have also recognized the importance of staying focused and not spreading across categories. They have zeroed in on clusters and regions to win market share before entering other regions due to supply chain complexities.