Capstone

D-Mart
Harshit Bansal - 25
 Retail

 The Indian retail industry accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per
cent of the employment. It is is expected to nearly double to US$ 1 trillion by 2020 from US$ 600 billion in 2015
 Penetration of organized retail is at 2 per cent in India, compared with between 17 per cent and 75 per
cent in other developing Asian countries
Geographical presence
 DMart

 Now how can a retail store push up its turnover? By selling more from existing stores OR opening
new stores. DMart has done both!
 Asset – Turnover ratio has increased. This means that the company is generating higher
revenues per rupee of asset invested in.
 the company collects cash in less than 1 day and has to pay its creditors every 9 days. This
actually creates a business wherein the company has negative working capital requirement!
Revenue per sq. feet and stores
Profits and Revenues
Income statement
 Key Product categories

 176 retail stores with an area of 5.9 million square feet

 (Foods )Dairy, staples, groceries, snacks, frozen products, processed foods and fruits &
vegetables — 51.55%
 Non-Foods (FMCG) Home care products, personal care products, toiletries and other
products —-20.03%
 (General Merchandise & Apparel) Bed & bath, toys, garments, footwear, utensils and home
appliances— 28.42%
 Company operates distribution centres and packing centres, which form the backbone of
D-Mart supply chain to support the retail store network.
 As of 31st March, 2018, company had 24 distribution centres and 6 packing centres in
Maharashtra, Gujarat, Telangana and Karnataka.
 Observations:

 Quick supplier payment helps the company gets discount

 Fast moving SKUs; 26 days inventory turnover
 While the company’s sales per square foot stood at Rs 32,719 for FY18, the same for its competition is
less than half in most cases
 Cluster Approach - this gives them edge in better understanding of local preferences.
 Observations:
Network:
 To capture a bigger slice of its target markets, the management is investing in new stores in a cluster-based format to
achieve cost efficiencies.
 At least 20-25 outlets are expected to be added each fiscal, most of which would be under the owned-store model to
limit rental outflows
 Subject to economic viability, in due course, the company may consider leasing properties as well.
Online traction:
 D-Mart Ready, the company's e-commerce application, allows buyers to place orders online. The products can be either
delivered to the consumer's address or may be collected from a D-Mart pick-up point.
 This service is available only in 40-50 locations in Mumbai. The plan is to rollout this facility in other metros in a phased
manner as well. Over time, Tier II and III towns may also be looked at
 Like e-retailers such as Amazon and Flipkart, D-Mart Ready is likely to report losses for a few years due to continued
investments in technology, promotions, inventory management and logistics.
Everyday low prices
 steep discounting and benign food inflation have forced D-Mart to reduce selling prices, wholesale sourcing and
distribution efficiencies should help derive operating leverage going forward.
SWOT
 Reasons of Low prices:

 Right product assortment: DMART focuses on the most popular SKUs(from the perspective of its target
customers’ monthly purchase basket) in each product category
 Owned stores model: Its strategy of expanding through owned stores ensures savings in rent costs (4-
5% for peers) and protects it from escalation in rentals
 Sourcing efficiency: DMART purchases directly from manufacturers and primary vendors, thus saving
on distributor/dealer margins.
 It stocks faster moving products like food and grocery in warehouses closer to its stores and slower
moving products like apparel further away, thus optimizing storage costs
 lower employee cost: DMART works on a variable employee model, which ensures low employee
costs – below 2% of sales. Only~4,200 employees are on its direct payroll. The balance staff are third-
party party hires.
 Positives

 Higher and productive footfall

 Owned stores and leased stores
 Sales growth per store would be driven by more customers, higher billings and inflation. With
the company owning most of its stores an
 limited real estate at vantage points
 Focus and limited geography
 Sales growth per store would be driven by more customers, higher billings and inflation.
 High utility space per feet
 Challenges

 Myopic approach: Most revenue coming from Gujarat and Maharashtra

 Money from principals for promotion
 Footfall only because of price;No CRM and loyalty program
 On special days, crowd handling becomes difficult raising discomfort
 Growth is stagnating and need quick turnaround
 How to improve footfall and quality of footfall
 What if the Principals get the alternatives
 Check the viability of newly entered cash and carry like business
 V-Mart like stores
 Opportunities

 10-15% real estate price fall gives an opportunity to expand Money from principals for
promotion
 Mid size retail chain acquisition
 Push private labels to improve margins – Challenge would be marketing spend and
trust
 Cluster based approach to take advantage of synergy of supply chain
 On special days, crowd handling becomes difficult raising discomfort
 WAY FORWARD

 Accelerated expansion
 Keeping costs lower
 Higher same store sales growth(SSSG) : High margin products like apparel
 Loyalty programs and mobile wallets
 Build on DMart Ready-58 stores (order online and have the goods delivered home)
THANK YOU