D Mart - Why it is an upcoming retail giant!Mar 21, 2017(17:35)
IPO markets is on peak in the Indian equity market as retail giant Avenue Supermarts Ltd (operator of the DMart brand of stores) 1870 crore initial public offering received a roaring response from investors. The operator of retail chain DMart, made a mind-boggling debut on the bourses today, much on the lines of the phenomenal response to the company’s public issue. The shares opened at Rs 604.40 a share, an overwhelming 102 percent surge over its issue price of Rs 299 per share.
This is the only supermarket in India where the customer is not bothered about the ambience of the store. His entire attention is on filling up the shopping trolley without a care in the world. We know for a fact that when customers are completely sure what they are getting is the best value, they let their guards down and buy more and in the bargain, the store wins.
“They don’t keep many things that I want. But DMart! Sometimes I wonder if they’ve placed a spycam inside my house. How do they know exactly what I’m looking for?” – A review by a DMart customer.
DMart was not started by a grand business strategy, but merely as a concept venture that was backed by ace investor and promoter, RK Damani. It stands tall amongst large corporate and multinational supermarket chains in the market. How did this happen? How an unadvertised, unsung and relatively unplanned venture did more than a shade better and more organized competitors? Obviously, there is something this supermarket does smarter than many bigger, wiser supermarket teams.
DMart started in a very simple way in New Bombay. By supermarket standards, the first store, which also acted as a pilot for the business, located in a 4,000 square feet premise. But the principles it developed have stood the test of both time and scale. The business was in no hurry to create history, but instead patiently went about laying down the first principle of creating a core consumer friendly environment. Probably the simplicity of the business has helped it to scale nicely across various parts of the country. One of the cornerstones of DMart’s continued success is how it has retained its simple outlook to retail through all market upheavals and internal changes over the years.
Indian customers who shop at air-conditioned stores, do not run the family’s grocery needs on a tight budget. While supermarket customers are, by and large, well-to-do people, they still want to save money. People with money buy more, to achieve higher savings. DMart’s pricing is designed for the customers to save more across everything. Hence, those who buy bigger packs save even more. It’s as simple as that!
The merchandise department of DMart acts like an agent of the customer and not of the company. If the buyers buy better, they can sell cheaper. The very fundamental principle of ‘what you receive, you pass on’ is the simple way to retain customers. If, as buyers, DMart negotiates a good price with vendors, it passes on the benefits to the customers, in the process communicating a message of care and protection. “Even when you are not looking, you’ll still save money with us” seems to be the unstated subtext in its communication. DMart has not focused on a well designed shop floor with smart facilities and category flows, polite staff, proper communication, attractive weekly and monthly promotion cycles because then it would have lost its edge. It has totally concentrated on how much the customers save, and has became a market leader for the same reason.
The Vendors, who deliver goods and get paid by retailers, are small and medium traders, micro-entrepreneurs, by a vast majority. Even when supermarkets buy goods made by reputed MNCs, the real last-mile seller is often a distributor named Agarwal & Sons, for example. Small traders in India, as a rule, are always short on capital and perpetually stressed about their working capital situation. DMart decided to be a market beater by paying faster than market norms to its vendors. Thus, quickly came to be known as the best pay masters in town. In spite of being tough negotiators, every vendor wanted them to succeed, for this very reason. Vendors did many small things in their power to ensure DMart got the best availability and deals.
Going forward, from being a regional retailer, as it expands into other parts of the country, DMart has to settle with the fact that India is more like a continent than a homogeneous market. Food tastes, preferences and buying behavior change in every 100 kilometers. It is a well-known fact that in most of the large markets, the biggest retailers are the discount supermarket and in many cases, it is a local player and not a multinational company. DMart with its stable fundamentals is well-placed to play for that spot, for now at least!
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