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Forbes India has shared a brilliant article on how DMart grew from a humble start in 2002 to becoming a retail behemoth in India. Take a look at the entire article here – Forbes (DMart)
Some interesting pointers from the article (emphasis mine):
- Unlike its rivals who, for the most part, focussed on achieving scale, DMart worked on keeping costs to a minimum and getting the per unit economics right.
- Take, for instance, racking. A company pre-IPO prospectus states that to effectively utilise resources, the company has higher racks—the upper ones used to store goods and the lower ones for display. Sounds intuitive, but few retailers take the racks all the way to the ceiling like DMart does. The result: More efficient storage of goods. Couple efficient operations with rapid expansion and the result is a company whose stock the market can’t get enough of
- The first thing Noronha realised was that price was a differentiator in India, particularly for groceries and fast-moving consumer categories like toiletries and personal care. The whole operation had to be geared towards offering an everyday low price. But since margins in this business are wafer thin, inventory turns are the key. “The trick lies in driving footfalls through grocery and then selling higher margin items such as toys, crockery, garments, home appliances and footwear,” says Noronha. “It’s the groceries that get shoppers in, but the general merchandise that drives our profits,”
- To get the best prices for groceries DMart follows a simple strategy. It pays suppliers faster than others (on an average, 8 days as against 60 days by its rivals) in exchange for an upfront discount which is then passed on to the customer. Other savings are extracted through operational efficiencies
- DMart employs only half the number of employees per square feet as rivals, according to a research note by Ambit Capital
- All this results in a superior days sales of inventory—a key metric by which retailers are measured. DMart’s stands at 25 days, which compares favourably with Walmart’s 32 days for its global operations; Future Retail’s is 80 days.
- “The biggest advantage we have is that customers come to our stores and take the items home themselves. Home deliveries are the fastest way to the graveyard,” says Noronha.
Read the rest of the article to understand the DMart story.
Disclaimer: I am not a SEBI registered Investment Advisor. This article is not a recommendation to buy/sell the stock.