D-Mart

Read this short read from The Ken reminding me of why DMart is DMart - not only is it profitable and green (vs most struggling national retailers) but it's operating margin is a cut above most other worldwide retailers.

Here's my understanding of what's working for this company:

DMart's success lies in its unwavering commitment to value with Damani's mantra of "everyday low prices," which is not just a tagline, but a core commitment. 

1. DMart has figured out how to sell grocery profitably

The company negotiates directly with farmers and manufacturers, bypassing middlemen and slashing costs. DMart sources over 80% of its products directly from farmers and manufacturers.

Selling grocery proftably is hard. No wonder quick commerce is moving to additional categories to increase the AOV and move from being red. Yet, Dmart still excels at making money off grocery. About 50-55% of DMart's revenue is grocery, and the rest is general merchandise and apparel

2. Growing same store/same city

 It took DMart almost eight years to expand beyonds its first ten stores. It focussed on growing same store and same neighborhood revenue. Unlike other competitors in the industry like Reliance retail whose expansion rate is over 714 stores every year. Getting it Right before Getting Big sure worked for this company

3. Average revenue / profit per Sq. Foot is a Case Study in itself

Despite a similar product mix, DMart has always outperformed its competitors in optimizing the topline and bottomline vs peers like Reliance or Future Group. DMart's profit margin is ~2.7 times Reliance and their profit per sq ft is 2x that of Reliance. So, even though Reliance leads in revenue and market share, it's overall less efficient and profitable than DMart.

Basis some historical numbers, 

Inventory Turnover Ratio:

➝ Reliance Retail = 1.27

➝ DMart = 2.4

Assuming both parties have the same batch of inventory size, the no. of days it takes to sell a batch of inventory is:

➝ Reliance Retail = 365 days/ 1.27 = ~287 days

➝ DMart = 365 days/ 2.47 = ~148 days

Reliance Retail

Revenue ➝ INR 1,90,000 crores

Net Profits ➝ INR 4935 crores

Operational Store area ➝ 54.5M sq ft

Profit margin ➝ 2.6%

Profit made per sq ft ➝ INR 905

D-Mart

Revenue ➝ INR 30,353 crores

Net Profits ➝ INR 1616 crores

Operational Store area ➝ 12.1M sq ft

Profit margin ➝ 5.3%

Profit made per sq ft ➝ INR 1335

Additional Reads:

Why is DMart opening bigger and bigger stores?

How DMart cracked the grocery market to become the most profitable grocer in India?!