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REASONS WHY D’MART PRODUCTS ARE SO CHEAP!

Introduction

The supermarket chain of DMart stores is owned and operated by Avenue Supermarts Ltd. Started from its first store in Powai in 2002, DMart today has 214 stores across Maharashtra, Gujrat, Karnataka, Andhra Pradesh and many more states. DMart was founded by Mr. Radhakishan Damani.

About DMart’s Founder

Mr. Radhakishan Damani is an ace Indian Investor and Billionaire. He was a stock market broker and operated a franchise of Apna Bazaar. Unconvinced by its business model, he started DMart after setting up its first store in 2002.

DMart, one of India’s most profitable supermarket chain, had made its presence very strong in the consumer goods sector. When you go for shopping in a DMart outlet, its very obvious that you would be astonished by the product pricing and wide availability of options. DMart offers products from home utility items to fashion apparels at very competitive prices.

So how does DMart manage and afford to keep its prices low as compared to its other competitors.

Here are 5 factors:

1) The Locality of DMart Outlet
2) Product Range
3) Volume Sales
4) Negotiation with Suppliers
5) Reduced Expenses

1) The Locality of a DMart Outlet

Every outlet of DMart is very strategically placed. These locations are such places where there is heavy footfall. They are generally near dense residential complexes or near a railway station. On an average, DMart receives an average footfall of 1000 people per day. These numbers increase by 10-15 times during festive seasons. DMart doesn’t operate its outlets in shopping malls. It believes in ‘store ownership model‘. They have bought land or leased them for atleast 15-20 years. This helps them avoid paying rentals unlike other retailers.

2) Product Range

DMart offers products from various companies. It also offers its own brands such as  D Mart Minimax, D Mart Premia, D Homes, Dutch Harbour, etc. These products are very price competitive, which is beneficial for the customer. DMart also charges Slotting Fees. When a manufacturer wants its product to be sold at DMart, it has to pay slotting fees. This brings revenue for DMart. Also, India being a very diverse country, has regional specific goods. DMart has tied up with local brands, which lowers the cost of certain goods as compared to its alternatives.

3) Volume Sales

DMart follows “Everyday low cost – Everyday low price” model. It has established itself as a lowest-priced retailer network across India. Low price leads to heavy footfall which leads to heavy sales. DMart is able to sell its inventory quickly and restock it. This cycle attracts manufacturers who extend additional volume discount, thereby reducing purchasing price for DMart.

4) Negotiations with Suppliers

DMart eliminates middlemen and intermediaries, thereby creating a Business to Customer Model. DMart have large outlets which can accommodate heavy inventories. The bulk buying allows DMart to negotiate prices from suppliers. DMart has the middle income group as its target audience. Therefore, its products attract an extensive customer base when compared to other retailers.

5) Reduced Expenses

DMart has kept its operating expenses very low. 80%-85% of its outlets are owned land or land leased for long term (20-30 years). This avoids property rent fluctuations. DMart also doesn’t spend much on advertising, marketing and interiors. Timely payment to suppliers and bulk delivery gets them more credit and discounts. Working staff and manpower is minimal in DMart which reduces additional expenses.

Conclusion

DMart weighs in the above factors for its benefits which are in returned turned to the customers. By avoiding expenses heavy expenses such as rents and advertising, DMart has managed to become a very profitable supermarket chain amongst its competitors. DMart has also become very attractive and profitable for investors. DMart IPO price was Rs 399 which opened at Rs 600 on NSE. As of 10-07-2020, DMart’s share price is Rs 2322.35. Roughly, Rs 10000 invested in DMart in 2017, would have been valued at
Rs 30,000 today!
In the initial 8 years, DMart had only 10 outlets. After 2010, it rapidly started to expand its business as DMart model was successful.


Thank You for Reading!

11 Comments »

  1. I am a resident of Banashankari Second stage, Bangalore. The proposed Dmart on the 39th Main road is very close to me. I am eagerly awaiting it’s opening. Please let me know when are you starting this store. Look forward to hear from you soon.
    Regards.
    B.Shankara

    Like

  2. Excellent information. Written in very simple good and lucid language.
    I always feel D Mart should live for ever.Long live D Mart.

    Like

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