The saga of Offline Giant – D-mart
In the age of eCommerce, there he stood strong with increasing market share and increasing customer base daily. D-mart success is complete because of the founder and promoter Radhakishan Damani.
From an Investor to an Entrepreneur, Damani owns almost 52% share of Avenue Supermart and his investment company Bright Star Investments owns 16%. Avenue supermart is the parent company for D-Mart. Damani is famously known as a successful stock market investor similar to Rakesh Jhunjhunwala. And to note it down, he is also the mentor for Rakesh Jhunjhunwala. Now, these two top investors are referred to as the Warren Buffet of the Indian Stock Market.
The first store of D-Mart was started in Mumbai by Damani in 2000. The chain started as a one-stop solution for all needs of a consumer from Utilities, to consumer goods to electronics, toys and games, stationery, footwear, home appliances and everything that is possible to be brought to the consumers at a cost cheaper than most of the retailers.
The main business model is very innovative. With direct contact with the manufacturers and producers, without the involvement of any intermediaries, D-Mart brings the products at a cheaper price to the end-users when compared to other wholesale and retailers, who gets products from many intermediaries. in addition the products are given at a much discount price compared to any other store.
The chain is a hypermarket and spread very rapidly to different locations. strategy and the way the business was expanded to different locations brought profits to the business in the long run. If you see stores and the location, the store was always established in the place which was brought by and never rented. It saved rental space for the company in the long run. The strategy is similar to Warren buffet investing model, which believes that long term investment will the key for business success.
Even in the expansion front, the Stores were never expanded hurriedly. They were always strategic locations that were carefully selected based on user research and profit analysis. If you observe the stores location, they are not opened in every city and every place. But opened only in few locations where customers are presumed to prefer offline shopping compared to online shopping.
D-Mart main point of operation remained the same for the last 20 years. Provide the best offers for the customers This remained even till today, that D-Mart offers the lowest price available for a product in the market. This attracted the customers to the stores and the availability of everything in a single store made customers buy everything that is available if they saw an offer on the item.
Maintaining a proper relationship with both the vendors and the customers is the key to the growth of this Chain. The vendors were given the importance with no delay in payments and assuring them best rates. and at the same time assuring the customers with the best price.
Coming to the point of how D-Mart selects a location for the store. Just observe the number of stores D-Mart has across the country. In the span of 20 years, the number of stores is around 200. That is very less compared to the growth the company has achieved during this time. The locations of these stores are in the residential areas and not in big malls and metro areas. This is because the business aims to target recurring customers and the residential customers will be a potential customer in the future if you provide better value to them. This strategy worked very well in the long run. If you see a D-Mart store today, every day the floors of the store are filled with people. This just not found only during some sale or some occasion season. But is observed daily because people prefer the store for their daily needs and everything is available in these stores at the best value.
So, in short, the target customers for this chain of stores in the middle-income people. The aim is not to meet the needs of every customer out there, But to focus on those who will be a valuable customer and a recurring customer in the long run. It always a long-run view with no focus on short-time benefits. The strategy that is normally talked about in the stock market. And what strategy can a stock market investor use other than the one that brought good returns in the long run?
Vendor support is the key to this business. The vendors are localized. That means most of the times local vendors are preferred and this saved a huge cost to the company. And also the relationship with the vendor is one big asset for this large chain. D-Mart assured the vendors quick settlement of payments and vendor offered better rates for the Company. It is a win-win situation for both. this also worked in the long run by developing the trust of the vendors and hence increasing the discount for the customers.
There is a known quote in the market that says ” Never open a store within few kilometres near D-Mart store because customers will never prefer any store against D-Mart. And also it is difficult to compete with this chain of stores.
Unlike Other competitors who target rich malls and metro places without leaving a customer, D-Mart just focused on a small but potential customer base.
Cost-saving is one of the biggest assets for this chain. Never rent a place but just buy the place required for the store. In the long run, this saved huge rent for the company, which in turn showed in the profits section. This will result in getting better profits in the future with present huge investment. ROI on this investment is very attractive.
Since the time Radhakishan Damani was an investor, he liked the consumer-based business and was seen investing in similar stocks to grow more. Therefore, Damani always had a strong affinity to start up a business in the same sector. In the year 1999, when the retailing business was far from reality in India, he decided to enter the ring of this market with a strong will of winning. He suddenly shocks to everyone and left the stock market for about six years, and along with his Damodar Mall, took a 5000 sqft land for ‘Apna Bazaar’ franchisee in Nerul, Navi Mumbai and soon, added many more outlets. After two years, they finally set up Dmart and took over Apna Bazaar which is their own brand.
The early days of their business were all about intensive learning for the market, majorly understanding the customer’s mindset and accordingly creating a store chain, improving billing systems in India, gaining the confidence of vendors, etc. Dmart has conservative but a fully profitable approach that seems to be modelled after its founder and Damani is notoriously media-shy personality and gives no interviews.