What is the business model of Dmart in India

The retail industry is undergoing a considerable transformation, with its shoppers enjoying the privilege of shopping for the goods and services they require through various channels. With some major players enjoying their large market shares and huge returns, new entrants like D-mart have made an exemplary debut in the industry. Its unique business model ( https://www.yourretailcoach.ae/services/business-strategy-consulting/ ) offers fierce competition to the existing players.

Introducing D-Mart

D-mart is a supermarket chain based in India owned by “Avenue Supermarkets”. One of India’s famous value investors, Radhakrishnan Damani, founded the supermarket chain in 2000. Starting its journey with just two stores in the state of Maharashtra, it spread to 214 other locations across Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab, and Rajasthan by FY20. Over three years, low-cost company shares have had a compounded growth of 60% and stand at a CMP (Current Market Price) of Rs 2544.

D-mart aims at a one-stop retail chain with a wide variety of simple household and personal items offered to customers at competitive prices that customers appreciate. The core objective lies in offering grocery and household products to customers at a greater value. With their mission focused on being the lowest priced retailer in the region they operate, the business continues to grow, with more locations planned in new cities across India. Price is the key strategy around which D-Mart operates, fanned by their wide variety of products. There is a minimum cap of 3% discount off their shelf on each product and in some cases up to 10%.

Characteristics of D-Mart Business Model

The exponential growth of retail chain D-mart is owed to its unique business model with a mission to be the low-priced retailer in the area of its operation.

1. Product Mix

D-mart comprises everyday use products for its customers categorised into Foods, Non-Foods, and general Merchandise & Apparel. The goods are directly sold from the manufacturers to the end-users by operating on a B2C (Business to Consumer) model ( https://www.yourretailcoach.ae/services/business-model-development/ ). The demand for these goods stays throughout the year as they comply with the consumers’ day-to-day needs, thus eliminating the risk of demand fluctuations and maintaining consistency in the business flow. D-Mart operates in small categories of goods – mainly food and grocery and has turned away from high-end segments, unlike other players in the market, thus keeping stocks low and stock turnover high. This quick turnover in return lets D-mart negotiate better prices with wholesalers and vendors.

2. Promotion

Advertising plays a small role in the retailer’s business model because its product lines and competitive process create daily visits by itself. It mostly only advertises about new store opening and reduced prices. Most of its marketing strategy ( https://www.yourretailcoach.ae/services/market-research/ ) is limited to word by mouth, which eliminates any marketing costs.

3. Distribution

Location is the most critical decision in retail; however, D-Mart ensures this through a compact supply chain and by staying away from malls. The concentrated supply chain ensures its footprints do not spread far and wide. The second characteristic of staying away from malls helps the chain keep its maintenance costs low.

Target's Demographic Market Products

D-mart mostly sources its products from local vendors and sells them at attractive prices. Additionally, D-mart also selects goods that are popular in the specific region of its operation. Quality is one its primary trademark and hence D-Mart ensures the highest quality local goods that creates consumer loyalty in return.

Revenue Model

-> Slotting Fees

This is the payment made by manufacturers to D-Mart in return for keeping their products on its shelves for sale. With its high volume of customers, D-Mart is an enticing place for manufacturers to keep their products. The slotting fee charged to its manufacturers indirectly reduces the products purchasing price to D-Mart, thereby rationing the products selling price to lower rates, which in turn attracts more buyers.

-> Reduced Expenses

D-mart tries to reduce the operational costs of the company with its low-cost interior concept. Efficient space utilisation by putting more products in less space is the key strategic element behind this low-cost operation. Additionally, fewer billing counters reduce the number of workforces required, thereby reducing resource costs and a basic and low maintenance store layout attributed to the low cost of operation.

-> Volume Sales

D-Mart is casted around as a low-priced store. Low-price attracts a large volume of customers, thereby resulting in a high sales margin, which attracts more manufacturers to sell their products in D-Mart. This is an ongoing loop created by D-Mart. In addition to this, this tempts manufacturers to offer volume discounts, thereby reducing purchasing price. This is how D-Mart reaps success from its low-cost categorised business model.

-> Self-owned Store

D-mart is a low or no debt company operating with a strong financial backbone. This is owned majorly by its self-owned stores eliminating rental costs, ensuring positive cash flow, which are then used to open more stores. Although expansion and growth of self-owned stores may be slow, it has its own advantages. Almost 80% of D-mart stores are self-owned.

Utilising Consumer Behavioral Patterns

With a wide variety of low-cost prices, customers are tempted to buy more goods at discounted prices. These behavioural patterns with consumer behaviour have been proven many times itself during the “Annual Sales Period”. D-Mart puts into play this buying behaviour to its own advantage until it becomes an indelible consumer’s lifestyle choice.
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This release was published on openPR.