RK Damani’s home and personal product supermarket chain, DMart is the lowest-priced retailer across 302 locations in India. Yet, it stands profitable - How? Let’s unravel the mystery!
Radhakishan Damani is a successful investor. In 1999, he took a 5000 sq. ft. franchise of Apna Bazar and invested in another franchise of the same store. It helped him understand how retail stores work and also seeded the to-be-successful thought of how to make retail stores profitable.
In 2002, Radhakishan Damani and his family started DMart in Powai - their target market, the quintessential and smart Indian middle class population.
Wide range of products at discounted prices Coupons for eligible customers Additional discounts during festive seasons DMart Ready enables customers to order groceries online
Other big supermarket chains followed a rental model that involved a lower capital expenditure. DMart acquired land in affordable locations at an early stage of development and follows a cluster-based strategy.
The capital expenditure for land acquisition is amortised over time. Overall DMart spends less on the store and more on providing value to its customer.
“In the process of opening new stores, the company takes into account key factors like population density, customer and vehicular traffic, customer accessibility, potential growth of local population and economy and the potential to develop an area (into a market).”
Varun Singh, Lead Analyst of FMCG and Retail at IDBI Capital Markets reasons, “They are very good at squeezing out the most from rentals and employee costs. Besides, the cluster approach allows them to create warehousing capacity, which reduces the cost incurred to move the goods and also cuts back on time.” Source: Business Today
Moreover, in smaller outlets, DMart offers free parking to customers, which results in higher levels of customer retention.
Akhil Parekh also points out, “Strong execution capabilities, right allocation of capital, a long-term thinking while building the business and a huge opportunity in terms of size are probably some of the key reasons for DMart’s high multiples.”
Source: Business Today
RK Damani’s investment strategy and understanding of his customers have made DMart the world’s 555th most valuable company. According to CompaniesMarketCap.com, the current market cap of DMart $30.29 Bn.