dmart marketing strategy

1. ASSIGNMENT 2
Strategic Management
GUIDED BY-PROF.SANE
PREPARED BY-ANURANJAN SINGH
PRN-19020475004

2. Avenue Supermarts Ltd., doing business as DMart, is a chain
of hypermarkets in India founded by Radhakishan Damani in the year 2002,
with its first branch in Powai’s Hiranandani Gardens. As of 21 November 2019,
it had 191 stores across India in the states of Maharashtra, Andhra
Pradesh, Telangana, Gujarat, MadhyaPradesh, Chhattisgarh, Rajasthan, Nation
al Capital Region, Tamil Nadu, Karnataka, Uttar Pradesh and Punjab.[2]
DMart is promoted by Avenue Supermarts Ltd. (ASL).[3]
The company has its
headquarters in Mumbai.
His retail chain accounts for 91 stores across India and is the third biggest in the
industry. RK owns 52% stake in the parent company of Dmart called – Avenue
Supermarts, and Bright Star Investments – his investment company, holds
another 16% stake.
Much before Dmart happened; RK was known to be an ace investor in the stock
market much like Rakesh Jhunjhunwala. Due to his Midas touch, he has
successfully earned the reputation of being one of India’s finest value investors,
and as a matter of fact, he was a mentor to Rakesh Jhunjhunwala himself.
He is someone who goes on to buy extremely cheap stocks which although hold
potential but yet, nobody wants to buy, and hold on to them for a very long
term.
At 98th
position on Forbes list of the wealthiest, he is valued at $1.1 Billion.He is
widely known for maintaining a low profile in media, and literally, very little is
known of the man. He likes to let his work speak for itself, and it indeed speaks
volumes.
But outside that community, even in the larger business circles, few know about
him. The information is so less that, if you search for RK Damani on the Internet,
one might often find information about his more high-profile friend Ramesh
Damani.
How Was His Early Life At The Stock Market?
RK had begun his career as a trader in ball bearings, with no intentions to enter
the stock market. But fate had something else in store for him. Post his father’s
death, he was forced to close down that business and had to join his brother in
the stock broking business, which was inherited from their father.
He was 32 then. He had absolutely no knowledge about that end of the world,
or how that market functioned. So he began as a speculator at the stock market.
within no time, he understood that watching was not the best way to make or

3. grow capital, and hence, taking inspiration from the legendary value investor
Chandrakant Sampat, he started playing for the long term.
It took RK some time to gain a foothold, and quite a few of his initial bets tanked
too. But since the time, he decided not to follow the strategies of the herd, he
began to succeed.
His strategy quite often was simple. His philosophy was long term, say 5 to 10
years. He would see if the product has the potential that far in the future.
Gradually, his judgement began getting right, and within the next couple of years
he was standing at par with the ranks of the biggies on Dalal Street.
And mind you, unlike many other players, his ego never came in his way and he
was very quick in cutting and booking losses too.
This is how RK built his fortune by buying multinational stocks during the late-
80s and early-90s.
He is also one of the very few who had locked horns with Harshad Mehta – the
Big Bull of the stock market, and had managed to eyeball him. This epic battle
and success over Harshad Mehta made RK a legend at the stock market. Due to
many such big-bang victories, RK has evolved into the most valued investor of
our times.
Anyway! On the stock market, he is observed to be wearing two hats. On one
end, he is the Trader, trying to understand the market’s swings, wherein on the
other end, RK is the Value Investor, betting on companies for the longer run –
similar to the god of the stock market Warren Buffett.
Over the period of time, he has transformed himself into a Value Investor at the
stock market, where some of his Investments include GE Capital Transportation
Industries ion (1.43% stake), VST Industries (23.97% stake), Samtel Ltd (3.05%
stake), Schlafhorst Eng (I) (1.05% stake), Somany Ceramics (2.79% stake), Jay
Shree Tea (1.07% stake), 3M India (1.48% stake), and many more like these…
After reaching such great heights, in 2001, suddenly quit the markets and
decided to enter the retail industry. He built Dmart.
What is Dmart?
Owned and operated by its parent company – Avenue Supermarts Ltd (ASL);
Dmart is a chain of hypermarket and supermarkets in India which was
first started in 2000 in Mumbai by R K Damani.
It is widely known to be a one-stop shopping destination to meet all the
household needs of a family. It offers a wide variety of products including –
home utility products, foods, toiletries, beauty products, garments,

4. kitchenware, bed and bath linen, home appliances, Toys & Games, Stationery,
Footwear, and a lot more…
The Merchandise offered at D-Mart stores comes at lower prices than the rest,
and these stores are also designed keeping customer convenience in mind.
What Strategies Have Been Adopted By Them?
To begin with – D-Mart wants to create an image amongst the masses of a
discount store that offers most of the products from across all major brands.
Basically, a store that offers value for money!
Now, since people mostly come to Dmart because they all what they need under
one roof; hence, Dmart stores are operational in high traffic areas and across
three formats including – Hypermarkets, that are spread across 30,000-35,000
sqft, Express format, that is spread over 7,000-10,000 sqft and lastly, the Super
Centers, that are set up at over 1 lakh sqft.
And Dmart’s target audience being the middle income group, it uses Discount
offers as a promotional tool for luring the customers and increasing sales as well.
Overall – Dmart’s success is focused on three things: Customers, Vendors and
Employees!
Take Customers. Since Dmart is targeting middle income households, all their
stores are in, or close to, residential areas and not in malls.
Their idea is not to meet every consumer need like other competitors, but
instead, Dmart aspires to meet most regular consumer needs, while providing
value for their money.

5. And since, 90% of these stores are owned directly by Dmart, they don’t have to
worry about monthly rentals and their rise, or relocation risk. Additionally, this
is helping them build assets on their books. This also helps to keep Dmart well
capitalised and debt-light, while its operations generate spare cash.
All the money that is saved using this strategy is eventually offered back to the
customers in the form of discounts!
Vendors! Vendor relationships are the second pillar of their model. Since he
comes from a trader background, his vendor relationships have been his biggest
strength.
The FMCG industry has a payment norm of 12-21 days, but Dmart pays its
vendors on 11th
day itself. This helps him stay in the good books of the vendors
and avoids stock outs.
And since Dmart buys in bulk and pays its vendors well in time, they also get to
earn higher margins.
Basically, their strategy is to “Buy it low, Stack it high and sell it cheap”!
Employees! This is the third pillar of their model. Dmart offers good money,
flexibility, empowerment, and relaxed & efficient work culture. They even go on
to hire 10th standard dropouts with the right attitude and commitment.
They prefer hiring raw talent, and then invest heavily in training, to mould them
as per their requirement. Employees are just told once about the value system
and policies at D-Mart and then are empowered by giving them the freedom to
operate without somebody constantly looking over their shoulders. There is
absolute clarity on what needs to be achieved, but you don’t need to fear
targets.
Unlike Its Competitors, How Did Dmart Turn Profitable So Fast?
In a market where more recognized and larger counterparts such as Spencer’s
(RP-Sanjiv Goenka Group), More Store (Aditya Birla Retail), Star Bazaar (Tata
Group-owned chain of hypermarkets) and Hypercity (Shoppers Stop-owned),
too are waiting to achieve profits, Dmart has successfully managed to crack the
code in just about a decade.
HOW?
Well for starters, no matter where it operates, the prices that Dmart offers are
6-7 % lower than its competition. What lets it achieve such pricing tactics is its
operational style.
Out of the all the stores it runs, Dmart owns majority of the properties, which
helps them to save a huge chunk of money on rent.

6. They also avoid opening stores inside malls unlike other hypermarkets to avoid
high CAM (Common Area Maintenance) charges and highly inflated rents.
And since rent is adds in a big way to the operations costs of a retailer, that
burden goes away, and helps Dmart to boost its profits further. This amounts
for almost 6-10 % of its sales.
What helps them even more is that, since most D-Mart stores are in the suburbs
in the metros and in tier II & tier III cities, the operational costs remain low.
Other than that, Dmart also saves a good amount of 2-3% from the suppliers by
paying them upfront in about 48 hours of delivery, when all other organised
retailers, buy goods on credit of 30-60 days.
Unlike bigger retailers, costs are further kept low by keeping a basic and
economical layout without any flashy interior.
Given its size, Dmart also manages to keep its financials at check and grounded
too. They have kept their debts and a bare minimum and have also cut their
advertising budgets by 30-40 % in the last couple of years to save costs.
There is an unsaid rule in the market that – “one must not open any store within
a 1km radius of Dmart, simply because, no one can beat them on prices.”
But honestly, Dmart’s cost efficiency model is practically very difficult to
replicate. One a larger scale, it is not possible for bigger chains to own stores
because, it requires huge capital expenditure, and this method is only affordable
till the time you’re a small chain, which is why Dmart is growing slowly.
Using such strategies, Dmart has managed to reach profitability much before
any other peers!
How Has Their Growth Been So Far?
Since the time RK was an investor, he liked the consumer business and was seen
investing in similar stock too! So he always had a strong affinity to start
something in the same sector.
And in 1999, when retailing was far from reality, at least in India, he decided to
enter the ring.
RK, in a sudden shock to everyone, left the stock market for about six years, and
along with Damodar Mall, took a 5000 sqft ‘Apna Bazaar’ franchisee in Nerul,
Navi Mumbai and soon, added one more as well. Two years later, they setup
Dmart and took over Apna Bazaar.
The early days of the business were all about intensive learning, understanding
the customer’s mindset and accordingly creating a store layout, billing systems,
gaining the confidence of vendors, etc… Damodar and RK would travel to the

7. APMC market in Vashi or Crawford Market in Mumbai, to interact with
wholesalers and traders.
Within about a year, when everything seemed sorted, they decided to apply the
model to multiple locations as well.
In 2007, Dmart began its expansion and went on to open various stores in
Ahmedabad, Baroda, Pune, Sangli and Solapur.
Their expansion strategy followed a collective approach and was designed in
such a way that they used the local vendor support, and opened all the stores
surrounding them.
By 2012-13 – Dmart had soared its revenues from Rs. 260 crores in 2006-07 to
Rs. 3,334 crores, making them India’s third-largest branded retail chain.
The beauty here was that, what Future Group with 1000 stores was clocking
(turnover of Rs.14,201 crores), and Reliance Retail was clocking (Rs.10,800
crores) with 1450 stores; Dmart was achieving with just 65 stores, which weren’t
pan India. Their sales per store was somewhere close to Rs. 53 crores, while
Reliance was making around Rs. 7.45 crores per store.
In just a span of 13 years, Dmart had also managed to achieve profitability, and
was now making around 2.5 %.
By 2014 – they had reached to account for 73 stores across Maharashtra,
Gujarat, Hyderabad, and Bangalore, and were also projecting to hit Rs. 4,500
crores in revenues this year.

8. The company has been growing robustly despite a slowing economy and were
also crossing the Rs. 100-crore mark in profits. At a time when other retailers
were finding ways to cut costs or slow down, Dmart was on an expansion drive
to open more supermarkets.
Moving on to 2015 – with revenues worth Rs. 6450 crores, Dmart booked
a profit of Rs. 211 crores in FY14-15, which was higher than Reliance Retail’s Rs.
159 crores and Future Retail’s Rs. 153 crores.
Dmart now accounts 91 stores spread across 26 cities including – Maharashtra,
Gujarat, Telangana, Andhra Pradesh, Madhya Pradesh and Karnataka, and have
also recently purchased a property in Rajkot.
Since its initiation, Dmart has not shut a single store and more recently, also
became the first retailer to cross the billion dollar market profitably.
Strengths in the SWOT analysis of D mart :
Strengths are defined as what each business does best in its gamut
of operations which can give it an upper hand over its competitors. The
following are the strengths of DMart :
• Focus on long-term: Damani, the founder of D Mart is an investor and thus
the company has been focused entirely on long-term gains. This has made
the company maximise its returns through a value is driven pricing
strategy.
• Slow scaling up : D Mart started off on a very low key note and slowly took
its time to move up the ladder. This gave the company a better control and
deeper understanding of its supply chain and also helped them manage
the bottom line better.
• People-centric management style : D Mart has a very good employee
policy in place and is very transparent in its employee relations. They also
have a good relationship with vendors and suppliers and the stakeholders
are happy.
• Discount Policy: One factor that delineates D Mart from its competitor is
its huge discount policy. The retailer sells essential goods at a flat discount
price which most competitors cannot match and this helped them
penetrate the market.
• Clear price based differentiation : D Mart never followed the trends set by
other competing retail brands but believed in setting their own trends.

9. They captured the market through a clear price based differentiation and
priced their goods at significantly lower prices than competitors.
Weaknesses in the SWOT analysis of D mart :
Weaknesses are used to refer to areas where the business or
the brand needs improvement. Some of the key weaknesses of D Mart are:
• Focus on certain places: Quite unlike their competitors, who are present
everywhere, D Mart has focused more on the Western States and has a
very low presence in the South. This has restricted them from gaining
market prominence.
• Slow growth : D Mart has established almost 16 years ago much before the
retail boom set a fire in India. However, it has not been able to capture the
market even as much as many of the later entrants primarily because of its
long-term focus.
• Sustainability of low pricing: The company has a zero credit policy and thus
vendors and suppliers give them a much better price which is how the
company is able to afford the low prices that the competitors cannot
imagine.
• No frills : D Mart follows a no-frills approach where the focus in to cut costs
wherever possible. Their facilities are basic and lack the frills of most
upmarket retailers. The customers who come here essentially look at the
low prices of products on offer. So thus the sustainability of this
differentiator is questionable.
Opportunities in the SWOT analysis of D mart :
Opportunities refer to those avenues in the environment that surrounds the
business on which it can capitalize to increase its returns. Some of the
opportunities include:
• Technology: Technology has a lot to offer to retailers in terms of in-store
experiences and retailer can use IoT, artificial intelligence etc to create
value-adding services to their customers for which a premium can be
charged.

10. • Personalization of services: Customers are looking for personalized
services for which they are willing to pay extra. Retailers should capitalize
on this propensity to pay more and increase the quality of their services.
Threats in the SWOT analysis of D mart :
Threats are those factors in the environment which can be detrimental to the
growth of the business. Some of the threats include:
• Online retailers: People in cities especially are highly lethargic about
leaving their homes and prefer to shop online today. Companies
like Amazon and Flipkart thus become major threats to most retailers.
• Online Start-ups: The hottest trend in India is online start-ups. Many of
them are aggregators who bring together the supplier and the customer
cost-effectively. These companies are the emerging threats more so
because many new brands are cropping up in the aggregation market
primarily because of lower barriers to entry.
Strategies adopted for growth
How DMart became a solid, homegrown regional supermarket chain in India
DMart wasn’t conceived through a grand business strategy, but merely as a
hunch that was backed by its promoter, RK Damani. And yet, it is
acknowledged as a successful, solid, homegrown regional supermarket chain in
India. It stands tall amongst large corporate and multinational supermarket
chains, in its markets. How did this happen? How did a humble, unadvertised,
unsung and relatively unplanned venture did more than a shade better than
more organised competitors? How does it remain the market leader in its
catchments year after year? Obviously, there is something this supermarket
does smarter than many bigger, wiser supermarket teams.
The story of DMart began almost 14 years ago in the dusty streets of Mumbai
and upcountry Maharashtra where its promoters walked the supermarkets and

11. co-operative stores of the time and observed the contents of the shopping
trolleys to gain an understanding of what the customer bought and what she
rejected. All operational wisdom was gleaned from the supermarket ‘street’,
while philosophically, it was clear that the store must follow the principles laid
down by Sam Walton. Wal-Mart had treated some fundamentals as gospel and
if they could succeed with their simple approach to retail, there was no reason
for a store in India not to do so. In a very basic way, therefore, all DMart did
was to watch the customer trolley and read everything about Sam Walton and
Wal-Mart. Nothing else was strategically important. The strategy paid off in
spades. DMart’s ‘Give ‘em what they want’ approach to retailing has
customers lining up at their doors.
Our work at understanding and decoding DMart led to some simple clues and
points of view about each of the three constituencies of retail – the customers,
the vendors and the employees.
DMart started in a very simple way in New Bombay. By supermarket standards,
the first store, which also acted as a pilot for the business, located in a 4,000
square feet premises, was tiny. But the principles it developed then have stood
the test of both time and scale. The business was in no hurry to create
behemoths. Instead it patiently went about laying down the first principles of
this fledgling business, and creating the core DMart point of view about the
three ‘constituencies’ of retail. Now the simple formula that makes DMart tick
is shared and intuitively understood as invaluable in the large organisation.
Probably this simplicity has helped it scale nicely while staying lean as an
organisation. One of the cornerstones of DMart’s continued success is how it
has retained its frugal outlook to retail through all market upheavals and
internal changes over the years.
From his stock investor days, RK Damani, or RK, as he is popularly known, had
the habit of forming strong, informed points of views about what mattered for
success and single-mindedly pursuing the chosen path. He pursued the same
mindset in the retail business. One of his biggest success sutras was that of
prioritising with a vengeance. “If there are 10 principles or acts needed to run
the business, I would pick the two or three that mattered the most and then

12. drive them to be a market beater in those things. It is okay for me if I am even
below average in the other seven things,” he says confidently. Running with
what matters the most and staying the course has obviously been a winning
strategy for DMart. It is therefore worth examining the most important
components of each of the three constituencies, the customer, the employee
and the vendor, for DMart.
The D-Mart point of view for the three constituencies
1. The Indian customer, who shops at air-conditioned stores, does not run
her family’s grocery needs on a tight budget. While supermarket customers
are, by and large, well-to-do people, yet everyone wants to save money.
People with money buy more, to achieve higher savings. DMart’s pricing is
designed for the customers to save more across everything she buys. However,
those who buy bigger packs save even more. It’s as simple as that! The
merchandise department of DMart, its buyers, act more like agents of the
customer and not of the company. This is in line with Sam Walton’s description
of his merchandise department. If the buyers buy better, they can sell cheaper.
The very fundamental principle of ‘what you receive, you pass on’ is almost
biblical in its simplicity. If buyers negotiate a good price with vendors, DMart
passes on the benefits to the customers, in the process communicating a
message of care and protection. “Even when you are not looking, not careful,
you’ll still save money with us” seems to be the unstated subtext in its
communication. How can any customer resist such a message of genuine
concern? It follows that the customer will let her guard down and fill her
trolley with reckless abandon. After all, DMart has her back and she knows it.
One of RK’s old beliefs is, if she saves well, she’ll overlook other flaws in the
offering. There are many aspects to a customer facing business. A well-lit and
designed shopfloor with smart adjacencies and category flows, polite staff,
proper communication, attractive displays, weekly, monthly promotion cycles,
so on and so forth. DMart could have tried to focus on all these and more. It
didn’t because then it would have lost its edge. It only looked at how much the
customer saves, and became a market leader in that, much to the shopper’s
joy. She bought more. “Also, she’ll tell others about us and therefore we’ll not
need any marketing!” chuckles RK.
2. Store employees or associates are first generation retail workers in India.

13. Self-service retail is still in its early stages of evolution. Combine this with the
fact that culturally, in India, service and servitude have often been treated as
one and the same, and it becomes obvious that introducing a service-oriented
format in our country is a mammoth task. Workers and servers in all walks of
life come from a different class and socio-economic background than the
people they serve. They are largely untrained and often uneducated or first
generation learners, their parents being employed in small factories or as work
hands in small businesses. Nothing in the environment or upbringing of these
new retail associates therefore prepares them for a customer facing service
job. The service culture is entering our environment, but it will take a
generation to become firmly entrenched as part of our society. Until that
happens, what is it that a customer-facing business needs to do? Can it afford
to depend on this class of workers to generate customer satisfaction? The
obvious answer is no. From this point of view, DMart has built a cadre of
simple, hardworking store people who ensure fully stocked shelves, clean price
communication and efficient check-outs and not much beyond in customer
service. Well, selling simple grocery items at fixed prices does not require
much people-based service, in any case. The simplicity of the shopfloor
associates is offset by state-of-the-art, global standard store equipment. Be it
flooring, shelves, trolleys, scanners – all hardware and connectivity deployed at
the stores is expensive, best in class. Not many things therefore need skilled,
smart manpower. Equally significantly, the associates have no sales targets.
Clearly, the organisation does not depend on its associates for its sales. It
allows its systems and basic principle of simplicity to do that for it. DMart
seems to live its ‘self-service’ dharna, diligently. While staff are amply trained
and rewarded, this is not where the company has chosen to place its sales
focus on.
3. Vendors, who deliver goods and get paid by retailers, are small and
medium traders, micro-entrepreneurs, by a vast majority. Even when
supermarkets buy goods made by reputed MNCs, the real last-mile seller is
often a distributor named Agarwal & Sons, for example. Small traders in India,
as a rule, are always short on capital and perpetually stressed about their
working capital situation. DMart decided to be a market beater by paying
faster than market norms to its vendors. Quickly, they became known as the
best pay masters in town. In spite of being tough negotiators, every vendor

14. wanted them to succeed, for this very reason. Vendors did many small things
in their power to ensure DMart got the best availability and deals. Vendors are
known to advise and tip off the buyer teams, often, with market intelligence.
DMart has ensured an ecosystem that’s very helpful in winning the
complexities of the supermarket business, with this simple vendor insight. It
also helps to have a liberal stock holding policy the way DMart does, in a
growing market like India.
The Indian customer is intuitively frugal and also traditionally underserved.
When she sees a hardworking store like DMart that empowers her, saves
money and has a no-nonsense outlook, she overlooks and forgives the no frills,
often cheerless, warehouse like store setting.
Going forward, from being a regional retailer, as it expands into other parts of
the country, DMart has to grapple with the fact that India is more like a
continent than a homogeneous market. Food tastes and preferences and
buying behaviour change every 100 kilometres. Assortments, work cultures
and therefore overall management will need to get complex. A simple business
model based on insights about the three constituencies of retail and a trusting,
forgiving customer will stand in good stead when DMart begins to engage with
greater complexity.
It is a well-known fact that in most large markets, the biggest retailer is the
discount supermarket and in many cases, it is a local player and not a
multinational. DMart with its stable fundamentals is well-placed to play for
that spot, for now at least!