D-Mart focuses on building a sustainable low-priced retail model emphasizing profitability and customer-centricity, targeting value-conscious consumers in suburban areas. Its competitive advantages include a cluster-based expansion strategy, frugal store infrastructure, and strong vendor relations, resulting in impressive financial metrics like a 23% ROCE. The company plans to enhance its services through initiatives like D-Mart Ready for home delivery while maintaining a long-term view on sustainability.

1. D-Mart’s Competitive Advantage

2. Wafer thin margins & intense competition characterize the F & G business, but…
Mr. Radhakishan Damani (renowned
value investor) wanted to…
…build a low priced retailer in
it’s area of operation
…focus on fundamentals
…emphasize on profitability and
sustainable scalability approach
…create everyday low-price
offering (EDLP)
Break-even in first year of
it’s operations
Industry best
revenue/sq.feet
Consistent profitability
Progressively enhancing
return ratios
Living up to the promise of
high discount offering

3. The pillars of the resilient business model…
Location benefits; frugal in store infra
Sustainable scaling
Customer centricity
Profitability
High discounting
Progressive return metrics
Rightpricing
Costefficiency
Ops.&
Infrastructure
Expansionmoves

4. Cluster based expansion strategy
Deepening penetration in areas where they already have footprints instead of expanding in newer regions.
[Source: ICICI Securities]

5. Cluster based expansion strategy
Ownership model rather than a
lease model
Regional/local clustering
Protection from unreasonable renewal
hikes that could affect profitability
negatively
Cost benefits on fixed expenses pass
on to consumers
Superior industry specific parameters
(RoCE 23%, Gross fixed asset
turnover of 4.1x)
Conservative new store addition
Opening new stores within radius of
few kms of its operating stores
Higher cost efficiency and visibility due
to concentrated marketing activities &
efficient SCM
On an average, ASL added 21 stores/yr during FY
16 to FY 19
Even faster growth of total
carpet area
Healthy asset turnover ratio Return ratio
[Source: ICICI Securities]

6. Cracking the consumers’ buying psyche
Targeting value conscious market
Customer loyalty using EDLP
strategy
Product categories: Food, FMCG,
General merchandise & apparel
Location: Sub-urban areas of major
cities; residential places; densely
populated
Target: Lower middle, middle and
aspiring upper middle class (inc. <Rs.
50000 per month)
Cost effective procurement policy
High levels of discounts compared to
peers
27% CAGR in terms of bills issued Improving average bill size
ASL’s revenue break up (Food category contributing to 50%+ revenue)
[Source: ICICI Securities]

7. Razor sharp product assortments
Stocking
Vendor relations
Limited SKUs of popular brands due to
their high recalls
Local preference orientation and bulk
buying to achieve better neotiation
Conservative approach towards private
labels
Faster credit cycle results in higher
cash discounts from vendors
Accelerated inventory churning
Controlled working capital cycle & low
creditor days
One of the best inventory turnover in the industry
Sustained record of low payable days
[Source: ICICI Securities]

8. The impact of strategies on the KPIs
[Source: Annual Report 2019, ASL]

9. The impact of strategies on the KPIs
The strategy of cost efficiencies while
offering best customer value has witnessed
stable performance across financial and
operational parameters.
[Source: Annual Report 2019, ASL]

10. The move for the future
D-Mart Ready
Concept of providing paid home
delivery/convenience of pick up
from nearby store
Low distribution cost
Conservative city based
approach where real estate
costs are high
Long term planning
Close proximity to main
stores
Compete against hyper
local services
For unserviceable pincodes
around key areas
Focus on sustainability as
the management considers
it a long term concept

11. Thank you
Contributors: Durbar Dasgupta | Krishna Prasad | Kuldeep | Praveen Kumar | Rahul Mishra | Shivam Sharma, PGDM SRCC