If you are a regular investor in stocks or like to keep up with news about good stocks to buy, I am sure you heard all about DMart’s stock last year. Now I am no finfluencer to tell you about which stocks to buy, but there is something worthwhile about how DMart looks at business growth.
In case you’re unaware, DMart is a retail superstore that made its place in Indian markets by consistently providing heavily discounted products across categories. It's like WalMart, but desi.
Until 2017, DMart was majorly an offline retailer. In January 2017, after fifteen years of operating offline stores, DMart launched its first online e-commerce store:
DMart Ready.
DMart Ready operated only in Mumbai that year.
However, during the pandemic, DMart was forced to rethink its offline-first strategy and consider expanding its online e-commerce business. In spite of the nudge, it didn’t rush the expansion.
In 2022, after five years of operation, DMart Ready expanded to just 12 cities. Take a look —
And evidently, gradual expansion has helped the business grow. Till 2021, DMart Ready was operational only in Mumbai (276 pick-up points) and Pune (14 pick-up points). It then scaled up to 519 pick-up points, expanding to 12 cities by the end of 2022, as illustrated in the snapshot.
Presently, it operates in 22 cities.
Another crucial aspect worth paying attention to is its foray into Tier 2/Tier 3 cities of the country, a market most e-commerce businesses find tough to operate in.
Financially, this is what the topline looked like:
FY17-1cr | FY18-44cr | FY19-143cr| FY20-354cr | FY21-791cr | FY22-1667cr
But I am sure you’re wondering where I am going with all these details. You probably also want to know how is a DMart Ready pick-up point any different from its offline stores.
Well, here’s why I found the growth of DMart Ready interesting.
DMart Ready pickup points operate as small stores that serve twofold purposes. Firstly, they serve as warehouses used to store online orders. Secondly, they also hold a limited number of Stock Keeping Units (SKUs), which customers can buy when they go to pick up their online order.
For instance, I can place an order on DMart Ready, which I can collect from a pick-up point near my house. Sometimes, additional items like plastic containers, kitchenware, and other knick knacks are also available at a Dmart Ready pick-up point, which can be bought on the spot. However, it won’t have all the categories of goods as its offline store would.
Unlike major grocery delivery businesses, DMart Ready recommends that its customer place the order online and collect the order from a DMart Ready pick-up point close to their location. The website explicitly mentions that home deliveries are chargeable, whereas pick-up point collections are free.
The charge for home delivery, regardless of your order size or value, is ₹50. The company started with a 3% delivery charge per order. A minimum order value of ₹500 is required for all transactions. Additionally, if you look at the website header, home deliveries are available at a fixed time only.
With improved supply chains and better store penetration, delivery time for DMart Ready has been reduced to 0-1 days from 2-3 days as it used to be. Orders received before 12 pm are delivered on the same day, while others are delivered the next day.
Now these conditions could be too much for a customer whose priority is quick delivery and convenience of home delivery. But, as a customer ordering from DMart Ready, I am made aware of all the caveats around modes of delivery and timing as explicitly as possible.
In fact, one of the FAQ questions clearly highlights the behaviour DMart Ready wishes to incentivize.
This hints at how well DMart understands its customer base. They are acutely aware that their customer base prefers affordability over convenience. The communication makes it clear that any convenience advanced by the business comes at a cost.
The business doesn’t impose just one type of convenience on all its customers or incentivize them via discounts. The business does not undertake flash sales like Independence Day, Republic Day, etc. And much like their business expansion, changes in delivery times, delivery charges, and minimum order values have been gradual too.
Their communication on all fronts is detailed and clear.
In addition to being an online grocery and e-commerce store, DMart Ready’s larger aim is to crack the neighborhood store format.
Since the failure of Subhiksha, the neighbourhood store format has been a tough nut to crack for the grocery industry. DMart Ready is, therefore, following a hybrid model of pick-up-cum-select merchandise sales.
Operationally, DMart Ready pick-up points are of two types, smaller ones with around 180 sq. ft. and larger ones with around 300 sq. ft. The pick-up points are located in catchments with reasonable rentals and real estate costs.Take a look at what differs based on the different sizes of pick-up points —
While the number of average orders per day could be high if it turned to quick delivery or provide better services of home delivery, it is not the growth DMart Ready is going after. So if you were wondering what DMart Ready is up to with its pick-up points and chargeable home delivery in an era of 10-minute deliveries, here's your answer.
Their growth choice at each stage has been a deliberate one.
And each choice shouts measured growth, from expanding within a wide range of geographies to charging for home delivery and having a minimum order value. Its focus on servicing customers looking for bargain deals and not instant delivery, free delivery, and cash deals is commendable.
If there is something we can learn from the growth story of DMart Ready is that the slow and steady last in the race. DMart Ready’s expansion is a fitting example of “Underpromise and Overdeliver”, a phrase you must have repeatedly come across in business.
You might not even see too many DMart Ready ads, and I am sure many of you are not aware something like this even exists, but therein lies the virtue of this story. You could argue that DMart can afford to build gradually because it has a robust retail business, but then you would still be missing the point.
DMart Ready could very well piggyback on the profits made by DMart stores and grow at breakneck speed, but it is building for the bad days. At every step of the way, it is ensuring that its capability to serve isn’t being overhauled from any quarter of business function. And it is operating independently of the offline stores, efficiently developing strength for both types of business — online as well as offline.
After all, the tortoise has been winning the race since our childhood, and there is little sense in ignoring the ways of the tortoise. I leave it up to you to figure out who the hare in this story is.
References
- https://bsmedia.business-standard.com/_media/bs/data/market-reports/equity-brokertips/2023-03/16794559170.43092500.pdf
- https://www.dmart.in/
