Hi
I understand that most of us are looking for convenience so we see Big Basket regularly. Maybe that is why we have this awareness bias about it.
Anyways the numbers for Big Basket are not that great. As of now for every rupee earned it spends 1.1 rupees.
Not being critical of a startup because I think their financials will never speak about the problem they are trying to solve until they grow out of this phase of the life cycle.
Source: from their filings.
Rgds
Deepak
Daily Ninja is the numero uno in this space. BB Daily comes distant 2nd.
If you talk about dmart vs big basket,
owing to above reasons, i feel even if big basket becomes profitable, it will remain a small subset of this retail story and wont be able to challenge the opportunities that dmart gets.
As said in the forum many times, the issue with dmart only remains about valuation, which is subjective !
I would come somewhere between the above two classes.
Below are my points:
I used to be regular shopper at D-Mart 2 years ago despite the distance from my residence to the store is very far. But now I only shop very few times in a year even though there is store near to me. Mostly for the items which are not available in BigBasket or Amazon or need immediately.
My reasons for the same:
But among the above three reasons, first one is very important. As soon as the discounts vanishes or goes to zero, I may move to D-Mart despite the next two reasons. But as long as I get discounts, I donāt think I will go to D-Mart quite often.I hope these Venture Capital money will be there at least for next 12 months. Not sure after that.
Disc: Investor since IPO. Sold off in between. Started tracking position after that.
Regards,
Ramesh
No doubt Smart is the finest stock in the market and a boon to customers. My problem is with the valuation.
A back of the envelope calculation shows that even if Dmart doubles its profits 3 times every 10 years for the next 30 years, the return to the investor is around 15%. For this I have assumed that the PE reduces to 60 after 10 years, then to 30 after another 10 years and finally to 15 at the end of the 30th year. The market has smartly discounted the future, leaving nothing extra for long term holders. If such profit doubling were to happen, as above, the market cap will be a mammoth 70 lakh crores. Any error by the management would surely lead to disaster for investors.
You know DMart is doing something right when your competitors keep you as the benchmark. I never saw DMart advertise like this. People know that prices are dynamic and hence there is no point comparing the current price in FBB to an earlier price in DMart.
I saw in UK all supermarket check their prices against TESCO, as TESCO was biggest, that does not mean TESCO get all business, as you see other factors as well like convenience, overall shopping experience other offers etcā¦ I see BB has offer on cards, their own Profit club cards and better ambience, less queque, better parking facilities (as BB mostly in malls or better locality) I find at D mart not only ppl at D mart even around D mart get cramped due to hardly any parking provided by D mart and I dont know how . local Police allow them to misuse the public-place for parking which does not belong to themā¦ I generally dont go to Dmart due to parking issues to save 200-300 rsā¦
Iām not saying DMart will get all the business. But their competitors acknowledge their positives. Ultimately we will all have preferences which is the reason why many companies survive in the same industry. How does the local police allow DMart to use public spaces for parking their customersā cars? I donāt think they do anything to encourage their customers to park vehicles in no-parking zones.
I enquired with big bazar ppl about this future pay app and itās comparison with dmart. You have to buy a minimum 3k to be eligible for cash back. Pls note this is not a discount. Secondly, whatever the cash back amount , Rs 150 is credited every month to your wallet - you donāt get it in one go. There was a long que in their customer service desk of customers waiting for their cashback. Some customers were really irated and it appears no one told them them that only 150 per mth would be credited. Those that knew, told me that the cash back was never credited to their wallet. It is pertinent to note that the line at the customer service dept was longer than the line at the cash counter itself.
When I went to buy diapers there were two salespeople there trying to convince me to download the app and pay through it. I told them about the complaints in the future pay app and one of them told me problem Hain aur hum logon be bhi complain Kiya Hain.
In the end, we went to d-mart and purchased the same diaper at 7.74 per piece while at big bazaar it was costing us 10.42 per piece even after the cashback.
I feel the biggest threat to big bazaar is big bazaar itself
if your are buying chidlrensā diapers, these are available from firstcry at prices cheaper than even DMart.
As someone mentioned above, the target class for Dmart is middle class and below from the economic strata.
While at individual category or Product level, there will always be other players who can offer it cheaper than D Mart, but at the basket level discount D mart more or less makes up for the value it offers.
BB, Amazon etc are convenient only for Tech savvy shoppers who hold multiple bank cards, and can simulate discount options to split their shopping across Apps and stores. For someone who gets salary on 1st and shops his needs for the entire month, Dmart is the go to option
Big Bazaarās future pay acts as more of a self goal with lot of issues and complicated cash back fundas. The only good part is you load your Sodexo into a Future pay card. 10K upfront allows you to shop for 1000 everymonth for 12 months. So you can get a mobile/ electronics/ appliances etc of your choice using Future pay @20% discount after a year.
There could be but we cannot go to different shops to buy different items.
I am using BB Future Pay & not seen any issue at all or not seen any queque for complaint at least in Navi Mumbai stores and for Profit club customers you have Priority Billing, no queque and you get 12000 worth fo loading 10k in 12 months (yes its 12 months) but its okay, along with this 2000 they have other offer always running in stores.
India is big market, so many players can survive, but ppls are too biased towards DMart, maybe due to RK Damani??
Probably you remember me as a fanboy of DMart. Anyway Iād still give a try. DMart is very highly valued. But I feel as we go forward deposit rates will plummet, stock valuations will increase and good companies will not be available for P/E of 15. Here are my reasons.
Unless there is going to be some serious asset destruction we will be experiencing this scenario. Still I do not think P/E of 80 is normal.
Completely agree with this point. Having said that Credit Card penetration is also going to increase in the next few years. Sometimes even without credit cards also you will get decent discount using Apps like HDFC PayZapp etc.
So the end game PE is taken as 15 and this is the maximum PE to pay for companies who have reached saturation stage. ? Did not get saturation stage remarks.
Food for thought:-
1.In market capacity terms, Dmart is just 0.3% of available opportunity as on march 2019.
2. DMartās stores generate more revenue/square foot than Walmart ā $530 versus $450 for Walmart Inc (WMT) in F19.Given that unit cost in India is about one-third that in developed markets, the throughput for DMart is 3.7x that of WMT.
3.Dmart today is in the same position as Walmart was in 1970s immediately after they got listed and had 136 stores in 1976. From 1976 till 1999 (23 years) Walmart grew at an avg. rate of 22-25% CAGR in sales and also stock price.India is 4 times bigger than US in population.
4. UK is the size of UP roughly in area. Population of UP is 3.7 times more than UK.Tesco has 3433 stores.
Dmart CEO on competition & disruption -
5.The moat for every retailer, not only us, is that there is a reasonably large, almost 50% of revenue where nobody can compare one retailer to the other on pricing. Like a steel glass, what I sell versus what my competitor sells versus what someone else sells - its rim is different, finishing is different, thickness is different, and hence its pricing is different, and hence you can adjust 2%-3% margin. . This is one area which Mr. Damani used to handle in the initial phase, and he kind of built this whole thing.That is a fun side of the business, because that is very difficult to decipher. And I am saying that is the moat for every retailer. And that is where you bring in the differentiation.
6.E-commerce turns out to be more expensive. But this is only in food / grocery. When you talk about cell phones, it is reverse, you talk about books, it is again reverse. And that is what you are seeing, money is like water, where arbitrage is, it flows there. Thatās how you see a significant disruption in sub-sectors. Like in electronics, in mobile phone many things have happened. So, wherever that arbitrage tilts, the business will tilt towards that area. So, fortunately because we are in the grocery business we believe the arbitrage is better for brick-&-mortar.
But I am not saying online will not or may not disrupt us, it can disrupt us. But the relative disruption is the lowest in food and grocery (F&G),which is a global phenomenon, you see across the globe, F&G is least affected by online. So, thatās the only data point I will give you. And with F&G, it generally affects those people who have high gross margin, high overheads while we are low gross margin, low overheads.
I am from Bangalore , whenever I go out I see lots of grocery store/supermarket other than our valuepickr favorites BB, Reliance etcā¦I see this as an opportunity for Dmart to snatch more market share from their existing market & players and when I travel to tier2/3/4 cities in India , I see there is dearth of grocery supermarkets.So they have market share to grab from other small players and also huge opportunity size to grow.Even if they capture 20-25% market in coming 20-30 years it will be massive, and leave the rest of pie for all the competitor out.
Regards,
Rakesh
Why should they double 9 times? They can become 15% of the market then. Assume the retail space grows 5% YoY for 30 years (equivalent to long term inflation of India + 2%). Assume DMart grows 20% for 30 years. Still from 0.3% DMart would only be at 16% market share.
I have removed ownership biased line, but other things written might be specific issues . and we can generalised, as I am using Future Pay & Profit club since more than 2 years and never faced any issues. So, it was very one . sided post, anyway difference of opinion makes market and everybody has right to keep his/her opinion.
Sometimes maths clouds common sense. If assuming you are right, the present sales of 22000 crores, grows by 20% for the next 30 years, the sales will be 52 lakh crores and profit after tax will be 2.6 lakh crores. Why is there no company in India like that at present? Even if this almost impossible act were to happen, you are already paying 1 lakh crores today in market cap for getting 2.6 lakh crores in profit after 30 years. Imagine paying one rupee today to get 2 rupees after 30 years!
