Come to know that DMART Ready home delivery orders spiked a lot in last few days in Bangalore. My Order which supposed to come on Sunday only delivered today. the delivery person was saying they got 400 order today(monday)…assuming this is for one DMART Ready point (Marathahalli/Bellandur).
Good opportunity to scale up and meet the demand…with COVID cases rising more business will move to home delivery.
No point scaling up a loss making business right.
Atleast till they get the model right, I wouldn’t be in favour of scaling this up.
Invested
DMART ready has to do investment like buying trucks, delivery centers etc…so it will take some time to break-even which again needs certain minimum scale.
I feel DMART ready is needed to sustain the existing business in COVID crisis. They are charging Rs 50 to 79 and that should cover their delivery cost and other investment cost.
Take my case as example :
Before March 2020, I used to visit DMART once a month at least. After that I stopped. Want to avoid huge crowd at DMART, started going to near my stores like Star bazar and online like big basket/filpkart/amazon. Once DMART ready started delivering to my area I started again with DMART.
There will be several customers like me not going to DMART and they are loosing all that business.
Disc: Being a shareholder, I want to buy from DMART, that way I also contribute to business.
These are all temporary hurdles, if they are indeed temporary. No management in their right mind will lose business if a particular change poses as a threat and becomes permanent. In the mean while, there will be hurdles and if they are temporary and if the business is back to its old operational ways and is profitable as in the past, the investors don’t lose here. But if a trend or change becomes permanent which dents the business and the management ignores it or tries to downplay it, then it will lose and the investors lose.
So we have to see if Dmart is willing to lose some business, for a few quarters, if the management thinks this is temporary, or the management starts building a model that handles the online demand if it thinks this change is permanent.
Either way, experience is gained or lessons are learnt.
Disclosure - Invested.
Agree and also respect dmart’s slow approach towards ecommerce… unlike last time, they are now prepared much better in case of any lockdowns…
Point is temporary or permanent, covid or no covid…in the long run one can neither ignore nor not adopt ecommerce…covid has only accelerated adoption…
It would be interesting to see if dmart would walk backwards in ecommerce once covid subsides and stores are back with flocking of people as before…
I am unable to gather with certainty if dmart ready is a long term strategic move accelerated by covid or a mere tactical move to maneuver present crisis…my tilt is towards the second case…as ecommerce, fanfare, jumping the guns etc. has never been the DNA of this sticking to basics retailer!
I don’t think the management themselves know about the online business, as the situation is still evolving. I don’t think there are definitive answers to a situation which does not have a precedent.
Dmart’s management may not be agile but I think they are not Luddites who are stubborn and will not embrace technology, although the current reviews of the Dmart Ready app are bad, so if need be I think they would act fast and Dmart Ready could be available for Tier 2 cities too.
In a long term story, where in many crises happen, one can never say to any degree of certainty what happens in the middle of a crisis.
Individual experiences may or may not reflect the mentality of the crowd, even if they do and people who are unhappy with Dmart’s service move to another retail, it will not be an exodus, and if it is, it will be visible in the sales.
Sales have increased by 17% in Q4FY21 compared to Q4FY20, 22 new stores were added in FY21, so Dmart is more than surviving I would say. Although no clear visibility at least for the next 2 quarters will dampen the earnings as it did in FY20.
Disclosure - Invested.
I find that most of the DMart Ready app reviews to be very good. https://play.google.com/store/apps/details?id=in.dmart&showAllReviews=true
I think DMart Ready does not change DMart’s goal: Being a low cost retailer. They strive to trim down the costs so that the end consumer gets their cheapest price. They did it with B&M stores, and now they’re checking if they can do it with DMart Ready. So DMart Ready is just another strategy for that goal in mind.
It is clear to me that DMart Ready is not competing with other egrocers. That is why they’re not afraid to charge even ₹80 for delivery. That is why, they’re not selling products at throw-away prices like other egrocers (₹1 for 1kg of Sugar!). DMart Ready does not do these things since the goal is not to gain traction.
DMart customer is only being given an additional option to buy from DMart. They’re seeing if the costs can be kept low here too similar to B&M store. This requires them to start small and fine tune the process to become efficient.
In spite of such efforts, if they come to a conclusion that egrocery cannot work as well as B&M stores, I’m pretty sure DMart will stop this experiment unlike other egrocers who are pouring their investors’ funds no matter what. Simply, goals of DMart Ready is very different from other egrocers, in my opinion.
Disclosure: Invested
Yes the current reviews are good as the users are different. The reviews that I mentioned were people who wanted Ready to be available in their cities, users who experienced glitches in the app, unavailability of slots etc.
It remains to be seen if Dmart will scale up their Ready operations if the need exists for a couple of quarters or if it is just for a couple of quarters they may maintain their status quo and not invest any of their resources and get back to the main business.
Just like WFH, this is a wait and watch game and the management has the same opinion.
From Q4FY21 update
Our business will continue to be dependent on how the pandemic trends further and the consequent restrictions for operating our stores. We continue to cooperate with the authorities and our single most important priority is to keep our customers and employees safe.
Invested.
I was wondering how Dmart works on such low opm?
And why everyone is not able to copy Dmart style? (buy huge quantity and sell at lower prices).
How do they achieve this? And why no other modern / traditional competitor is not able to work on such low gross profit?
I am aware that they sell staple and branded fmcg products at low margin and sell non - food items such as apparels at higher margin.
But I am specially unable to understand how they manage their apparel category?
First, let’s understand why apparels in general usually have higher margin
There are 2 main reasons.
The primary reason is fashion.
Barring Hosiery (inner garment, night wear such as t-shirt, Night Pant, Bermoda) & daily wear (shirts, pant, ladies kudti, ladies tops priced below 400), fashion keeps on changing.
There is seasonality in products and taste differs drastically if we take gap between 2 - 3 season.
So, now with change in fashion, there will be dead stock.
SO how Dmart deals with this dead stock iasue?
In traditional (mom & pop store) as well modern retail (brand EBO), this issue persists all the time.
They address this by initially charging products at very high margin (40 - 150%) & then gradually decreasing mrp or gradually adding discount.
Sometimes, they are also forced to liquidate this stock below cost price but usually this gets covered with surplus (excessive) margin of other items.
Now in case of Dmart, as they are charging very less margin on other products, how they address this issue?
2nd issue is seasonal products.
Many traditional store do not stock seasonal products such as winter wear or rainy season.
Primary reason for this is, unpredictable weather.
Many times, (especially in last 6 - 7 years), seasonal forecast has been excessively wrong.
Eg. This year, there was heavy rain in September and very less rain in June, July, August.
Similarly, Winter was less sevier than expected (cloduly weather by December end).
Now Dmart stock these both products (winter & rainy) in hugh quantities.
My question is what happens to these products once season gets over?
If they kept it warehouse for next year, then definitely it will affect their inventory turn.
If they sell for loss, then they don’t margins to protect themselves.
Disclaimer - I am a traditional apparel retailer & I personally know few vendors who supply to Dmart. I am frequent Dmart visitor (I have visited more than 30 - 40 different Dmart stores over last few years) and every year on an average I visit Dmart 10 - 15 times.
Invested in Dmart and I am raising these question in order to get confidence to invest more.
Good point.
I agree with you that it will be very difficult to understand Dmart 100%.
But as an investor, we need to understand company as much as possible.
My analysis on Dmart is more from investment point of view than business point of view.
Hope this clarifies.
Some Modern Retailers have an arrangement with the suppliers for taking back the unsold stock after the season. This is adjusted in the pricing and credit arrangement and the inventory risk moves back to the supplier. Not aware what is the arrangement in D’Mart.
Disclosure : Not invested. Tracking.
As far as I understand, DMart is very good at data analytics to make critical decisions. For example, different stores in different demographics have different product assortment requirements. Then, how come almost all the stores are crowded at every shelf? DMart uses data analytics to arrive at near perfect product assortment for each store. That means they can do things like A/B Testing. They even know the economic class of the customers. You can sense this understanding from their conf calls. They say things like “In COVID times, we find less affluent visit stores more often than the affluent”. Even the pricing includes data collection of the prices in and around the area to ensure lowest pricing.
Mom and Pop stores operate based on experience and understanding of the local needs. DMart has the advantage of scale over Mom and Pop stores, and uses analytics to match the experience and understanding of local needs. Other large retailers in my understanding are not as good at taking advantage of data analytics.
In short, DMart’s ultra localized data analytics is its main competitive advantage over other retailers. Thus they make better decisions that cut costs. Even more critical is the product assortment that suits the local interests which converts more revenue per sqft.
Disclosure: Invested
Precisely my point.
If you want to offer low prices to consumer then you have to source/purchase goods at lowest possible prices.
Vendors usually offers low prices when they get faster payment & there is no after sales services (taking back unsold stock).
So either way, if vendor takes risk then prices to Dmart won’t be cheaper than general trade.
If Dmart gets cheap prices, then vendor is not taking much risk.
I spoke with couple of Dmart vendors whether they take back unsold inventory. They said they offer lowest rate only because risk is nill from their side, one goods is sold.
My probably understanding is that entire risk will be borne by Dmart.
2020-21 Q4 results -
PAT margin stood at 5.9% in Q3FY21 as compared to 5.6% in Q3FY20.
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) in Q3FY21 stood at Rs.689 crore, as compared to Rs. 597 crore in the orresponding quarter of last year. EBITDA margin stood at 9.1% in Q3FY21 as compared to 8.8% in Q3FY20.
Couldn’t find any reasons as to why DMART deserves such mindboggling valuations. Revenue from sales per sq ft declining since two years, EPS declining, no such MOAT visibility from pandemic POV. Maybe I continue to be blind to obvious upticks / market is rating it very high. Their e-channel has also been below average(maybe needs more time).
Being the cheapest retailer is the moat.
None other than that is needed to pull customers.
They just made 1000cr plus of cash flow in the pandemic year. That shows the strength doesn’t it.
It is expensive but I can hardly understand why it would be cheap. Lowest cost retailer growing at 20% will not be cheap
What has been the same stores growth , any idea guys
Refer attached snapshot from results:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/fe93216b-1fe8-49ab-8104-9ee569998e8f.pdf
How can you expect those metrics to go up. Footfall is less for obvious reason For 1 quarter people didnt go to dmart and then discretionary items were not sold.
Let things get control and then you see the growth. Dmart stock has long way to go
