Recently found that this observation does not hold good, as there are some packaged items that are slightly cheaper in the store than DMart Ready. There are indeed some items that are cheaper in DMart Ready than in the store. The pricing strategy is unclear to me. This could be store specific.
My assessment was way higher 
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German retailer Metro looking to sell India operations for $1.75 bn: Report
The German retailer operates 31 cash-and-carry stores across India
Topics METRO Cash & Carry | Metro AG | Retail stores
Metro AG has been present in India since 2003 and has been operating a chain of 31 cash-and-carry stores
German retailer Metro AG is planning to exit the Indian market by selling its cash-and-carry operations for $1.5-1.75 billion, according to a news report.
The Economic Times reported that companies such as Amazon, Thailandās Charoen Pokphand (CP) Group, Reliance Retail, Avenue Supermarts, Tata Group, Lulu Group, and PE fund Samara Capital have been approached to buy the MNCās cash-and-carry operations in the country.
Metro AG has been present in India since 2003 and has been operating a chain of 31 cash-and-carry stores.
According to the report, JP Morgan and Goldman Sachs have been appointed to find a suitable buyer for Metro AGās business in India.
Pressures to sell below cost, free delivery of goods and negative EBITDA in the industry, were the reasons according to an industry veteran, quoted in the report.
The discussions with potential buyers are said to be in the initial phase.
Metro AG revenues in FY21 (Oct-Sept) stood at $898 million and it is likely to clock more than $1 billion in revenues with an EBITDA growth of 30-40% as compared to 50% in the last fiscal.
According to Metroās India website its, ācore customers include small retailers and kirana stores, hotels, restaurants and caterers, corporates, SMEs, all types of offices, companies and institutions, as well as self-employed professionalsā.
I see this to be a good news for dmart. failure of FutureRetail , Metro and many more companies will give investors more confidence on dmart.
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On the contrary, it is a sign that this is a very difficult industry with cut-throat competition where players are fighting for survival. Good sectors to invest are where all players in the sector are growing profitably without the need to pull each other down.
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Agree in competition but there are very few sectors where competition is less and all players growing not at cost of other ā¦
Also Retail is a secular sector in my opinion and most of losers have been because of their respective poor decisions and/or strategyā¦
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I can just say from my past experience of having dealt with these modern retail companies while working for an FMCG company that Metro (as well as Spencerās) were not the best managed businesses.
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These were never profitable opportunities to play for FMCG companies - they would always keep asking for large listing fees to list the range as well as constant budgets on visibility/promotions to pass on these discounts.
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Additionally, their stock management was no where close to ideal. Often till the last couple of months, they would not realise that the stock was getting close to expiry date. To address this, knowing that the companies would not have much option, they would come back with return of stock requests which would be a loss making proposition for all stakeholders. Companies would constantly ask them to look into their over ordering process/forecasting mechanics but nothing ever changed.
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Qualities of team/buyers usually involved here was generally quite lethargic
Versus this, DMart was a much better customer. They had better forecasting processes, less returns and also did not charge listing fee because they negotiated large product discounts with the companies and transferred a part of that to the consumer regularly.
Accordingly business was classified as cost to play (comprising of Metro/Spencerās) and as good to be in (comprising of DMart, Reliance, independent chains etc). In the long run this should benefit more efficient players as even companies direct their marketing investments in better opportunities.
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In my opinion, the entire game in this sector is around 4 to 6 percent net margin, this it self makes the inefficient companies to shut down sooner or later. Dmart demands premium valuation because of its effeciency in handling the inventories. We have/had hundreds of retailers including the ecommerce, none are generating free cash flows except few and dmart on the top.
I had jio Mart delivery guy at my place and I enquired with him on few queries and the and below.
1 are you employee - No jio has outsourced delivery to A and A inturn to B and he was fr E. See the level of sub out sourcing.
2 how many delivery your company do per day. Earlier it user to be 30 to 40 and now 10 to 15.
3 how your company get paid. 20 per order irrespective of size. I forgot to check if petrol or vehicle charges are given by jio or only 20.
In my opinion above model doesnāt looks to be very efficient.
I suggest if someone else can cross check
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Agree to most points you mentioned except for the point on āDmart demands premium valuation because of its efficiency in handling the inventoriesā. I would only partly agree to this point.
Part of the reason for high valuation of DMART is due to low float. A large part is with promoter, his best buddies and their families who will rarely sell large quantities. Hence it will continue to be overvalued even if we factor for its efficient business model.
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This too is another attribute for higher valuation. I am sure at some point Mr. Dhamani will dilute his stake and we will see more and more institutions joining the party.
While Dmart has served well for investors so far, and may very well be the same in the future too, it has got its own hurdles. Price consolidation for many months, very high PE which may come down for many reasons, competition, new geographies are becoming less although they can grow in the established states, perhaps expand to Tier 3 towns too. Very long story.
Had a position, sold during the recent fall, starting building the position again.
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Retail has witnessed competition but Dmart has thrived. The issue is cheap money led to more start ups entering into this space but one day they will have to shut down because losses cant be carried out for a very period of time.
Dmart is very profitable and see the pace at which it is opening stores. Pandemic has dented the footfalls otherwise its very strong
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I do see JioMart denting them. Used to be a loyal Dmart order online and collect from store next door person, but JioMart started offering same prices with home delivery free and for even small ticket items.
Reliance is here to stay and talking about personal experience, ~ 8 to 10k worth of groceries have now been diverted from D-Mart to either Jio or local home delivery kirana to support them.
Thanks for sharing your experience. Some questions come to mind, would be good to know your thoughtsā¦
- Do you get same quality stuff from Jiomart and same brands that you used to get from Dmart?
- Do you buy more private labels from both Dmart earlier and now from Jiomart?
- Have you already/or planning to shift for Fresh (vegetables, diary) items also?
- Is delivery experience of Jiomart seamless and good?
- Is goods delivered clean & in good condition?
- Why not a big basket if a Jiomart? Is prices the reason or something else?
My personal experience with Jiomart delivery and quality of products has not been that great when I tried once long back (They might have improved now). Same with Big basket also. (They might also have improved).
My personal experience of home delivery has been good with surprisingly only Natureās Basket (earlier Godrej & now part of Spencer). In store experience has been best for Star Bazar among all these. Although invested in Dmart but I fear to enter one by looking at the crowd!
As someone pointed out earlier that our personal preferences may not matter much but still good to know others views and a general consensus does matterā¦Thanks!
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My answers in quote above.
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JioMart is pulling away some customers from Dmart no doubt but it wonāt affect much until & unless they start operating offline as well. JioMartās main feature is the free delivery one with no minimum order requirements. I personally use JioMart a lot too but that hasnāt stopped me from stepping into Dmart stores yet. And, @All_Prosper asked the right question (the 3rd one related to vegetables,diary). Stuff like these cannot be delivered in India via online methods. Absolutely no wayā¦ yeah startups will come, burn cash & go away. But offline retail would remain the only way atleast for the foreseeable future. JioMart might have advantage in packaged foods & all but as long as the customers are going to DMart - to buy groceries atleast (tho actually they end up shopping more) - it shouldnāt be much of a problem. The worst case would be a duopoly between the two which isnāt bad either. Just my two cents.
I recall seeing Jiomart orders being fulfilled in Reliance Fresh stores. So, what exactly is the lacunae here? Like me, lots of people are assuming Jiomart is the online extension of Reliance Fresh
IMO the issue will not come between a Dmart vs a Jiomartā¦issue will creep from within the incumbents itself.
If management is not right, it will not take more than few years to create a mess in retailingā¦look at plight of once a behemoth Big Bazaarā¦so the worst enemy of retailers can be they themselves and not the competitionā¦
A dull and boring Spencer is still surviving while the mega Big bazaar is long gone! While Spencer has turn around Natureās basketā¦
We should not write off Star Bazaar, Star Quik, Big basket & even Amazon in this raceā¦so certainly there will be no duopoly in the game of Indian Retail!
Top notch management and razor focus on strategy & vision is what will make you survive in long runā¦
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Yeah you can say JioMart is an online extensionā¦ they are using the supply chains set up by reliance retail. Thatās why there is a major pain of JioMart in inventory managements. Many time I order stuff, they deduct the money & I am told that some items were out of stock after my order is delivered. Like for example I ordered 20 items, got delivered 17, 3 were out of stockā¦ now it would take another 1-2 days for the refundā¦ This is a big pain. They need to connect themselves to small retail shops within oneās community to scale big in ahead timesā¦ lets see
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I have a different thought.
Even if the prices are the same for Dmart and JioMart, and JioMart offers free home delivery, someone has to be at home taking that delivery. If the people who buy in Dmart are the sections of people who work, either salaried or working class, not all of them will be at home at all times. I think, despite the home delivery being free even for one item, people will not keep on putting orders, wait for it, number of times. For monthly groceries, I think one person can visit the physical store once a month, avail the discounts, it will be over until next month.
So if the majority of the people who buy at Dmart cannot afford being at home for the deliveries, what difference does it make, even if the delivery is free. Paradoxically, the very convenience may become an inconvenience.
My 2 cents, have a position in Dmart and Reliance.
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