DMart is one of the fastest-growing hypermarket retail chains in India. It was started in 2002 in Powai in Mumbai, Maharashtra by Radhakishan Damani. Today, it is one of the biggest retail store chain companies in India (196 stores) not just in terms of size and spread but also in terms of performance and management.

Source: Pixr8

Conservatism worked wonders for DMart. It is commonly observed that supermarkets or hypermarkets eventually bring diversification into their merchandise.

However, DMart hardly ever digressed from their original offering which is still food and grocery.

The company has a terrific inventory turnover ratio of 12.64 indicating strong sales, the efficacy of their marketing strategies, robust inventory management, and business-friendly supplier/vendor management.

In this post, we elaborate more on what makes DMart such a successful brand and highlight five of its key success factors.

Purchase Strategy

For a retail chain business, purchase strategy plays a vital role in inventory management. If purchases are not made on time, inventory takes the immediate heat which then passes on to adversely affect sales and revenue.

We experience this phenomenon quite often in small stores when a good is not available and the owner and staff begin to explore the reasons with each other about such non-availability.

Such instances instantly reflect the lack of internal procedures. Such instances are rare with professionally-managed brands like DMart who not only have robust procedures but also business-friendly purchase policies and strategies.

For instance, DMart shortened the industry standard time of payment to suppliers and vendors from weeks to days. Such commitment served as a motivation for the suppliers and vendors to play their part diligently.

The incentive of early payment also worked well with the suppliers. With an improved payment cycle, distributors and suppliers were willing to deliver more and quicker.

DMart passed on the cost benefits, if any, to the customers leading to increasing footfall and sales year after year.

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Source: Acuity Insurance

Inventory Management

Inventory management plays a crucial role in making or breaking a retail business. Maintaining the optimum level of inventory consistently is necessary.

Stock deficiency in a store will make customers look elsewhere while stock excess will result in space crunch and unnecessary increase in holding costs.

For DMart, considering the wide variety of products (with several SKUs, specifications, etc.) which they offer in their stores, it is manually impossible to keep track of the flow of inventory. Here, DMart leverages through technology to ensure a fine balance between stock-out situations and inventory spoilage.

Auto Replenishment System (ARS) helps in managing the store inventory to ensure that required stock levels are consistently maintained. The re‐order levels are pre‐defined and when a product falls below a specified number, it gets reordered automatically for replenishment.

The ARS system can track the different products on display and in stock and accordingly place the order automatically reducing manpower efforts and saving time and money.

Customers rarely get to see any stock-out board inside DMart stores indicating the efficiency of the inventory management system of DMart.

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Source: ITarian

Retail chain operations management

DMart has a strong middle-level management. This gives the company a strong shade right in the middle of its organization structure.

These are the people who oversee the business operations at one end and work closely with the people leading the company on the other. They serve as a connecting medium between company-wide strategies and grass-root implementation.

When we are talking about a large number of stores, maintaining uniformity and consistency of store operations becomes utmost important for several reasons. Firstly, customers need to be delivered the same quality of service and experience across stores.

Secondly, the internal management of the stores becomes easier when all of them are operating under the same set of rules. Thirdly, it becomes easier for the nation-wide suppliers and distributors to interact with the business processes of the company.

This is possible with store operations manuals. These manuals define the SOPs of the various retail store operations like purchase, inventory management, customer service, employee management, etc.

These manuals need to be planned, documented, self-explanatory, and above everything, common to all the stores in the country. The uniformity and consistency in store operations shown by DMart reflect the involvement of SOPs and store operations manuals.

Robust IT Systems

We have already mentioned earlier that DMart leverages through technology. When we talk of modern-day business-IT systems, two technologies we would like to bring to the fore are ERP and analytics.

Enterprise Resource Planning (ERP) refers to any business software application to manage business operations and activities. There are standard, stand-alone ERPs for each business process like HR, Finance, Project management, etc.

With the complete ERP suite, the management of all the business processes is brought under one umbrella. The entire gamut of business operations data gets stored centrally and disseminated to each business process as per requirements.

For example, a company’s HR payroll data can be shared with its Finance department for further processing like approvals and payment. And after the salaries are paid by the Finance department, the same will also reflect on the HR systems.

For a retail store chain company, close operational coordination between multiple departments like marketing, finance, purchase, inventory and supply chain is the key to maintaining the store operations and customer service intact. ERP can make such real-time coordination possible.

To come up with the most effective strategies and improvisations, business owners and managers need the most relevant and specific of information and insights. Data from which meaningful insights can be generated are not outside but very much within the organization.

For example, a retail departmental store may know that during various festive seasons the sales usually go up. But with retail analytics tools, they can be more precise with what goods were purchased more during different festive seasons in the past or the rise in the number of employees in and around the festive times in the previous year.

Such detailed information helps store managers make better decisions rather than relying on general assumptions which are true but not precise.

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Source: Analytics Training

Bigger stores

Bigger stores in size have many advantages over smaller stores.

Bigger stores can invest in advanced technologies like highly-featured CCTV surveillance systems, RFID tags on products, analytics tools for better insights and decision-making.

One interesting highlight of the retail industry anywhere in the world is the revenue per square feet or profit per square feet. Bigger stores have a better return on investment (RoI) when compared to smaller stores due to economies of scale.

The gross profit per square feet is higher in larger stores than their smaller counterparts as a wide variety of goods can be merchandised in one store to generate more sales opportunity at a slightly extra cost leading to higher gross profits.

If we consider only space and rent, it is often observed that the rents of bigger spaces are more cost-effective than the same for smaller spaces. The rent charged for a big store may be higher but gives a better deal in terms of space.

A big store means wider merchandise, ability to handle more footfall, flexibility for visual merchandising, aisle space, etc.

According to data compiled by Bloomberg-Quint and published and updated in 2017, DMart’s revenue per square feet is INR 25,844 while that of its competitors are nowhere close. And according to the same report, DMart’s profit per square feet is INR 965 which again is higher than even that of big brands like Reliance Retail and Future Retail.

This justifies why DMart is heavily relying on large format stores in all their locations predominantly in western and southern India.

Summing up

DMart has not been an ordinary right from the outset. They did not tinker much with strategies that worked for them.

Instead of following the growth routes adopted by other businesses, they focused on market penetration which worked amazingly well for them. More importantly, they work on making their internal functioning robust.

We saw this with their purchase policies and strategies which not benefitted them in providing value to customers but also proved to be business-friendly to their suppliers and vendors.

We saw how technologies like ARS can help companies like DMart make their inventory management systems more responsive to business requirements. With ERP systems in place, companies could work under an integrated platform connecting the various business processes.

With analytics, business owners, senior executives, and store managers get access to meaningful insights and informational inputs for planning, building strategies, and decision-making.

DMart also strengthened its middle-level management giving leverage to the company for better coordination between business operations and the broader business goals and strategies.

About us

Your Retail Coach (YRC) is a retail consulting and eCommerce outsourcing company in India offering a wide range of services in retail, eCommerce and omnichannel catering to a multitude of industries.

With its experience and expertise as a retail domain expert, YRC offers various services to retail chain store businesses and aspiring start-ups in building a roadmap of success and sustainability through better supermarket retail chain operations.

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