Why is D-Mart Facing a Storm of Challenges in Their Business? 🌩️🛒
Remember a time when the Kirana stores in our area used to say that we were facing many problems in our business because of D-Mart, D-Mart disrupted many stores within 1 - 2 Km of their range in any place that it had opened a store. Well it turns out that D-Mart themselves are facing many issues
When it comes to their business let’s first understand their business
D-mart positions itself as a company selling daily use products at a lower price they have three major categories under their portfolio
1. Foods
2. Non-foods
3. General Merchandise and apparel
So what is the problem that D-Mart is facing in its business let's understand the problem
Slower Pace in Store Expansion: As per the Investor presentation of Avenue Supermarket in the financial year 2023 – 2024, the company added 41 stores in the country which is the highest number of stores added in the past 5 years but their store expansion is growing at a rate of 11.2% CAGR which is less than its competitor Reliance which has already rolled out 600+ Stores as compared to D-Mart which has 365 stores
Revenue from Sales per Retail Business Area sq. ft: The revenue from Sales per Retail Business Area sq. ft has not increased and has been almost constant for the past 5 years and has grown from 32,879 in the Fy 20 to 32,941 in the Fy 24 which is a growth of only 0.038%CAGR in the past 5 years
Less sale of High-ticket Products: this is one of the major factors why D-Mart is facing pressure with their Operating Margin, we have discussed that D-mart has three categories and the one with the highest margin is General Merchandise and apparel, D-mart has seen a major pressure when it comes to this segment as they face immense competition from brands like Trent and other Retail stores like Reliance
Immense competition: Big Pocket people (People with high Discretionary Income ) are ordering from apps like Blink-it, Zepto, Big Basket, and other apps that offer customer convenience. These big-pocket customers do not care for the money that they are paying but care more for the convenience provided by the business. Along with this, they are also facing immense competition in brick-and-mortar business from brands like Reliance, StarQuick (A Tata Enterprise), and other stores as well like Patel R Mart, etc
