Your neighbourhood kirana store is a toughie. It may not let it on, but food and grocery (F&G) retail in India is not an easy bout. Online and offline, the competition is intense and margins, wafer-thin. The biggies are consolidating. In 2015, Bharti group sold its Easyday chain to Kishore Biyani’s Future Group and so did Shoppers Stop, in 2017, when it handed over HyperCity. Last year, the Aditya Birla group sold More to Samara Capital and Amazon.
The giants may leave the ring, but a smaller, more resilient player is still standing — the Radhakishan Damani-owned DMart chain. It is one of the most profitable firms in F&G retail with a market cap of Rs.810 billion. According to a Morgan Stanley report, DMart’s stores generate more revenue/square foot than Walmart – $530 versus $450. The DMart success has been built, by its parent company Avenue Supermarts, on carefully crafted strategy and well-planned expansion.
But the retail trade of today is not a business where you can sit pretty on your laurels. It is a fast-evolving market with varied delivery formats, all competing for a share of the consumer’s wallet. The new challengers that are turning on the heat are online supermarkets such as Bigbasket and Grofers. The e-grocers currently have a miniscule share of the F&G market, of less than 1%, but they are growing fast. Brokerage CLSA expects the e-grocery segment to grow to $99 billion over the next decade, which is an impressive leap from $1 billion in 2017! (See: A giant leap)
That’s probably one reason DMart started courting a new store format DMart Ready in 2017. In this new store format, customers can place their order online or through the app. They can then collect their purchases from the DMart Ready stores, which average 150-200 sq ft, or have it home-delivered for an additional charge. Today, there are more than 150 DMart Ready stores in Mumbai and Thane. “Our rough estimate suggests that these stores may account for 1% of DMart’s overall revenue in FY19,” states a Kotak Institutional Equities report.
You don’t want to be left behind. Do you?
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