DMart’s online biz clocks Rs 144 crore in sales

Avenue Supermarts, which runs the DMart retail chain, saw its online sales more than double during FY19 to Rs 144 crore despite operating only in Mumbai.
The country’s most valuable retailer by market capitalisation, however, posted a net loss of Rs 51 crore in the two-year old e-commerce venture.
“We entered this business on a pilot basis since we thought we can learn from it and also be part of the channel ecosystem. We can’t comment on its growth strategy as its still an experiment for us,” said Neville Noronha, CEO of Avenue Supermarts.
A year ago, its online business – DMart Ready – posted sales of Rs 44 crore with net loss of Rs 48 crore, according to the company’s investor presentation filed on the Bombay Stock Exchange.
Unlike grocery delivery startups like BigBasket and Grofers, which rely on delivery-based distribution model, DMart’s online venture essentially has multiple delivery centres or pick-up points in catchment areas, where it has a store, so that customers can order online and pick it up products from there.
Within the physical retail channel, DMart has better operational metrics such as cost to sales or invested capital than Aldi and Lidl, the German retailers that are often seen as benchmarks for discount retailing as they run some of the leanest retail operations globally.
In fact, DMart stores generated revenue per square foot of $530 compared to $450 for Walmart Inc in FY 19. Even in India, it generates nearly three times the revenue per retail square feet compared to other grocery rivals such as Big Bazaar and More.
But in the ecommerce business, DMart is competing with Amazon, Flipkart, BigBasket and Grofers which use deep discounting as their core strategy. While DMart is cautious not to burn cash to get higher sales, it has retained its lowest cost retailer advantage despite the onslaught of online and offline players, say analysts.
“Despite the aggression of other players in the organised retail segment both online as well as offline, product assortment and competitive pricing have helped DMart successfully defend its turf,” said Abneesh Roy, senior vice president at Edelweiss Securities. “We compared DMart Ready’s prices with peers in the online retail space for a basket of 27 essential household products and found that 52% are the cheapest at DMart.”
The company, that runs online business through its subsidiary – Avenue E-Commerce – had a negative EBITDA margin of 28% during the year compared to physical store business that had 8% margin. “Based on our channel checks, we infer that a typical DMart Ready outlet is likely to achieve break even if it clocks an order rate of 16 or more per day with a basket value of Rs 1500,” added Roy.
DMart, owned by stock broker Radhakrishnan Damani, has nearly 176 stores with annual revenues of Rs 19,916 crore and net profit of Rs 936 crore during FY19.

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This article is automatically sourced by automatic news feeds through online softwares, Inventiva team has not made any modifications and adjustments in the article and is published as it is after giving due credits to its original source.

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