Home-grown supermarket chain DMart, which is all set for a ₹1,800-crore IPO next month, is building supply-chain capabilities, to reach its customers faster.
According to sources, the company is piloting a project wherein it plans to open multiple delivery centres or pick-up points in catchment areas, where it has a store, for its online customers.
The company had recently launched a mobile app and a website, to take on big-box retailers such as Star Bazaar and Big Bazaar besides online players such as Bigbasket, Grofers and ZopNow.
Christened ‘DMart Ready’, the centres will be 150-200-sqft stores that will act as pick-up points for customers who order products on its app.
When contacted on the development, Neville Noronha, Chief Executive of Avenue Supermarts, DMart’s parent company, told BusinessLine that he would not be able to comment on the same at this moment since the company is going for an IPO.
According to experts, hybrid or omni-channel business models are needed to address diverse consumer needs and manage a variety of business constraints.
“Using existing infrastructure, with a ‘digital layer’ on top, is a good way to offer convenience and flexibility to consumers at an incremental business investment,” said Devangshu Dutta, CEO of retail research and consultancy firm Third EyeSight.
Dutta said that when UK-based retailer Tesco launched its online store, the company mapped each customer to its local stores, used store staff’s off-peak time to pick and pack orders, and delivered the merchandise at home through a fleet of trucks. This allowed Tesco to build online traction without having to create a completely new business infrastructure.
Similarly, a brick-and mortar-retailer also benefits from having an existing relationship, and doesn’t have to spend much on acquiring and reacquiring customers, compared with an online-only business, he said. Dutta added that both offline retailers and online players are still struggling with last-mile delivery and logistics and supply chain.
Mumbai-based DMart is experimenting with this strategy in a few places in the city, such as Andheri and Ghatkopar, at present. It will be soon replicated in all the 26 cities where DMart is present.
DMart, promoted by equity investor RK Damani, is one of the most profitable companies with a strong balance sheet, among its peers. According to data collated by business research platform Tofler, Avenue Supermarts’ revenue has grown 40 per cent year-on-year, while its profits have witnessed 50 per cent growth in the past five years. In FY 16, the company’s revenues stood at ₹8,600 crore and profits at ₹320 crore.
DMart’s better financial performance in comparison to its peers has been driven by its differentiated business model, wherein 90 per cent of its stores are located in properties owned by the firm, unlike most retail firms that go for leasing. Also, the company has kept operational costs low by opening stores in suburbs and small towns.