In­dian re­tailer D-Mart suc­ceeds where Wal­mart and other for­eign ri­vals have failed

Cheap gro­cery prices fuel sales of other, higher-mar­gin goods

Bloomberg Businessweek (Europe) - - CONTENTS -

“We’ve been do­ing just one thing. No dis­trac­tions”

In­dia has long been the place big re­tail­ers go to lose money. Wal­mart Stores landed in 2007 with dreams of a su­per­mar­ket em­pire but, be­cause of mea­sures de­signed to pro­tect lo­cal busi­ness, has had to set­tle for a scaled-down whole­sal­ing op­er­a­tion that’s been burn­ing cash in each of the last seven years. French mer­chant

Car­refour came in 2010, opened five stores, then left in 2014. Losses for Ger­many’s Metro have also per­sisted, 13 years af­ter it opened its first store. But In­dian su­per­mar­ket op­er­a­tor

D-Mart, which has turned a profit in each of the last 15 years, seems to have fig­ured out how to sat­isfy In­dian shop­pers. The chain gives cus­tomers far fewer choices of no-frills prod­ucts, en­abling it to ne­go­ti­ate bet­ter prices with ven­dors. It also re­fuses to spend on an­a­lyt­ics, loy­alty pro­grams, so­cial me­dia, or other new­fan­gled strate­gies. In­stead, it sells cheap stuff. “We’ve been do­ing just one thing. No dis­trac­tions,” says Neville Noronha, chief ex­ec­u­tive of­fi­cer of D-Mart par­ent Av­enue Su­per­marts. “On Sun­day evenings our stores are so crowded, it’s worse than a lo­cal train dur­ing peak hours.”

With only 94 stores, D-Mart takes a dif­fer­ent path from those of many lo­cal com­peti­tors, as well. In­dia’s big­gest su­per­mar­ket oper­a­tors, Fu­ture Retail and Re­liance

In­dus­tries, have ex­panded vig­or­ously over the past few years, open­ing 1,000 su­per­mar­kets com­bined. That’s caused them to clock tiny prof­its while pil­ing on debt. D-Mart has ex­panded more slowly, adding about 35 stores since 2013. But its rev­enue has grown faster. D-Mart sales for the year ended last March in­creased 38 per­cent from a year ear­lier, to 64.5 bil­lion ru­pees ($940 mil­lion), and will likely show a 29 per­cent in­crease when this year’s fig­ures are cal­cu­lated, Noronha says.

That’s buoyed D-Mart’s prof­itabil­ity. Ebit mar­gins, or profit be­fore in­ter­est and taxes as a per­cent­age of sales, were 6.1 per­cent for D-Mart in the last fis­cal year, com­pared with 5.9 per­cent at Fu­ture with its 400 stores and 2.4 per­cent for Re­liance’s 3,000 out­lets, which in­clude su­per­mar­kets and cloth­ing stores.

Wal­mart has yet to turn a profit in In­dia and logged a 2.3 bil­lion-ru­pee loss in 2014 from its 20 stores, which sell only to reg­is­tered busi­ness­peo­ple. Metro, which runs a net­work of 19 whole­sale stores, re­ported a loss of 1.1 bil­lion ru­pees in the year ended March 2015. A spokes­woman re­it­er­ated Metro’s goal of ex­pand­ing to 50 stores by 2020. Fu­ture and Wal­mart didn’t

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