DMart gets ready to take on JioMart – falling profits and footfalls, and competition push Radhakishan Damani towards e-commerce

• DMart is now ready to take on the next phase of growth with small steps in its e-commerce offering – DMart Ready.
• The COVID-19 pandemic impact continues to reflect in the second quarter results of the company as DMart’s year-on-year profits fell by 37% to ₹211 crore.
• DMart, when compared to its other offline retail peers, has cracked the code of brick and mortar retailing but falls far behind others in online retailing.

With falling profits, and rising competition from JioMart, Amazon, Flipkart, among others, Radhakishan Damani’s DMart is finally making strides into the e-commerce world. The COVID pain continues to reflect in the company’s earnings for the second consecutive quarter. DMart’s year-on-year profits fell by 37% to ₹211 crore, while its revenue for the quarter ended September fell by 12.3% to ₹5,218 crore.

But despite the yearly fall in profits, DMart’s quarterly rise in revenue and profits, and plans to double down on e-commerce brought in some cheer in the markets. On Monday morning, DMart’s stock was up over 2%.

Getting ‘ready’ for e-commerce

And DMart is now ready to take on the next phase of growth with small steps in its e-commerce offering – DMart Ready. The company has said that it will be shutting down two stores in Mumbai and turning them into fulfillment centers for its e-commerce operations. “One each in Mira Road and Kalyan. Both these locations have an alternate DMart store within 4 kms,” Neville Noronha, CEO & Managing Director, Avenue Supermarts Limited, said in a statement.

The company is also expanding its e-commerce offerings in Mumbai as well as select pincodes in Pune. “We continue to increase our footprint in the Mumbai Metropolitan Region covering additional pin codes. Mira Road and Kalyan FC addition was to deepen our reach and serve customers better in these regions,” said Noronha.

DMart already has a registered entity called Avenue E-commerce, where the company had invested ` ₹252.76 crore as of March 31, 2020.

DMart vs others – a king in brick and mortar but online push needed

DMart, when compared to its other offline retail peers, has cracked the code of brick and mortar retailing and falls only short of the mammoth Reliance Retail.

Source: Edelweiss report

But when it comes to online retailing, DMart falls far behind others. Analysts too have been waiting for DMart’s ‘second phase of growth’. “We believe time is ripe for players to get the model right before scaling it up. While DMart has cracked B&M retailing, it has treaded cautiously in online retailing. A comparison with other providers shows DMart Ready must ramp-up in many categories, if it has to replicate its offline success online,” said a report by Edelweiss from September 23.

Source: Edelweiss report
*DMart recently announced that it’s expanding to Pune, taking the total to two cities.

Experts agreed that DMart would face pressure from new retail. “In our view, the company may face some margin pressures in the short term due to increased pressure from E-com players,” said analysts at Antique in a report on October 19.

Falling footfalls further make a case for online operations

It’s not just the rising e-commerce play of Mukesh Ambani’s JioMart that is causing Damani to take the plunge into online retail. It’s also the fact that footfalls continue to be lower in DMart stores. The company said that footfalls continue to be ‘significantly lower’, but basket values are increasing.

Although the company opened six new stores in the quarter, DMart stores, which are two years and older, managed to do 87.5% of September 2019 sales in the month of September 2020. DMart currently has 158 (out of the total 220) stores that are two years and older.

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