1/ Thank you everyone for your overwhelming responses on my earlier tweet. Sharing my key findings below.
Below table compares the PnL of DMart vs Spencers Retail vs Future Retail - in FY19.
Commentary on what DMart does well is as follows:
Below table compares the PnL of DMart vs Spencers Retail vs Future Retail - in FY19.
Commentary on what DMart does well is as follows:
2/ DMart has - by a distance - the highest sales throughput (per sq ft of retail space) in the brick and mortal industry.
They operates at Rs 35K per sq ft. This is 3x of Future Retail. And 2x of Spencers Retail. And 3x of Kirana (though Kirana is not a like to like comparison)
They operates at Rs 35K per sq ft. This is 3x of Future Retail. And 2x of Spencers Retail. And 3x of Kirana (though Kirana is not a like to like comparison)
3/ They're able to achieve this by providing an 'everyday low pricing'. This of course come at cost of their gross margins.
They've an overall gross margin of 15%. The same for Future and Spencer Retail are 27% and 21% respectively.
They've an overall gross margin of 15%. The same for Future and Spencer Retail are 27% and 21% respectively.
4/ Their share of the (high margin) fashion and general merchandise category stands much ahead of its peers at 30%. This number for both Spencers and BigBazaar (Future) is sub 10%.
They've mastered the art of X-selling fashion and general merchandise SKUs in-store.
They've mastered the art of X-selling fashion and general merchandise SKUs in-store.
5/ They also have a unique assortment strategy of having wide breadth of categories but relatively limited SKUs in each category - where they get the lowest pricing from their suppliers - and are of high value to their customers.
6/ Because of careful inventory buying (and high sales throughput), they see a much higher inventory turnover than its peer (10 days vs 70 days for Future - unverified).
As a result, they have shorter credit cycles and are able to further negotiate better pricing from suppliers.
As a result, they have shorter credit cycles and are able to further negotiate better pricing from suppliers.
7/ As a result of all of the above - they've been able to significantly cut down on their COGS, and delivered on their promise of 'everyday low prices'.
And it's not just COGS, their total operating cost is a mere 1/3rd of its peers - i.e. 7% vs 21% for both Spencer and Future.
And it's not just COGS, their total operating cost is a mere 1/3rd of its peers - i.e. 7% vs 21% for both Spencer and Future.
8/ One of the key elements in the reduced operating cost is the cost of rent. They own the land or enter into long term leases because of which they end up getting very attractive pricing.
Their rent cost is a mere 0.3% of revenue vs 5% for Spencer and 7% for Future.
Their rent cost is a mere 0.3% of revenue vs 5% for Spencer and 7% for Future.
9/ The higher sales throughput ensures that some of the fixed costs like SG&A and even some fixed labour /employee cost is a lesser % of the sales - given the high denominator.
They also have a frugal DNA which results in a lesser 'other cost', hiring more contractual labour etc
They also have a frugal DNA which results in a lesser 'other cost', hiring more contractual labour etc
10/ For all of the above reasons, they've grown the fastest in the industry.
They grew from Rs 8.6 Cr revenue in FY16 to Rs 20K Cr in revenues. This is 32% CAGR vs industry's growth rate of 12% CAGR during the same period.
They grew from Rs 8.6 Cr revenue in FY16 to Rs 20K Cr in revenues. This is 32% CAGR vs industry's growth rate of 12% CAGR during the same period.
11/ And their lean cost structure has ensured that they see highest PAT margins inspite of having the lowest gross margins.
They saw a PAT margin of 4.7% in FY19 while Spencers and Future saw 0.4% and 3.6% during the same period. <end>
They saw a PAT margin of 4.7% in FY19 while Spencers and Future saw 0.4% and 3.6% during the same period. <end>
