Thread by @sidcoins

1/8 DMart shut its outlet in Mira Road and turned it into a dark store. This is the first store shut down by DMart ever since they started operations nearly two decades ago. @ETPrime_com
economictimes.indiatimes.com/prime/consumer…

2/8 There has been a rise in the number of dark stores globally due to Covid-19. In September, Amazon opened its first dark store dedicated to Whole Foods e-grocery fulfilment. In August, Walmart-owned Flipkart opened dark stores across India in order to take on Reliance JioMart.

3/8 "Typically, dark stores aren’t located in any prime areas, the economies are very different. So, if it is a fully functional and profitable store it doesn’t make sense to convert it into a dark store," says @asinghal2004

4/8 In food and grocery, there is no loyalty element. Whoever offers the best price wins the customer. And over the years, DMart has established itself in a dominant position as an extremely aggressive discounter. But that is slowly getting challenged.

5/8 The product pricing data from Kotak Inst Eq shows that DMart was the lowest-priced retailer for 14 out of 31 products in March. However, due to higher competition, its price gap versus competitors has shrunk; and in Sept, it was the lowest-priced retailer for only 7 products.

6/8 For online operations DMart will have to shave off a few % points from its profitability bcoz online fulfilment costs are prohibitively expensive and going ahead we might see more stores converted into dark stores if DMart wants to maintain its relevance in the online space.

7/8 This will impact its stock price which at present is trading at exorbitant levels. Dmart's share price didn’t see a sharp fall during the pandemic-triggered sell-off in March but it hasn’t either recovered in line with the broader market over the last six months.

8/8 The move shows that even a risk-averse player like DMart is serious about e-commerce. However, for a company focused on its brick-and-mortar operations, will this be the best way to experiment with e-commerce? Further, is this a sign of more shutdowns to come?