Business Strategies that made D-Mart a success!

The above verses, narrated by Lord Krishna to Arjuna in the Mahabharata can be roughly translated to mean: Every piece of knowledge about duty, finance and aspirations can trace its origins to the Mahabharata.

Welcome to our series of articles on business lessons from the Mahabharata. The epic has many analogies about crafting finance strategies to create a lasting business empire in the wake of market competition, industry obsolescence, reimagining your business model, not to mention global socio-political & environmental changes.

What is your Brahmastra?

In any war, the faction that is in possession of the Brahmastra (a supernatural weapon that can win any war) has higher odds of winning the war.

As an entrepreneur wanting to create a legacy business, what should be your Brahmastra? And how will you wield it?

Your Brahmastra is formulating a well-planned strategy that aligns with the vision of your business!

Let us learn some finance strategies from one of India’s most successful hypermarket retail corporations, which can be applied in any business, large or small.

How the biggest retail chain in India crafted their growth story – applying calibrated strategies at each step!

In May 2002, Radhakishan Damani opened a grocery chain store in India – “DMart” when people still preferred going to their neighborhood kirana store.

Did you know since then DMart has opened over 238 stores but has never had to shut a single store?

1. Prototyping the Business Model

Dmart started with a single store instead of simultaneously launching multiple retail stores. By and by, DMart has opened more than 238 stores across 12 states in India in the last 19 years.

Your Strategy Shastra:

Start Small: DMart channelled their efforts on creating a “Minimum Viable Product”, (a single store in Powai, Mumbai) which allowed them to focus on realizing the core functionalities, strengths, and weaknesses of their business. This allowed them to prototype the most appropriate sales mix and market expectations accurately with minimum costs and time! In contrast, its major competitor Reliance Retail quickly forayed into multiple segments (electronics, furniture, etc.) upon its launch. DMart however, decided to create customer value by sticking with its limited sales mix (food, groceries and daily products).                                        

2. Optimizing the Business Model

How does DMart manage to sell at the lowest prices in the market and still make considerable profits? It follows a strategy of “EDLP” – Every Day Low Price, instead of resorting to seasonal, weekly or flash sales. This goes a long way in assuring customers consistent low prices without any associated skepticism about the quality of goods on offer. Other complementary strategies followed by DMart are:

• • Entry (slotting/shelving) fee – To place their products on the shelves of DMart, manufacturers have to make a one-time payment to DMart. This reduces cost of that product for DMart & they’re able to sell those goods at a discount. This revenue model of DMart also helps it generate revenue from manufacturers.

• • Low Operating Costs – Every DMart store has the same structure and low-fuss interiors with effective utilization of space. DMart focuses on putting up more products on its shelves. They also prefer not to set up a store in malls due to high CAM (Common Area Maintenance) charges.

• • Share of Wallet vs. Customer Footfalls – Most retail hypermarkets either achieve an extensive Share of Wallet (the amount an existing customer spends regularly on your product) or high customer footfall (the number of people entering your store). However, DMart has managed to build both by sustained customer loyalty

Your Strategy Shastra:
DMart thrives on a low-cost functional business model to create value for their customers. The success of your business entirely depends on the functionality of your Business Model.

Your business model must answer the below questions to ensure that it is optimum for the business:

• What critical business problems am I solving for my customers?
• Am I creating value for my customers which is unique in nature giving me a competitive advantage in the market?
• What am I charging for this value (to cover my business costs)?
• Is there scope of any innovation in the design of my business model?

(Click here to download our free guide on other critical questions your business model must address to be effective!)

3. Working Capital Efficiency

Prompt Payment Discount Model: DMart pays its vendors in less than 15 days. Beating the competitors in this aspect has enabled DMart in securing valuable discounts & preferential treatment from its vendors & suppliers.

Here is how DMart created a win-win-win situation for its suppliers, customers & itself:

Your Strategy Shastra:
The key to creating a cash-rich business lies in achieving Working Capital efficiency.

Businesses can benefit from paying their invoices on the last date to take full advantage of the offered credit period. You must also ensure timely collections from your debtors, otherwise your sales will only be numbers on a page, instead of cash in the bank. This strategy of lagging payments and leading receipts will help you achieve working capital efficiency.

Do you have a policy in place to ensure cash is collected from your debtors in time? In addition, are you disciplined about paying your suppliers on time?

4. Strategic Pivoting

When the pandemic disrupted the supply chain of the retail industry, DMart pivoted and launched DMart Ready in October 2020. They provided customers the added safety and comfort of online shopping with its EDLP store prices and discounts! It offered customers 2 options: home delivery (with a nominal delivery charge) and pick-up points from where online orders could be collected.         

Your Strategy Shastra:
Whatever your business model, you must ensure constant upgradation, with a focus on customer-centric strategies such as:

Phygital: “Physical + Digital” – As an entrepreneur, you must leverage the latest that technology has to offer, in order to improve customer experience. A “phygital” strategy which bridges access to the digital world with the physical world, will provide an interactive experience for your customers.

Is your existing business model in line with the customer shift towards an increasingly digital world? Connect with me on LinkedIn and let’s discuss an innovative way for you to introduce a “phygital” strategy in your business!

BOPIS: While BOPIS stands for “Buy Online, Pick-up In-Store”, the underlying philosophy is to offer the best of both channels (online & physical store) to your customers. It is the perfect way for customers to browse and purchase items at discounted online prices and later pick them up from a physical location at their convenience.

Can your business create a delivery channel for its customers to offer a more flexible experience?

Parting Thoughts!

Not having a blueprint of your strategic plans is like driving a car without your hands on the steering wheel – You will invariably miss the turns you need to take to ensure sustainable success. Even worse, you might miss seeing the speed-breakers and roadblocks! I’ll leave you with these questions to ponder on:

• Do you have a blueprint of your strategic plan?
• Do you use that plan to make everyday decisions?
• Do you carry periodic checks on whether you are in line with your strategic goals?

(When he was still the CEO of Amazon, Jeff Bezos used to carry out this activity with his team every Tuesday!)

• Is your strategic plan ultimately centered around improving your customer experience?

We hope you found this to be an insightful read!

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