Avenue Supermarts, which runs the DMart chain of stores in India, is taking a contrasting view on its future retail operations in the country. While new store additions will be increased by 20-30 outlets annually over the next 2-3 years mainly in smaller cities, e-commerce will largely be centered to bigger cities, MD & CEO Neville Noronha said in an analysts’ meet this week.
“We are clear that we want to do both brick and mortar retail and e-commerce. The two complement each other. While customers enjoy going to our physical stores in smaller cities, we find that consumers in larger cities such as Mumbai and Ahmedabad prefer having a share of their grocery basket coming from e-commerce. We see a convergence of our (online) model with the expectations of the market,” Noronha said.
DMart Ready, the online platform of the company, contributed around 6% to the retailer’s consolidated topline of Rs 50,789 crore in FY24, with e-commerce operations in 23 cities. The retailer sees the contribution of its online operations growing in the next few years.
However, Avenue Supermarts will not enter the q-commerce segment since the focus of q-commerce players remains on “convenience” rather than “value”, it said.
“We want to chart our own path on the e-commerce side of the business. We want to be relevant to consumers from a value standpoint, even if it is a bit inconvenient. We are clear that we want to be distinctly relevant, where we stand apart from the rest,” Noronha said.
The value retailer is looking to add around 60-70 physical outlets annually in the next 2-3 years from 40-41 stores added annually now, Noronha said, as the company seeks to capitalise on the organised retail opportunity in smaller towns and cities.
“Brick and mortar retail is aspirational and fun in smaller cities. We are projecting store additions of around 40-45 in FY25. But over the longer term, we have to increase our store additions to maintain our revenue run rate,” he said.
While DMart has in the last three years doubled its new store openings from 22 outlets in FY21 to 41 outlets in FY24 (FY22 was an exception with 50 store launches), the grocery retailer, which is the country’s second-largest player after Reliance Retail, lags its peer by a wide margin in terms of total number of stores.
At the end of the June 2024 quarter, DMart had a total of 371 stores versus Reliance Retail’s 18,918 stores, adding 7 stores during the period versus the latter’s store additions of 331 for the June quarter.
But DMart’s unit economics have been better than Reliance Retail’s with the former deriving revenue of nearly Rs 33,000 per sq.ft. versus the latter’s Rs 10,000-11,000 revenue per sq.ft, according to sector analysts.
Noronha maintains that the company will continue to take a cluster-based approach when launching new stores, choosing to populate existing markets first before entering new markets. “A combination of old and new stores adds greater value and the sales throughput is also high,” he said.
Over 110 stores of DMart, for instance, are located in Maharashtra, Gujarat has some 60 stores, while markets such as Andhra Pradesh, Telangana, Tamil Nadu and Karnataka have between 22 and 41 stores.