India: D-Mart Discount Retail chain has shocking first quarter, but recovers quickly
Updated: Jul 31, 2020
Being an Essential Discount Retail Chain in the essential products business helped D-Mart in providing shoppers their basic needs, pay its employees their wages and its suppliers and other service providers their dues just like before.
Organized Retail (India versus Developed Countries)
Unlike developed countries where organized retailers had a surge of customers walking into their stores, it did not happened with the same intensity at D-Mart. This was because of the strong enforcement of store shutdowns, restrictive movement of people in general and strict social distancing rules inside stores. Its negative impact on footfalls and sales were significant. There is also a sales channel of traditional trade which is smart, agile and resourceful. India still has a strong and resilient network of small shops and neighbourhood stores. They came roaring back after the first 2 or 3 weeks of lockdown serving the needs of an anxious customer the way the customer wanted it - quickly over the counter or through home deliveries. Value wasn't top of mind for shoppers during this time.
D-Mart's Discount Retail Chain Business Model
After the passage of three months D-Mart can say with further certainty that D-Mart Discount Retail Chain business model of store ownership, steady incremental store additions over time and strong focus on cost efficiency during usual times has allowed the business to face the pandemic shocks with relatively less harm. While India is in the midst of the second wave of the pandemic and business outlook may continue to seem uncertain, D-Mart is less anxious than in the beginning of April 2020.
D-Mart Online sales in Mumbai has grown very well. D-Mart is making all attempts to scale it up in a meaningful manner. It started Home Deliveries (using D-Mart Ready App) through its stores across other cities, but discontinued it once the stringent lockdowns were withdrawn and its stores were allowed to open for business.
Wherever stores were allowed to operate unhindered, D-Mart recovered to 80% or more of pre-Covid sales in most stores. Discretionary consumption continues to be under pressure, especially in the Non-FMCG categories. This is impacting gross margins negatively. Store operations and duration of operation per day continues to remain inconsistent across cities due to strict lockdowns enforced by local authorities from time to time. In addition, in certain cities authorities are once again insisting on selling only essential products. Hence D-Mart's future revenues continue to remain uncertain. It continues to cooperate with local authorities and takes all necessary precautions and measures to keep its shoppers and employees safe and make shopping 100% safe.