A successful business model is the crucial element of any business to flourish, grow and beat its competition. DMart's business model has made the company grow exponentially and become the most profitable supermarket chain in India. The company's mission is to be the low-priced retailer in its area of operation.

Characteristics of DMart's Business Model

Product-Mix

The company comprises everyday use products for its customers, which are categorized as Foods, Non-foods and General Merchandise & Apparel. The chain operates on a B2C (Business to Consumer) model, where goods are directly sold from the manufacturer to the end-user.

The demand for these goods is on-going as they comply with the basic day-to-day needs, thereby creating a demand throughout the year. This eliminates the risk of high demand fluctuations and provides consistency to the business.

Revenue Drivers (DMart's Revenue Model)

Slotting Fees

It is a payment that is made by the manufacturer of goods to the superstore to keep its products on the shelf for sale. Also called an entry fee for the products, which are held in the supermarket. Being a supermarket chain DMart also charges a 'Slotting Fee.'

The store attracts high volumes of customers, making it an attractive and opportunistic place for the manufacturers to keep their products. This attracts more and more manufacturers willing to put their products in the store.

A slotting fee indirectly reduces the product's purchasing price for the retailer, thereby allowing it to offer the products at discounted prices, i.e., less than the MRP (Maximum Retail Price), hence attracting large buyers.

Reduce Expenses

A low-cost business model with high profits is one of the most attractive and successful forms of running a business. As simple, it sounds like it is not that easy to achieve.

However, DMart has successfully achieved it. How? DMart operates on a low-interior-cost concept where it has tried to reduce the operational expenses for the company. These low operating expenses are a result of- efficient space utilization by putting more products in less space thereby creating space for more products; less number of billing counters reduces the requirement of more workforce and systems thereby reducing employee cost; a very basic and low-maintenance interior of the store, are some of the ways through which DMart has controlled its expenses.

Low Purchase Price for the Products

The credit cycle of DMart, i.e., the time in which it returns the payment to the manufacturers for the goods purchased from them is quite less than other retail operators. This allows the company to avail massive cash discounts from the manufacturers, thereby cutting the purchase price of the goods.

Volume Sales

Being a low-priced retailer gives an edge to DMart. Low price leads to high footfall in the store leading to high sales volume, thereby attracting more and more manufacturers to keep their products in DMart. This is a cycle created by DMart, which keeps the loop ongoing. Further, due to high volume sales, manufacturers also extend a volume discount, reducing the purchasing price. This supports the low-cost business model and makes it stronger.

Regional Goods

India being a diverse country has various regional specific goods. DMart grabbed this opportunity by stocking its stores with area-specific products. People across different states have unique lifestyles habits and hence lead to slightly different consumption habits.

DMart pooled the popular local brands of a particular region in one place, making it more convenient for the buyers to avoid going to the local Kirana shops. This helps DMart to cut the competition from general Kirana stores gaining more market share.

Self-Owned Stores

The Company operates on self-owned stores, which allows it to be a low or no debt company making it stronger financially. Further, no rental cost helps in high positive cash flows, which are used for opening more stores. Although the expansion and growth in self-owned stores are slow, it has its own advantages. Of all the existing stores to date, almost 80% are self-owned.

Target Audience

DMart’s target customers are low-income groups who are looking for low-cost goods. Thus by providing excellent quality and branded products at a lower cost, DMart attracts a more extensive customer base than other retailers.

Eliminates Middlemen

Operating on a B2C model eliminates intermediaries and hence the added cost to the product's price. This further helps the company to sell goods at a lower price.

Advantage of Consumers Behavioural Patterns

Offering a variety of products at low-prices creates psychology in customers to buy more, which is offered at a discount. This behavioral pattern among the consumers has been evident when the 'Sales Period' of the year arrives in stores.

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