Sharing a consumer insight on Dmart.
I stay in South Bangalore and have always been fascinated by the massive crowds in Dmart stores nearby. My parents prefer Dmart, but I generally prefer to go to the More store – similar distance but much, much less crowded!
In my experience, while on an average, the prices at Dmart are a tad cheaper than More, the difference though wont be more than 3% – 5%. Why then does Dmart do more than 5x the sales per sqft than what More does?
For the longest time, I have connected this user behaviour to 2 possible factors:
- Better branding/perception that Dmart is the lowest cost provider
- An average Indian loving a good deal more than anything else
But I myself haven’t been entirely convinced of the above, for 2 reasons:
- What about the premiumisation theme? Would people not be willing to pay slightly more for a better (read – running around with your cart in More vs. constantly being hit / apologising to my fellow shoppers in Dmart) shopping experience!
- If pricing was that critical a factor, how would you then justify the massive adoption of quick commerce and food delivery applications?
Then, a couple of days, we had a family friend and his mother visit us for lunch. While discussing they mentioned that they shop for groceries exclusively at Dmart and not at Star (which is just opposite to their home). Intrigued, I asked them to elaborate.
So, while they frequently visit Star for fresh fruits and veggies, their reason for buying all their groceries from Dmart was that they have observed that the rice/pulses/etc. that they buy from Dmart lasts much longer than that from Star, or any other store nearby store.
I am fairly certain that the above are commodity products where sourcing is pretty much the same for all key retailers. What then is the difference? Inventory Turns
This now makes so much more sense:
Lower Prices → Higher footfalls → Faster Replenishment → Fresh Inventory → Higher Footfalls → Lower Prices. A very strong flywheel!
Inventory turns, as it turns out may not be just a critical financial metric, but a very strong customer requirement as well!
Disclosure: I do not own any shares in Dmart / Amazon / Trent
