D-Mart on expansion drive, looks to take leased premises route
The retailer has 29 stores in Maharashtra and Gujarat, and is likely to double that number in the next two years.
Supermarket chain D-Mart has chalked out aggressive expansion plans for the next two years at a time when many of its midsize rivals are going through a trough.
The retailer has 29 stores in Maharashtra and Gujarat, and is likely to double that number in the next two years. The plan is to close financial year 2010 with 35 stores, up from 29, a D-Mart executive said.
A second executive said, on condition of anonymity, D-Mart will add 10-15 large-format stores of 30,000-40,000 sq. ft every year for the next two years. D-Mart did not reply to email queries.
Other midsize retailers either shut stores or reduced their number during the downturn. Chennai-based discount retailer Subhiksha Trading Services Ltd, shut 1,600 stores after defaulting on loans, vendor payments and staff salaries. Wadhawan Group s retail brands Spinach and Sabka Bazaar closed more than one-fourth of their 200-odd stores last year.
Industry observers said D-Mart enjoys an edge due to its combination of large stores and a value platform.
Launched in 2001-02 by Avenue Supermarkets Pvt. Ltd, the chain has stores of 8,000-30,000 sq. ft, compared with up to 4,000 sq. ft for other typical supermarkets.
D-Mart executives credit the chain s operating model for its smooth sailing. The chain pays its suppliers within 48 hours of delivery, gaining a 1-2% advantage on cost margin over other national retailers, claimed the first company executive mentioned earlier.
Thomas Verghese, chief executive of Aditya Birla Retail Ltd, said D-Mart is a well-established mini-hypermarket player , but would face its test in the next three months as it competes with hypermarkets, which are larger, offer international experience and strong value positioning .
Expansion will also see D-Mart operate from leased premises a different ball game, said Shubhranshu Pani, managing director (retail services) at Jones Lang LaSalle Meghraj, a real estate advisory.
On an average, rentals are 3-5% of revenues, and there is no asset creation. Also, in the long term, rentals still have to be paid versus ownership, where the cost gets nullified, he said.
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