The local mom and pop shops have faced fierce competition
by hypermarkets and supermarkets that have cropped up since the early 2000’s
and have emerged as the customers preferred choice owing to factors like
affordability and cheaper prices for otherwise expensive products sold at local
shops.
One such chain of hypermarkets is D-Mart, the brain child
of Radhakishan Damani, which commenced operations pan India in 2002 and is
still one of the preferred destinations for grocery shopping in India.
D-Mart follows “Everyday Low Cost- Everyday Low Price”
model, which means it positions itself as the lowest-price retailer network
across the country, which but naturally kills competition and increases sales
which in turn brings profits for the retail chain.
Penetration strategy wherein the retailers introduce
products at a much lower price to capture a larger market share, can only work
up to the loss-bearing limit of the organization, after which they are
compelled to raise prices and focus on profits if they wish to keep themselves
afloat.
But this doesn’t seem to be the case with the ever-low
pricing strategy of D-MART, that seems to have never even touched the
loss-bearing limit and instead goes onto make larger profits year-on-year.
D-Mart sells goods at ridiculously low prices. Yet, they
still make a profit and have managed to do more than just sustain. Here’s how:
Dealing in day-to-day essentials
Operating on a highly efficient B2C model, D-Mart mainly
deals in products that are procured by individuals on a daily basis and the
demand for which is at an all-time high.
Their prices indicate a deviation from the elasticity of
demand because even the highest demand is met with extremely reasonable prices
that no other store is able to provide.
Living in a price-sensitive society, customers are
naturally attracted to D-Mart which furthers the demand for their products, in
turn increasing their sales and thus profits are at an all-time high.
Shelving fees
A slotting or a shelving fee is a one-time charge that
the manufacturers pay to place their products on the retail shelves of D-Mart.
A higher price is charged for shelves that are bound to
catch the eye of potential customers which has a high probability to convert in
profitable sales.
The shelving fees is a relatively novel plan of action
that further helps reduce prices of products on display.
Low maintenance cost
D-Mart’s main focus is to provide consumers with all they
are looking for under the same roof. They maintain simplicity in their
interiors, with minimal spending on fancy interiors or festive decorations.
Very few billing counters and numbered employees working
in the mart, further help save monetary resources.
The same funds are then utilized to provide attractive
discounts and incentives to their customers.
Low price purchase
D-Mart returns the payment to their vendors way before
the deadline.
Manufacturers also prefer dealing with stores like
D-Mart, that don’t deal in credit purchases or delay payments. It is very
convenient for the manufacturers to receive payments before hand so that they
can meet their own needs as well.
This practice helps D-Mart to avail massive cash
discounts from the manufacturers.
Self-owned stores
D-Mart store owners are usually financially sound with
little to no debt.
Most of the D-Mart stores are owned by themselves which
reduces retail cost and helps positive cash flow.
Renting out a place to operate a D-Mart would be futile,
as a major part of your profits would be diverted towards paying a hefty monthly
rent especially if the store is located in a metropolitan city where property
rates are always touching the sky.
Cheap goods
Good retailers always know they target audience. By
providing products at an affordable price, they attract a much wider range of
customers.
Customers are usually perplexed by the availability of a
diverse range of products at such cheap rates, that they end up stocking up on
everything that they can get their hands on, but of course, subject to their
predetermined shopping budget.
These are the 6 main reasons that make D-Mart the ideal
choice for customers in a market as price sensitive as India. The novel plan of
action, innovative sales strategy, affordable pricing combined with the most
appropriate form of marketing, positions D-Mart at the top of the list outshining all other one-stop-shops in India.
Written By- Tushna Choksey
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