Here’s How Radhakishan Damani’s DMart offers heavy discounts on products throughout the year – News18

Radhakishan Damani, one of the most astute investors and entrepreneurs, over the years, has surpassed many prominent Indian Billionaires like Ajay Piramal, Rahul Bajaj, and Anil Agarwal in terms of wealth. Damani is the founder Avenue Supermarts Limited, which runs the DMart hypermarket chain of stores. The businessman reached the pinnacles of success after he launched the IPO of his Supermarket Chain DMart in 2017. The company has grown to more than 300 stores of supermarkets and hypermarkets across the 14 states.

The immense success of the model should be credited to Damani’s pioneering vision and business acumen. His unique, effective, and relentless execution led the company to be the toast of its investors. On the other hand, for the consumers, DMart is known for offering the best discounts and other potential competitors can’t match in terms of cost and value proposition.

So, how does the retail company manage to give such huge discounts throughout the year? Well, the approach is clear. If the rental costs account for around three per cent of total turnover, the benefits will be higher in comparison to those operating at an EBITDA margin of 3-4 per cent. EBITDA refers to earnings before interest, taxes, depreciation, and amortisation and indicates the operating profit.

DMart, unlike other retail chains, owns real estate. It delivers higher EBITDA margins due to its savings in rentals. Where Damani went exactly right is that instead of taking properties on lease or rent for his stores, DMart acquires land in affordable locations focused on the target audience of the company, which is the quintessential Indian middle class. DMart works on high volumes and low margins. The approach of the company is to spend less on the store and to focus on providing value to the consumer.

Varun Singh, Lead Analyst of FMCG and Retail at IDBI Capital Markets highlighted how DMart offers high discounts. He explained, “They are very good at squeezing out the most from rentals and employee costs. Both together account for about half of a retailer’s gross profit. Besides, the cluster approach allows them to create warehousing capacity, which reduces the cost incurred to move the goods and also cuts back on time.”