Avenue Supermarts listing: Lessons for retailers from stellar market debut

D-Mart parent Avenue Supermarts doesn’t follow the discount model, unlike Flipkart and Snapdeal, and has had a slow and steady, focused and consistent expansion


Avenue Supermarts opened the first D-Mart store in 2000. By 2010, it had just 25 outlets. There are 118 outlets as of 31 January 2017. Photo: Mint
Avenue Supermarts opened the first D-Mart store in 2000. By 2010, it had just 25 outlets. There are 118 outlets as of 31 January 2017. Photo: Mint

Mumbai:It’s not that modern retail is the blue-eyed baby of stock market investors. If anything, companies in the sector—from India’s largest listed retailer Future Group to Reliance Retail, the retail arm of conglomerate Reliance Industries Ltd—have gone through deep learning curves, re-thought their business models, exited formats and most continue to remain a work in progress.

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The story for online retailers is even less rosy. Companies like Snapdeal and Flipkart, poster boys for online retail, are on a downward spiral. Flipkart has become an investor-run company fighting for its life against Amazon.com. And Snapdeal is fast running out of money, laying off people and hiving off businesses. Recovery is still a while away for India’s e-commerce firms.

Meanwhile, Avenue Supermarts Ltd, the parent of D-Mart, India’s most profitable and fastest growing large modern retailer, listed with a 115% premium on Tuesday morning to raise Rs1,870 crore. It’s the only company since 2010 to list at over 100% premium. It’s market cap at Rs40,000 crore makes is bigger than companies like Britannia Industries Ltd, Marico Ltd, Idea Cellular Ltd and Bank of Baroda.

What are the lessons for modern retailers from the stellar listing of D-Mart?

Slow and steady: The first D-Mart store opened in 2000. After that in the first nine years to 2010 there were only 25 D-Mart stores. It is only after perfecting the business model the company ramped up. Even now the company is not in a mad rush to open new stores and its expansion remains measured. There are 118 outlets as of 31 January 2017.

Scale: Retail accounts for 30% of India’s GDP and the opportunity is huge. Food and groceries is a $147 billion market. D-Mart sells everything except for jewellery and watches.

Consistency: Avenue Supermart’s numbers are good because the retailer does the small things repeatedly and consistently, chief executive officer Neville Noronha had said in the past.

Don’t spread yourself too thin: Even though its market cap is larger than national consumer goods companies like Marico and Britannia, Avenue Supermart remains a regional company with operations limited to the West largely. States where D-Mart is present account for 48% of India’s overall retail opportunity, the company has said during a press conference to discuss its listing.

Optimal product assortment: The retailer believes that it’s soul is its assortment. But it does not offer the widest product assortment. If there are 100 items in a category at D-Mart the assortment is half that. The retailer does not spoil its consumer for choice.

Focus: From inception the retailer has stood for one message: value. It constantly benchmarks itself to see whether it provides better value to its consumers than anybody else.

Stay away from discounts: Avenue Supermart has never followed the discount model in the past and does not intend to follow it in the future, it said in its prospectus.

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