Avenue Supermarts, the operator of the renowned DMart retail chain, witnessed a remarkable feat in FY23. With its online grocery unit’s sales surpassing INR 2,000 crore, the company achieved significant success in the digital market. Nevertheless, this achievement was accompanied by a widening of losses as the company embarked on an ambitious expansion into untapped geographical territories.
According to its latest annual report, Avenue E-Commerce (AEL), the online subsidiary, experienced a substantial 32% surge in sales, reaching INR 2202 crore. However, the net loss also expanded to INR 194 crore. In the preceding fiscal year, the online business brand, DMart Ready, reported sales of INR 1667 crore but incurred a higher loss of INR 142 crore.
“During the financial year 2022-23, it expanded its service coverage to include 10 more cities – including Chandigarh, Jaipur, Chennai and Ghaziabad. Our current service footprint includes a total of 22 cities,” the company said in its report. “Avenue Supermarts has invested about INR 713 crore in its online subsidiary that started operations six years ago” added D’mart, India’s biggest retailer by market capitalization.
AEL, in addition to its primary operations, runs a compact grocery store named DMart MiniMax. In the preceding fiscal year (FY22), it managed two DMart MiniMax stores, but during that same period, it expanded its presence significantly by opening an additional 13 stores.
In contrast to grocery startups like Amazon and BigBasket, which primarily rely on a delivery-based distribution approach, DMart’s online venture follows a hybrid model. This hybrid model involves establishing delivery centers in regions where it operates small physical stores, allowing customers to not only receive their orders but also have the option to pick up products in person. DMart’s impressive performance reflects its success in this approach, as it achieved annual sales of INR 41,833 crore with 324 stores. Remarkably, the retailer generates a revenue of INR 31,096 per square foot, nearly three times higher than its competitors in India. Additionally, during FY23, DMart operated 49 distribution centers and 10 packing centers, further contributing to its efficient operations and customer service.
In the annual report, Ramesh Damani, the chairman of Avenue Supermarts, emphasized that despite facing global macro headwinds, India continues to shine as a beacon of hope. He highlighted that, in contrast to other subcontinent countries, India has demonstrated remarkable resilience in the face of geopolitical challenges and other disruptions.
“Since FY2017-18, we have more than doubled our store count to 324 despite the outbreak of the pandemic in 2020. Our strong belief in our business model and focused execution have driven this steady growth,” Damani added.
During the quarter ended June, the flagship company D’Mart witnessed a revenue growth of 18% year on year. However, this marked the lowest growth in any quarter when compared to pre-Covid levels. The profit growth was even more subdued, barely reaching the low single digits, as sales remained impacted by sustained pressure on the recovery of discretionary non-FMCG products.
“We believe this is largely due to drag from lower sales of general merchandise and apparels, cannibalization from store addition in existing areas and possible share loss to online and e-commerce players,” said a report by Axis Capital.