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Avenue Supermarts pins hope on e-commerce model

Avenue Supermarts pins hope on e-commerce model – The Financial Express

It is also consciously adding larger stores given good response to new stores. Land costs are certainly higher than Dmart’s historical land costs, which is driving up capex.

Avenue Supermarts pins hope on e-commerce model

In its annual analyst meeting, Dmart mentioned: (1) store additions lagged in FY2019 but should pick up going forward, (2) competitive intensity has gone up meaningfully though Dmart’s EDLP/EDLC strategy enables it to maintain SSSG without compromising much on margins, and (3) the e-commerce venture is becoming scalable though immediate focus is to ramp up further only in Mumbai.

Dmart management mentioned that the company lagged behind its target in FY2019 on account of delayed permissions for some stores. Given the uncertain nature of approvals there may be some lumpiness in store additions, though the company is definitely looking to accelerate the pace of store additions.

It is also consciously adding larger stores given good response to new stores. Land costs are certainly higher than Dmart’s historical land costs, which is driving up capex.

Management remains confident that their proposition of low pricing coupled with superior product assortment will continue to find favor with their target segment (households with monthly income of

Competitive intensity in terms of price discounts has definitely increased in the past 12-18 months. Dmart has responded by further increasing price discounts resulting in yoy decline in gross margins. However, this was offset by strong 17.8% SSSG in FY2019 indicating good response in both old and new stores.

Avenue E-commerce, the entity which has undertaken e-commerce operations in Mumbai, grew revenues by 225% yoy in FY2019. EBITDA loss of the entity remained similar yoy at Rs400 mn, indicating the business model is steadily stabilizing.

Dmart is focusing on improving its tech platform, processes and customer experience, in order to make the model scalable and potentially replicable in many other cities. Dmart believes that the e-commerce model can find sizeable appeal in metro cities, while Tier II/III cities may see limited acceptance.

Management continues to focus on its core EDLP/EDLC strategy and does not want to initiate loyalty programs or wallets to attract customers.

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Source: Financial Express