Demart and Big Bazaar made their entry into the Indian retail industry with a gap of almost a year. They were fierce competitors, with Big Bazaar operating in every state, city, and even small town in India. However, Big Bazaar has now disappeared, as it started a year earlier than Demart in 2011. Despite Big Bazaar's rapid growth in India, with 250 stores in 2011, Demart was only able to establish ten stores during that time. The disparity between the two companies suggests that Big Bazaar was never a true competitor to Demart. Even in 2022, with only ten stores, Big Bazaar's business is nowhere near the scale of Demart's in India. Demart has become the largest business chain, valued at 2 lakh crores. On the other hand, Big Bazaar has accumulated a debt of over 20 thousand crores and has ceased operations in India. Due to its streamlined business strategy, Demart now stands as the number one player in this industry, leaving Big Bazaar in its wake. Today, I will also discuss the reasons behind Big Bazaar's mounting losses, so please pay close attention. Radhakrishna Dhamani, who had amassed a fortune in the stock market until 2001, abruptly shifted his focus to the retail business in 2002. He opened two small retail stores in Maharashtra, targeting investors. There are two key factors to consider: long-term growth, which emphasizes the potential for profits even if they are not immediate, and the importance of making informed investments in any business.
Investing in a profitable business can lead to significant long-term profits. The power of compounding allows your initial investment to grow exponentially over time. For example, if it takes ten years to earn one crore rupees, it won't take much longer to double that amount to two crores. This compounding effect is a key factor in wealth accumulation. If you're interested in learning more about this concept, please leave a comment below. Now, you may be wondering why I'm discussing this topic. The answer will become clear as you continue watching the video. Radhakrishna Damma has a clear vision of their business and target customers. By being specific about their products and target market, their business can grow rapidly. D Mart, for instance, focuses on selling essential goods to the middle class, making their stores accessible and straightforward. Similarly, Big Bazaar, started by Kishore, aimed to provide a one-stop-shop for various household essentials. By consolidating different shopping experiences into a single store, Big Bazaar revolutionized the retail industry. The first Big Bazaar store opened in Kolkata in 2012, fulfilling Kishore's vision.
In fact, Big Bazaar exceeded his expectations in terms of success. Prior to its establishment, Indian people were not well-informed about the One Plus One offers, such as 50% discounts. When Big Bazaar introduced these offers, people flocked to the store to purchase everything they needed. The situation was favorable, and Big Bazaar began generating substantial profits as anticipated. Observing this, the founder of Big Bazaar, Kishore, swiftly expanded the company, outpacing Demart. By 2002, Demart had only expanded to 10 stores, whereas Big Bazaar, which had started a year earlier, had already established over 200 stores across various cities in India. Although Big Bazaar expanded rapidly, it made some erroneous decisions during the process, which ultimately led to its absence from the market today. On the other hand, Demart, which expanded at a slower pace, has emerged as the market leader. The reason behind this lies in the fact that Demart purchases the necessary land, constructs its own buildings, and establishes stores, thereby eliminating the need for rent payments. In contrast, every store opened by Big Bazaar operates on a rental basis. Additionally, Big Bazaar does not rely on external funding for its expansion; instead, it utilizes profits from its existing stores to establish new ones. At this point, you may question what would happen if the profits are insufficient to establish a new store. In such cases, Demart would halt the establishment of new stores. From 2002 to 2011, Demart was only able to open one store, and none of the stores operated by Demart were profitable. Conversely, the founder of Big Bazaar, Kishore, obtained loans for all the new stores he opened.
The significance of these businesses in the market is evident through the existence of such establishments. Both dmart and Big Bazaar faced the consequences of the financial crisis in 2008. However, Big Bazaar made a mistake by setting up all their stores in city centers, resulting in high rent and maintenance costs. Despite establishing over 200 stores, Big Bazaar found itself drowning in a debt of over four thousand crores due to the financial crisis of 2008. On the other hand, D Mart, which initially had only 10 stores in 2011, rapidly expanded to nearly 300 stores by 2022. This exemplifies the compounding effect. As mentioned in the video, it takes less time to turn one into ten compared to turning ten into one hundred. Radhakrishna Dhamani, known for stable growth, has adopted a slow and steady approach in his business. While Big Bazaar was partially affected by the financial crisis in 2008, it was completely submerged by the impact of the COVID-19 pandemic in 2020. During this time, the company's debts skyrocketed from four thousand crores to over 20 thousand crores. Big Bazaar has excelled in the market by attracting customers through deals and discounts, surpassing even Jio Mart, established by Mukesh Ambani. The prices at D Mart are consistently 10 to 15% lower than other stores, making it the preferred choice for customers.
There are several reasons why this company stands out. Firstly, they settle payments within a reasonable timeframe of 15 to 20 days for suppliers who provide goods to Demart. In comparison, other companies like Big Bazaar and Jio Mart take much longer, ranging from 60 to 90 days. As a result, farmers and contractors who supply goods to Demart are willing to offer a slight discount on the Maximum Retail Price (MRP) of their products. This discount is then passed on to the customers, allowing Demart to offer lower prices compared to other shops.
One key factor that sets Demart apart is their ability to quickly empty the racks and restock with new goods. This is crucial in maintaining a competitive edge, and only Demart has mastered this process. Other companies, such as Big Bazaar, are unable to replicate this efficiency. Many people believe that selling to more customers will lead to higher profits, but Demart understands that attracting more traffic by offering lower prices can actually result in greater profitability.
The success stories of entrepreneurs like Radhakrishna Dhamani, the founder of D Mart, and Kiran Kumar, the founder of Lalita Jewellery, serve as inspiration. They have strategically outperformed their competitors and expanded their businesses. It is important to remember that a company's debt should never exceed its profits, as this negatively impacts its valuation. If your debt surpasses your profits, your company's value will decrease. Making hasty decisions in the pursuit of rapid growth often leads to mistakes. Instead, it is wise to wait and allow the compounding effect to take its course.
Demart, which started with just two retail stores in 2002, has now become a well-known and highly valued company, worth over two lakh crores. This remarkable growth demonstrates that focusing on customer care and steady expansion, rather than rapid growth, can lead to long-term success in the market.
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