Daymart: Keeping the hustle – Part -1

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North Kerala’s largest retailer aims to be the state’s best & biggest

Overview: Kerala has a super-abundance of supermarkets with most of them duking it out for the customer mindshare and pocket. Unfortunately, quite a few of them are also going off the deep end, overburdened by their own naiveté in running a challenging grocery retail business.

The Malabar region of north Kerala’s Kozhikode (Calicut) district stretches out before the eye like a picture-perfect, postcard-pretty expanse of lush green landscape. The veridical beauty of the city, the rhapsody of sea waves on shores, the elegance of its heritage buildings and the sparkle of its supermarkets and shopping centres makes it a city where life sings, in soft serenade.

Go further down north from Kozhikode along the Malabar Coast, and the green curtain of nature keeps unspooling. At regular intervals, the leafy and lush oases are interspersed by signs of human life and habitation, with all the attendant hustle and bustle.

But what stands out is the sense of nature’s pristine beauty and the living world wrapped together in a warm embrace. In a rare instance of harmony and consilience between nature and human, the magical scene stretches all along the region with little jewels of villages and fairy-tale gumdrop cities dotting the landscape.

Cute and bijou places — Kuttiady, Vadakara, Villiapalli, Nadakkavu, Wayanad, Kannur, Karaparamba, Chaembara, Kakkattil, Chakkarakkal, Karanthoor… lie amidst a checkerboard of green farms and rolling orchards, at times silhouetted against distantly looming hills.

Many of these places like Kuttiady are picturesque villages with a small human footprint – just about 20,000 residents. But for its sparse demographics, it more than makes up by way of the number of supermarkets, which could give some serious envy to retailers anywhere in the country.

Kuttiady today boasts of six operational and running food and grocery supermarkets – Big Market Hyper, Daymart, Happyday Supermarket, and three more, ranging from 2,500-10,000 sq. ft. in size.

The first of the lot to come up was Daymart, which debuted in 2009 and has since grown to become the largest Food & Grocery retailer in north Kerala with 20 stores as of date, spanning some 1,25,000 sq.ft. in retailing area. The store chain is promoted and managed by Muhammad Ali C, Group Chairman and Mustafa Vazhat, Managing Director.

A retail dream takes shape

Both Ali and Mustafa come from a family with strong roots in business. “Ali’s and my family have been in the wholesale business for almost 60 years now and it became the stepping stone for us to enter the retail business,” says Mustafa, adding that Daymart has direct and indirect links to five wholesale businesses, including those in fresh fruits & vegetables, staples, and household essentials.

The family also has close ties with relatives living in the Middle East. “For as long as I can remember, people in my village have been going to countries in the Middle East and I have been hearing tales of glitzy supermarkets and gleaming shopping centres since my childhood days, and that never failed to tickle my fancy,” reminisces Mustafa.

Back at his village in Kerala, breezy accounts of the supermarkets in the Middle East seemed like an unreachable empyrean. But somewhere, subliminally, those supermarkets left a deep impression on Mustafa. So, in 2008, when he made his first trip to the Middle East, he was more than inquisitive to see for himself the trends that were shaping the contours of modern retail. Before long, the mall-and-supermarket utopia of the Middle East seemed to have captured his imagination. Those young-age influences and experiences worked their way from the skin to the bone… and then to the heart.

“Upon returning to my village in Kuttiady, I went into dithyrambs over the details of the supermarkets I had seen in the Middle East when describing them to my friends in the village. To me, those supermarkets were like eidolons, sublime archetypes and daedal structures that represented the evolution of urban progress and development. So strong was the imprint on my mind that I began dreaming of building similar supermarkets in my neck of the woods,” recalls Mustafa.

What was once a glimmer in the eye gradually began coming together when Mustafa came of age. “Entrepreneurship was flowing in my blood and baked into my genes. When the time came to pursue my vocation, my genetic package kicked into gear and I was ready to cut my entrepreneurial teeth,” he says harking back to the time when opening a supermarket had become his all consuming passion.

However, when Mustafa spoke his mind out in the family, he ran up against a wall of disagreement and differences. He was dissuaded from pursuing the idea and join the family wholesale business instead. “I was a little surprised to find so many Debbie Downers in the family who were not too enthused about my hope-filled business plan. Their apprehension was mainly on the account that grocery retail is a slim-profit game with too many attendant risks along the way,” shares Mustafa.

But refusing to be disheartened, he shared his plan with friends and others in the village, with whom it struck an instant chord. “Many of us in the village have familial connections with the Middle East and an easy familiarity with the supermarkets in those countries. For them, I became a lightning rod for an idea they all bought into and encouraged me to go ahead with my plan for opening a supermarket in our own backyard,” recounts Mustafa, adding that the endorsement came as the final thumb on the scale.

So, even as Mustafa decided to cross the bridge and take the plunge, it was with the full weight of the knowledge of the business risks involved. “But egged on by the tonic of youthful hope and passion, I decided to pursue my dreams without any second thoughts,” confides Mustafa.

A retail journey begins in a rural Kerala

Daymart opened its first store – a 3,000 sq.ft. supermarket in Mustafa’s village Kuttiady, located at a distance of about 50 km from Kozhikode. While the store itself created quite an impression in the region and among the residents with its modern sleek looks, novel format and amenities, it did not rise to Mustafa’s hopes of becoming a commercial success and a business sensation overnight.

“Honestly, for the first 2 years, the business was almost treading water and we were struggling to survive. For a store of its size, and the Rs. 60 lakh initial investment that I had poured into it, the daily sales was not more than Rs. 20,000-30,000 and the cash register refused to ring louder. But gradually, after about a year and a half, the tide began turning, customer traffic started to swell and our revenue turnstile started buzzing.” says Mustafa.

By the close of its second year of operations, the store was finally able to break even and revenue climbed into black. “What helped to bring about this change was that more numbers of people bought into our new, modern shopping self-service format that also offered attractive discounts and schemes to the shoppers. Supermarket shopping, until then, was an elitist trend with only premium and affluent customers visiting those stores. The masses, by and large, were accustomed to buying from their neighborhood grocery store and did not think twice before paying MRP of the product, a practice followed by most Kiranas then,” observes Mustafa.

A regional store-chain comes into its own

When word spread that the Daymart store sold almost all products below the MRP, people started coming in to check for themselves and when they left assured they spoke to others about it in their own community. But it took almost two years before the trickle of customers to Daymart turned into a torrent, and now more than 10 years later that torrent has become a cascade. The store which barely scraped through with Rs. 20,000-30,000 in daily sales during its early phase now mints an average of Rs. 2.5 lakh per day.

In 2011, Daymart opened its 2nd store in Vadakara, also in Kozikhode district, about 25 km away from its 1st store. This second store, 2,500 sq. ft. in size, proved to be a cash cow from Day One itself. “Our first store, despite its initial slow take off, provided the tailwind for growth in the form of a fund of goodwill for its younger sibling. The public awareness and goodwill generated by the first store rubbed off instantly on the second store whose financial performance lifted off like helium from day dot itself, coming in at an average of Rs. 2 lakh daily,” reveals Mustafa, adding that sales were buoyant and customers flocked to the store in droves from the inaugural day onwards.

The instant success of Daymart’s second store set up the road map for frisky store expansion in the days to come. Within a year of its second store opening, Daymart launched its 3rd store in Villiappally, also in Kozikhode district in the Malabar region of Kerala.

Since 2012 onwards, the retailer has been spreading its wings, in right earnest. In the years to follow, Daymart began launching its new branches, opening stores at regular intervals in places like Nadakkavu, Orkatteri, Kunnamangalam, Mattannur, Karaparamba, Naduvannur, Chakkarakkal, Sulthan Bathery, Mananthavadi, Pattambi, Balussery, karanthur, Chembra, Kakkattil, and Thottilpalam.

“With the network of stores that we operate today, we have come to enjoy a lot of purchasing power and clout, which helps the business to tick along profitably and keep scaling further up. In my opinion, the only way to succeed in the modern trade grocery retail business is to increase the number of outlets and, by default, increase your purchasing power vis-a-vis the suppliers,” avers Group Chairman Muhammad Ali.

Keeping this principle as its business baseline, Daymart has kept expanding its retail venture since opening its first store, back in 2009. Today, Daymart operates 20 stores in north Kerala, spanning some 1,25,000 sq. ft. of retailing area with store size ranging from 2,000-20,000 sq. ft. Apart from Kerala, Daymart has also opened one of its branches in the Sultanate of Oman.

The smaller stores – those in the 2000-4000 sq. ft. range – belong to the convenience store format, the ones between 4,000 sq.ft. and 6,000 sq. ft. fall under the supermarket category, and those in the range of 6,000-15,000 sq. ft. belong to the mini hypermarket category, while stores above 15,000 sq. ft are run as hypermarkets.

“Today, by dint of our store network strength, we enjoy more bargaining and leveraging power with the companies that supply products to us. That translates into getting additional discounts on the products supplied to our stores. It also allows us to go for more display schemes across our merchandise range, and put out more offers for our customers compared to stand-alone outlets and our competitors with lesser stores,” remarks Ali.

DAYMART – FACT FILE
Retailer/ Brand Name: Daymart
Parent Company: Dm Trade Link
Launch Year: 2009
Company Headquarters: Kozhikode (Calicut),
Kerala
Key Executives: Muhammad Ali C, Group
Chairman; Mustafa Vazhat, Managing Director
Store Count: 20
Retail Format: Supermarket; Hypermarket
Store Size: 2,000 sq.ft – 20,000 sq.ft
Total Retail Area: 1,25,000 sq.ft.
Geographical Area of Store Operations: Across 4
Districts in Kerala – Kozhikode, Kannur, Palakkad,
Wayanad; 1 store in Oman
Major Product Categories: Food & Grocery;
Packaged Food & Snacks; Staples; Dry Fruits;
Spices; Oil & Ghee; FMCG; among others
Store Service Options: In-store shopping; Online
Order; Delivery
Store Ownership Model: Company-operated
stores on rent and lease; Franchise
SKU Count in Store: 7,000-15000
Average Bill/ Ticket Size: Rs. 600
Sales per sq.ft.: Rs. 1250
Sales Growth: 10-15% Y-o-Y
Footfall: 12,000-15,000 per day for all stores
Employee Base: 700+
Supplier Base: 250
Future Plans: Grow Daymart’s footprint to 50
stores and cross Rs. 500 crore in annual turnover
by 2030

(Continued in part 2…)