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Outline Retail Stores
Types of Retail Formats in India Complexities in Retailing
About Subhiksha Retailing scenario in India Retail format of Subhiksha About Subhiksha (Vision, Mission, Internal Analysis,
Fund Raising) Segmentation, Targeting & Positioning Promotion, Distribution, Pricing & Competitors Decline of Subhiksha Reasons of Decline Revival Strategies of Subhiksha
Recommended Revival Strategies for Subhiksha
Types of Retail Formats in India
Mom & Pop Stores (Kirana Stores) Departmental Stores (Westside, Lifestyle) Category Killers (Best Buy, E-Zone) Malls (Inorbit, Ansal Plaza) Discount Stores (Primus Retail) Supermarkets (Haiko) Street Vendors (Hawkers) Hypermarkets (Reliance Fresh, Big Bazar) Kiosks (CCD Express)
Complexity of Indian Retail Market
1997 – Retail Market was non-existant Organized retail accounted for Rs 55000
crores in 2006($12.4 billion) It is only 4.6% of total Indian retail
value($270 billion) Retail in India is expected to grow at a
rapid rate of 37% in 2012 and 45% in 2015
In 2010, 60% of the retail value ($270 billion) was dominated by food & grocery
Retail Stores Scenario in India
Subhiksha Reliance Fresh
Food Bazaar
Food World Spencer's Daily
0
100
200
300
400
500
600
700
800
900
1000
2004
2005
2006
2007
142, 150, 450, 1000
0, 0, 22, 325
94, 46, 55, 70
0 , 0, 140, 250
22, 35, 60, 105
No. Of Outlets Country Wide
Vision & Mission
Vision “To emerge as the largest retailer in the food,
grocery, pharmacy segment in all the geographical regions we operate from”
Mission “To deliver consistently better value to Indian
consumers , as guided Subhiksha to deliver savings to all consumers on each & every item that they need in their daily lives, 365 days a year without any compromise on the quality of goods purchased”
About Subhiksha
Subhiksha was started by R. Subramaniam, an IIM A & IIT Chennai alumnus in 1997
Subhiksha in Sanskrit means (prosperity)“the giver of all good things in life”
Theme - Why pay more when you can get it for less at Subhiksha?
Discount store at prices lower than other retail outlets
500 outlets in early 2007 Set up 1,000 sq ft shops all across the city
Retail Format of Subhiksha
Discount Store Multiple Products Small Store format Service Oriented Residential Locations Availing Branded Products
Retail Strategy – 2C’s
1. Criticality of cost2. Convenience of Buying
No Frills Store EDLP Strategy Off the main roads to take advantage
of low cost Catchment area of approx 2 kms Local low overhead front-end of Kirana
stores with efficient supply chain of a large retailer
Internal Analysis
Establish itself as a neighborhood store
Everyday low price system Wanted to attain greater penetration
in all markets Lease rental system for stores Centralized purchasing
Internal Analysis
Subhiksham Card Marketing Communication Supply Chain and Inventory turnover efficiency Home Delivery System Use of IT Online Retail System
Success Timeline of Subhiksha
1997 - 1st grocery Store in Chennai 2000 - 50 stores in Chennai 2000 June - ICICI Venture 10% stake for
15 Cr 2001 - Increased Stake to 23% 2002 - 120 Stores across Tamil Nadu 2003 - Azim Premji 10% stake for 230
Cr 2006 - 500 Stores across the country 2007 - 1000 Stores Across the country
Failure Timeline of Subhiksha
2007 - 350 Crore IPO 2008 April - Enter into Wholesale
Market 2008 April - Un-mindful Expansion 2008 July - Market Falls 2008 Oct - Operating Difficulties 2009 - Major Financial Crisis 2009 March - Shut Down Operations
Fund Raising
In 2000 ICICI Venture invested in Subhiksha with 10% stake at Rs15 Cr & raised stake to 23 % by 2004
Subhiksha also raised a 15 Cr debt from the market
2003 - Azim Premji took 10% stake from ICICI for Rs230 Cr
2004 – 2007 equity of Rs160 Cr, debt of Rs. 345 Cr & bridge loan of Rs.125 cr
2008- raised debt capital of Rs.600 Cr from Enam Securities Ltd, ICICI Ltd & Kotak Mahindra Bank
Segmentation
Segmentation was done on the basis of geography initially Opened stores in South
India initially , later expanded elsewhere
Later on, was done on the basis of age groups Different product portfolios
were targeted for different market segments
Target Market
Expanding middle & upper classes has played a big role in the expansion of existing modern format stores & entry of new ones
Attract not the top end customer but the aam aadmi
Target Market for different products: Grocery & Vegetables – Common man &
specifically Housewives Mobile – Youth Medicines – Old Age People
Positioning
Low prices Consumer Savings Consumer Trust One Stop Shop
Multiple products under one store Store designed with Indian touch Location Convenience Privilege to loyal customers Indian Management
Promotion & Advertising
TV Advertisements Price Challenge
Campaign Hoardings Celebrities for
promotion EDLP approach “Subhiksham” Card
Pricing Strategy
EDLP – Everyday Low Pricing Approach Prices below the MRP
Product Subhiksha
MRP
Rice 5 kg Rs.102 Rs.119
Britannia Marigold 400 gm
Rs.21 Rs.24
Sugar 1 kg Rs.15 Rs.17
Distribution Network
Distribution Channels helps in the ‘place’ aspect of the marketing mix
It provides place, time & possession utility to the consumers
Carpet Bombing Model Cluster of stores in close proximity
10 stores in 1998 to 1000 stores in 2008
Stores with one intermediary – Retailers
Competitors
Brand Name Outlet Type Level of Operation
Spencer’s Supermarkets National
Reliance Fresh Supermarkets National
Food Bazar Supermarkets National
More Supermarkets National
Food World Supermarkets South India
Niligiri’s Supermarkets South India
Fabmall Supermarkets South India
Spar Supermarkets South India
Founder Speaks….
“We are a golden egg laying duck, we are in trouble. We need their (bankers and lenders)support and upon getting it we will restart operations and repay all debt. It is not easy,but we have to make it happen.”
Why the decline?
Un-mindful expansion spree across the country Subhiksha was thinking of going for an IPO in
2007 but shelved it in view of “uncertain market conditions”
No consolidation- Tried to be first in every town Poor inventory management Private Labels Operations came to a standstill due to non-
payment of salaries, huge debt burden & arrears to suppliers
Major competition by stores like Big Bazar, Spencer’s etc
Why the decline?
Spending the debt raised money Lack of Transparency Liquidity crisis Poor Management Government Intervention Lack of strong HR policies & Staff Wrong Assumption that telecom
sector is sound to invest Over Confidence & Aggressiveness
Subhiksha’s Revival Strategies
March 2009- Undergone a corporate debt restructuring exercise, with lenders reviewing its books
Subiksha’s subsidiary Cash and Carry Proposed scheme
50% waiver and amalgamation with Blue Green Construction & Investments
Post merger promised to pump in 150cr Reopened as Subhiksha Rice Wholesaler 3 stores opened in Chennai
Why these strategies failed… Madras high Court and creditors
against the reopening Petition filed by Kotak Mahindra & ICICI Debt burden Tried to re open to fast to soon without
clearing dues Chose debt over equity for funding Liquidity crunch Inadequate I.T support
Recommended Survival Strategies Specializations in products Improved stores
Better Store Design & Interiors Better management with suppliers Raise funds in a systematic manner Shut stores with low sales Focus on quality instead of quantity Invest more in R&D
Study target market well Carry sales check on regular intervals Improve quality & after Sales service Choosing Equity over Debt to be risk free
Recommended Survival Strategies
New Store Format Open stores in malls or shopping
complexes to increase footfall Diversify in products which are profitable
Products for which overall industry performance is good
Products which are related to the current product basket
Customer Relationship Management Better working conditions for employees