Rise and Fall of Subhiksha

Presentation By:Ankit Verma

Rohit Sharma

Contents

• Indian Retail Industry

• Subhiksha- Introduction

• Strategies adopted by them

• Their Positioning

• Their Format

• Competitive analysis

• An end has a start

• Expert’s comment

• Fall from Glory

• Conclusion

Indian Retail Industry

• The Indian retail industry has been riding a wave for the last couple of years.

• According to a latest report, retail sales are expected to rise from US$ 343 billion currently to US$ 543 billion.

• Reliance Fresh, Subhiksha, Vishal Retail, Spencer’s, More, Big Bazaar and many more have entered India since the modern format retail concept began.

Source: www.trak.in

Continued…

• The expanding middle and upper class has played a big role in the expansion of existing modern format stores and entry of new ones

• But, “Have all of these stores been successful?”

• The answer is a big NO

Not So Good News

• Subhiksha, which runs the retail stores across India, is battling for survival. It has negotiated its rentals in many cities but now it is planning to close its stores

• UK retailer Argos is pulling out of India

• Reliance Fresh is not doing that well

• Same is the case with Spencers and Aditya Birla group’s More

Good News

• Future Group’s Big Bazaar has bucked the trend though it is resorting to new ways to boost sales

• It is trying to rent expensive clothes for special occasions. It is also in talks with Carrefour for a cash-and-carry set-up

• Mahindra and Mahindra group has quietly entered the retail space with its Mom & Me store

• Bharti has collaborated with WalMart for a cash and carry business and has named its stores as BestPrice Modern Wholesale

What Actually Works Out?

• Since organized retail is pretty new in India, no body knows what really works

• But there are few trends if we look closely-1. Big Bazaar is a hit- Which means their store format, which is a rip-off

of Saravana Stores in Chennai, is something worth paying attention to.2. Small stores like the Subhiksha format or the Reliance Fresh format

did not work. The profitability is not there for that small a space.3. Good customer care4. Parking space

- An Introduction

• Subhiksha was started by R. Subramaniam, an IIM A and IIT Chennai alumnus with its first store at Chennai

• It was a discount store at prices which were much lower than other retail outlets

• Subhiksha started with 1 store in 1999, In 2004, they opened 164 stores all over Tamil Nadu & Pondicherry and had grown to more than 1665 stores by 2009.

Strategies adopted by Subhiksha

• Focus on the lower & upper middle class

• Offer a better ambience than typical general stores

• Prices were 8% less than the MRP

• Inform customers about promotional offers

• Store keepers help buyers in purchase decision

Introduction Continues…

• Subhiksha had ICICI Ventures and Wipro’s Aziz Premji as its investors.

• Everything seems to be in the right place.

• So What could possible go wrong?

The Positioning

Subhiksha made an extensive research on consumer behavior and found that offering the branded goods at a lower price could make them stand in competitive retail industry

• Low Prices- Subhiksha positioned itself as Discount/Value Retail Chain with theme as “Why pay more when you can get for less”

• Trust- Its consumers started relying on it to deliver larger savings

Continued…

• Savings- It focused on the concept of constantly sustainable low pricing so that regular customers see the same low prices month after month and buy with an assurance that they are going to save

Their Format

• Subhiksha and its format was viewed to be the best suited to the Indian market for food & grocery retail

• It opted for a format of discount store at prices much lower than Kirana (Mom & Pop) Stores and other retail outlets

• Their approach was a combination of the Indian kirana shops with the efficient supply chain of a large retailer

• Subhiksha's shops were no-frills (sub-500 sq ft, non-AC)

Continued…

• They did not allow consumers to walk through the store to browse products (no aisles – no wasted area)

• They planned to be well distributed (aimed to have a store within 1 kilometer of any household)

• Subhiksha focused on selling FMCG, fruits and vegetables, medicines and lately mobile phones

Key Elements Subhiksha Neighborhood Stores

Convenience Yes Yes

Store Location 2Km in radius 1Km in radius

Product Range Grocery, Perishables, Pharma, Mobiles

Grocery, Perishables

Prices 5-10% low than MRP MRP

Competitive Analysis

Continued…

Key Elements Subhiksha Neighborhood Stores

Positioning Discount Store Pop & Mom Store

Store Format No touch and feel offered

No touch and feel offered

Brand Image Low Pricing Trust and Relationship

Quality OK OK

Strengths Everyday low prices 365 days

Credit provided and Customer relationship

An End Has A Start

• There are several things which went wrong in Subhiksha’s case but 2 points are to be noted:

1. Expansion against consolidation

2. Lack of Focus

Expert’s Comment:

• Alok Kejriwal- The founder of 2Win Group says-

Subhiksha’s fall is something to do with the DNA of its founder, the self styled Sam Walton of Indian Retail(!!!!!). I know this guy right from the days when he was an executive in Enfield. His arrogance was stunning even in those days. And when such a person by hook or crook establishes a company then it will be a manifestation of his arrogance and the end is very natural. In Subramanian’s dictionary there is no word as Humility.

Fall From GloryFrom Largest Indian Retailer Doom

• Reason 1-

Un-mindful expansion spree across different parts of the country

• Reason 2-

Over expenditure in advertising, wages and rent

Continued…

• Reason 3-

Did not consolidate

• Reason 4-

Inadequate system control and IT support

Continued…

• Reason 5-

Poor Inventory Management

• Reason 6-

Strong Competition

Conclusion

• Before opening the 500th store they would have checked whether people were buying medicines from them or going to the medical shop round the corner.

• Before opening the 1000th store they would have checked whether people were buying a mobile from them or from a specialized mobile store.

Conclusion Continued…

As Indian customers, we all would rather go to a store which has a specialization for the thing we want to buy.

That is the bigger issue ailing Indian retail not just Subhiksha.

References

•http://www.chennaibest.com/cityresources/home_needs/profile02.asp

•http://www.economictimes.indiatimes.com/articleshow/2456436.cms

•http://www.thehindubusinessline.com/2007/07/26/stories.htm

•http://www.indiaretailbiz.com/blog/category/indian-retailers/subhiksha-subramanians/

•http://www.livemint.com/subhiksha.htm

•http://www.trak.in

Thank You!!