Failure of SubhikshaTeam Members-Priti R. Gupta 31Roshan Shanbhag 85Bipin Tiwari 103Chintan Vora 115Bhakti Vadia 107

Outline Retail Stores

Types of Retail Formats in IndiaIndian Retail Market

About SubhikshaAbout Subhiksha- Vision, Mission & Business VerticalsStrategic Format of SubhikshaRetail Strategy, Store Scenario, Success & Fund RaisingSegmentation, Targeting & PositioningPromotion, Pricing & CompetitorsDecline of SubhikshaReasons of DeclineRevival Strategies of Subhiksha

Types of Retail Formats in India•Mom & Pop Stores (Kirana Stores-Shivraj Store)•Departmental Stores (Westside, Lifestyle,)•Speciality Store (E-Zone)•Malls (Inorbit, infinity)•Discount Stores – Subhiksha & The Loot•Supermarkets (Dmart)•Street Vendors (Hawkers)•Hypermarkets (Big Bazar)•Kiosks (CCD Express)

Indian Retail Market• Till 1997 – Retail Market was non-existent inspite of 1991 FDI, untill 1998

when Shoppers Stop started the Huge Retail Chain.

▫ Growth Wave I – Pre-1991

▫ Growth Wave II – 1991-2004

▫ Growth Wave III – 2005-2015

• In past Entire retail accounted for US$12.4 billion (4.6%-OM) in 2006), now in

2015 it is US$ 600 Billion (8%-OM)

• fastest growing in the world - expected to grow to US$ 1.3 trillion by 2020

• The government has approved 51% FDI in multi-brand retail and increased FDI

limit to 100 % in single brand retail.

The rise of Subhiksha….

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 trading service was started by R.

Subramanian an IIM A & IIT Chennai alumnus in 1997• Subhiksha in Sanskrit means (prosperity)“the giver of

all good things in life”• It was a super market and pharmacy chainTheme• Why pay more when you can get it for less at

Subhiksha?• Discount store at prices lower than other retail outlets• Set up 1,000 sq ft shops all across the city

About Subhiksha – Business Verticals•Super Markets

•Fruits &Vegetables

•Pharmacy

•Telecom

Ref: http://www.ukessays.co.uk/essays/education/the-indian-retail-industry.php#ixzz3mpuv71KB

Strategic Format of Subhiksha

•Discount Store

•Multiple Products

•Small Store format

•Residential Locations

•Availing Branded Products

Retail Strategy 2C ModelCriticality of costConvenience of Buying• No Frills Store• EDLP Strategy(every day low pricing)• Catchment area of approx 2 kms• Establish itself as a neighborhood store• Wanted To Attain Greater Penetration In All

Markets

Continued…•Lease Rental System For Stores

•Centralized Purchasing

•Subhiksha Card

•Marketing Communication

•Supply Chain And Inventory Turnover Efficiency

•Home Delivery System

•Use Of IT

Retail Stores Scenario in India

Subhiksha Reliance Fresh

Food Bazaar

Food World

Spencer's Daily

0100200300400500600700800900

1000

2004200520062007

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

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

Ref: http://www.ukessays.co.uk/essays/education/the-indian-retail-industry.php#ixzz3mpuv71KB

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

Ref: insead.edu

Segmentation•Geographical Segmentation

Opened stores in South India initially , later expanded elsewhere

•Later on, demographic (age groups) segmentationDifferent 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 (USP)•Consumer Savings•Consumer Trust•One Stop Shop

▫Multiple products under one store•Store designed with Indian touch•Location Convenience•Privilege to loyal customers

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.119Britannia Marigold 400 gm

Rs.21 Rs.24

Sugar 1 kg Rs.15 Rs.17

CompetitorsBrand Name Outlet Type Level of

OperationSpencer’s Supermarkets National

Reliance Fresh Supermarkets National

Food Bazar Supermarkets National

More Supermarkets National

The fall of Subhiksha…

Why the Decline?• Aggressive expansion without proper focus• 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

Continue…•Spending the debt raised money•Liquidity crisis•Poor Management•Government Intervention•Lack of strong HR policies & Staff•Over Confidence & Aggressiveness•Over expenditure on advertising

• http://www.business-standard.com/article/companies/from-subhiksha-to-viswapriya-subramanian-s-fall-from-grace-115091900768_1.html

• http://www.livemint.com/Industry/NZuA2lGw14976GioZpjKwK/Rs144-trillion-stuck-as-cases-pile-up-at-debt-tribunals.html

• http://www.ukessays.co.uk/essays/education/the-indian-retail-industry.php#ixzz3mpuv71KB

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 the debt. It is not easy, but we have to make it happen.”

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

Subhiksha’s Revival Strategies•March 2009- Undergone a Corporate Debt

Restructuring (CDR) exercise•Merger with Blue Green Constructions &

Investments Limited•Post merger promised to pump in 130cr and Rs.100cr

after 6-9 months (Indian retailing news)

•2010- Opened cash and carry store in Chennai

Why These Strategies Failed…•Madras high Court rejects merger plan (The Hindu,Oct-2010

& ET, Oct-2010)

•Petition filed by 13 banks •Repayments •Tried to re open too fast without clearing dues•Liquidity crunch

Conclusion

Strategies Can Be Implemented (taking some particular set of assumptions)

•Repayment of Statutory liabilities•Opening store in Tier-II & Tier-III cities •One store at One city •Warehouses near store •Touch and feel aspect •Dealing with B2C(Business to Customer) & also with

B2B(Business to Business) business model •Achieving economies of scale•Right decision at right time

Scanned Copy Of Product List & Prices

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