Failure of Subhiksha

Team Members-
Priti R. Gupta 31
Roshan Shanbhag 85
Bipin Tiwari 103
Chintan Vora 115
Bhakti Vadia 107
 Outline
Retail Stores
Types of Retail Formats in India
Indian Retail Market
About Subhiksha
About Subhiksha- Vision, Mission & Business Verticals
Strategic Format of Subhiksha
Retail Strategy, Store Scenario, Success & Fund Raising
Segmentation, Targeting & Positioning
Promotion, Pricing & Competitors
Decline of Subhiksha
Reasons of Decline
Revival 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 chain
Theme
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 Model
Criticality of cost
Convenience 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

1000
142, 150, 450, No. Of Outlets
900 1000 Country Wide
800
700
600 2004
500 2005
0, 0, 22, 325 2006
400
2007
0 , 0, 140, 250
300
200 22, 35, 60, 105 94, 46, 55, 70

100
0
Subhiksha Reliance FreshFood Bazaar Food WorldSpencer's Daily
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) segmentation
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 (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.119
Britannia Rs.21 Rs.24
Marigold
400 gm
Sugar 1 kg Rs.15 Rs.17
Competitors
Brand Name Outlet Type Level of
Operation
Spencers 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, Spencers
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-d
ebt-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
Subhikshas 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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