Failure of Subhiksha

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Information about Failure of Subhiksha

Published on September 29, 2015

Author: roshanshanbhag

Source: slideshare.net

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

2. 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

3. 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)

4. 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.

5. The rise of Subhiksha….

6. 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”

7. 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

8. About Subhiksha – Business Verticals • Super Markets • Fruits &Vegetables • Pharmacy • Telecom Ref: http://www.ukessays.co.uk/essays/education/the-indian-retail-industry.php#ixzz3mpuv71KB

9. Strategic Format of Subhiksha • Discount Store • Multiple Products • Small Store format • Residential Locations • Availing Branded Products

10. 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

11. Continued… • Lease Rental System For Stores • Centralized Purchasing • Subhiksha Card • Marketing Communication • Supply Chain And Inventory Turnover Efficiency • Home Delivery System • Use Of IT

12. Retail Stores Scenario in India 0 100 200 300 400 500 600 700 800 900 1000 Subhiksha Reliance Fresh Food Bazaar Food World Spencer's Daily 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. Promotion & Advertising • TV Advertisements • Price Challenge Campaign • Hoardings • Celebrities for promotion • EDLP approach • “Subhiksham” Card

19. 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

20. Competitors Brand Name Outlet Type Level of Operation Spencer’s Supermarkets National Reliance Fresh Supermarkets National Food Bazar Supermarkets National More Supermarkets National

21. The fall of Subhiksha…

22. 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

23. 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

24. 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.”

25. 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

26. 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

27. 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

28. Conclusion

29. 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

30. Scanned Copy Of Product List & Prices

31. THANK YOU

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