Failure of subhiksha

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  • niyati
  • Mom-and-pop StoresThese are small family-owned businesses, which sell a small collection of goods to the customers. They are individually run and cater to small sections of the society. These stores are known for their high standards of customer service.Department storesDepartment stores are general merchandisers. They offer to the customers mid- to high-quality products. Though they sell general goods, some department stores sell only a select line of products. Examples in India would include stores like "Westside" and "Lifestyle"--popular department stores.Category KillersSpecialty stores are called category killers. Category killers are specialized in their fields and offer one category of products. Most popular examples of category killers include electronic stores like Best Buy and sports accessories stores like Sports Authority.MallsMalls are the largest retail format in IndiaOne of the most popular and most visited retail formats in India is the mall. These are the largest retail format in India. Malls provide everything that a person wants to buy, all under one roof. From clothes and accessories to food or cinemas, malls provide all of this, and more. Examples include Spencers Plaza in Chennai, India, or the Forum Mall in Bangalore.Discount StoresDiscount stores offer price reduction.Discount stores are those that offer their products at a discount, that is, at a lesser rate than the maximum retail price. This is mainly done when there is additional stock left over towards the end of any season. Discount stores sell their goods at a reduced rate with an aim of drawing bargain shoppers.SupermarketsOne of the other popular retail formats in India is the supermarkets. A supermarket is a grocery store that sells food and household goods. They are large, most often self-service and offer a huge variety of products. People head to supermarkets when they need to stock up on groceries and other items. They provide products for reasonable prices, and of mid to high quality.Street vendorsStreet vendors, or hawkers who sell goods on the streets, are quite popular in India. Through shouting out their wares, they draw the attention of customers. Street vendors are found in almost every city in India, and the business capital of Mumbai has a number of shopping areas comprised solely of street vendors. These hawkers sell not just clothes and accessories, but also local food.HypermarketsSimilar to supermarkets, hypermarkets in India are a combination of supermarket and department store. These are large retailers that provide all kinds of groceries and general goods. Saravana Stores in Chennai, Big Bazaar and Reliance Fresh are hypermarkets that draw enormous crowds.KiosksKiosks are box-like shops, which sell small and inexpensive items like cigarettes, toffees, newspapers and magazines, water packets and sometimes, tea and coffee. These are most commonly found on every street in a city, and cater primarily to local residentsRead more: Types of Retail Formats in India | eHow.com http://www.ehow.com/list_6679006_types-retail-formats-india.html#ixzz1Y6wYZi8e
  • JineshIntroduction of Subhiksham card: They introduced Subhiksham cardwhich they used to give ti their customers. The customers can use thiscard to get a certain amount of discount at their purchases.Home delivery: They also offered home delivery of the goods that thecustomer purchased. This way they also attracted a lot of ordersthrough telephone calls alone
  • nikhar
  • It was in 1996 that the idea of Subhiksha (prosperity in Sanskrit) came to his mind. Organised retail, in India, was non-existent. Subramanian, an IIT Madras and IIM Ahmedabad alumnus, was then into the financial services business of asset securitisation. Research revealed that grocery was one of the largest categories of spending for the average customer, that they were extremely price sensitive on groceries and that discount stores were the largest growing format.
  • Subhiksha's target clientele is the middle class: households with incomes inthe 50-90 percentile range. It believed that top 10 per cent don't spend verymuch more on food and groceries than those in the income categories belowthem, nor do they account for large numbers. But they do expect more interms of ambience, variety and service. Catering to this group, then, isn'treally worthwhile for Subhiksha.Instead, with functional outlets no bigger than 1,200-1,500 sq ft - and nofrills like air-conditioning - Subhiksha set itself up in direct competition withthe kirana shops. They focused a lot on cost cutting
  • jineshSubhiksha's motive behind establishing a no-frills stores that does not provide air-conditioning, dazzling lighting, or a touch and feel experience to its customersSubhiksha offered a lot of value to its consumers. Some of them are:One stop shop: Subhiksha focused on selling FMCG, fruits andvegetables, medicines and mobile through a single location thusreducing the consumer’s time and energy to go to different locations tofulfill different needs.A discount store: Subhiksha offered a discount of about 10% on almostall of its products be it fruits and vegetables or the FMCG items andeven on pharmacy products. Thus it attracted a lot of customers.
  • MitiIntroduction of Subhiksham card: They introduced Subhiksham cardwhich they used to give ti their customers. The customers can use thiscard to get a certain amount of discount at their purchases.
  • Discount Model: It was based on Wal-Mart’s Every Day Low PriceModel (EDLP). They offered a discount of 10% apart from loyaltydiscounts and special promotions.
  • Carpet Bombing Model: It was based on Starbuck’s approach. Inthis strategy retail chain opens a cluster of stores in close proximityto each other, in a geographical area which has high populationdensity with purchasing potential. This enables the chain tocannibalize sales within its own network rather than allowing themto go to other individual stores or retail chains.
  • sakshi
  • Un-mindful expansion spree across different parts of the countrySubhiksha didn’t realize that with this only a few stores would be profitable and generate positive cash flows. It moved across different sectors such as medicine, grocery, IT, mobile etc very fast.IPO problemSubhiksha was thinking of going for an IPO in 2007 but shelved it in view of “uncertain market conditions”. But I believe that they got greedy as they expected a market correction.Both of them didn’t consolidateSubhiksha and Vishal instead of stabilizing and consolidating themselves first in different places and then moving to newer locations, tried to be the first in every town.Poor inventory managementSubhiksha had a bad history of credit defaults and this led to supply breakages. This led to situations where sometimes the store had very high inventory and at others, the stocks were out. This led to great dissatisfaction.Private LabelsVishal tried to develop private labels in almost every category but had limited scale to support them.Subhiksha closed down in 2009 amid allegations of defaults, non – wages payments and bankruptcy. The people behind it are still struggling to come up with valid explanations.
  • At a time when the market is rife with speculation as to what went wrong in the case of retail chain Subhiksha, experts feel the prime reason could be a challenging case of small-format grocery retailing in India.But that is only one of the many conjectures. Others reasons include lack of transparency, liquidity crisis and poor management, among others.GOVT INTERVENTION- CANCELLED LICENSE OF THREE OF ITS VENDORS COZ IT DID NOT KEEP UP WITH THE HEALTH AND HYGIENE NORMS PRESCRIBEDRapid expansion without consolidation and focus: Subhiksha kepton expanding its stores without focusing on consolidating the growth. Iteyed on having as many stores in the country as possible. In the processit ignored to manage its stores efficiently.Cannibalization of its own sales: Some of its stores were locatedwithin 500 km range of its own store. Thus there happened anintersection of the target customers hence causing cannibalization of itsown revenues and profits.High debt: It planned its expansion by using a high amount of debt. Ahigh financial leverage induced very high financial risk to itIncorrect format: Subhiksha was neither a supermarket nor it was a localkirana store. The special format requires a special plan that Subhikshawas not able to implement. As a result it faced an intense competition withboth the big players as well as from the local grocery shops.Inefficient management: Its focus was on increasing its turnover andthey did not paid attention over their management and service. The staffservice was very poor which proved to be a horrible experience for theircustomersImproper diversification: Subhiksha ventured into various areas likegrocery, pharmacy, mobile and accessories. All of them require a differentlevel of expertise lacking which it was anot able to sustain. It did not creategrowth platform for its expansion.Inefficient supply chain management: Its downstream supply chain wasnot integrated. The bargaining power with its suppliers was very low. Itsbusiness model was based on getting discounts at bulk buying which is notat all sustainable.Poor inventory management: It used to keep an inventory of about 15days against the industry average of around 35 days. The high inventoryturnover and low fill rate resulted into a high stock out thereby a highamount of opportunity loss in revenuesEconomic slowdown: In 2008 it was already under a huge debt (around700 crores). It owed to the suppliers as well as to its employees. It plannedto raise further debt to repay its current debts but due to advent of theslowdown in the economy it was unable to raise the much needed debt.Low margin: To offer its customer at a lower price it compromised on avery low margin. It focused on getting profit by volume rather than profit byprice. But it could not get the required amount of volume transactions.Lack of HR policy: Due to the absence of proper HR policies it was able toneither recruit nor retain the talented staff. It did not give training to its staffthat resulted into the degraded service offered by its employees.
  • The scheme was basically a compromise between the company and its creditors through a 50% waiver of principal and a payment period of 10 years. But the court deferred appointment of a provisional liquidator, as an appeal in this regard is pending before a division bench.The bank’s counsel said the retail chain has an exposure of around Rs 870 crore to banks, Rs 107 crore to unsecured lenders and Rs 250 crore of reserves, “which none of us know where it went”. There are also loans/advances of Rs 119 crore where the identity of the parties is unclear, it said.The banks, including ICICI Bank Ltd, HDFC Bank Ltd and Bank of Baroda are owed around Rs750 cror investigation request came after Subhiksha told the court that investors and promoters are ready to pump in Rs 250 crore. “Post merger (with Blue Green), we can pump in Rs 150 crore in eight weeks from the investors and another Rs 100 crore in 6-9 months,” counsel representing Subhiksha told the cou
  • The Court observed that all the 1,600-plus retail shops run by Subhiksha had been closed and the inventories valued at Rs 551 crore were said to have evaporated into thin air.The Court, which dismissed the merger proposal stating that it was mainly to protect public interest, said that the revival plan submitted by Subhiksha was was based on certain presumptions including infusion of Rs 150 crore as equity at par, infusion of Rs 100 crore as fresh debt/debt convertible into equity, incorporating the effect of debt restructuring, utilisation of Rs 51 crore of the infused cash to create the balancing investments in the fixed assets.Subhiksha, with a debt burden of over Rs.7.5 billion (Rs.750 crore), is looking for a Rs.3 billion (Rs.300 crore) cash infusion to stay afloat.
  • Failure of subhiksha

    1. 1.  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
    2. 2.  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)
    3. 3.  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
    4. 4. 1000 No. Of Outlets900 Country Wide800 2004 700600 2005500 2006400 0, 0, 22, 325 300 0 , 0, 140, 250 2007200 22, 35, 60, 105 94, 46, 55, 70 100 0 142, 150, 450, 1000 Subhiksha Reliance Food Bazaar Food World Spencers Fresh Daily
    5. 5. 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”
    6. 6.  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
    7. 7.  Fruits Vegetables Grocery Medicines Mobiles
    8. 8.  Discount Store Multiple Products Small Store format Service Oriented Residential Locations Availing Branded Products
    9. 9. 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
    10. 10.  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
    11. 11.  Subhiksham Card Marketing Communication Supply Chain and Inventory turnover efficiency Home Delivery System Use of IT Online Retail System
    12. 12.  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
    13. 13.  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
    14. 14.  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
    15. 15.  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
    16. 16.  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. 17.  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
    18. 18.  TV Advertisements Price Challenge Campaign Hoardings Celebrities for promotion EDLP approach “Subhiksham” Card
    19. 19.  EDLP – Everyday Low Pricing Approach  Prices below the MRPProduct Subhiksha MRPRice 5 kg Rs.102 Rs.119Britannia Rs.21 Rs.24Marigold 400gmSugar 1 kg Rs.15 Rs.17
    20. 20.  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
    21. 21. Brand Name Outlet Type Level of OperationSpencer’s Supermarkets NationalReliance Fresh Supermarkets NationalFood Bazar Supermarkets NationalMore Supermarkets NationalFood World Supermarkets South IndiaNiligiri’s Supermarkets South IndiaFabmall Supermarkets South IndiaSpar Supermarkets South India
    22. 22. “We are a golden egg laying duck, we are introuble. We need their (bankers and lenders)support and upon getting it we will restartoperations and repay all debt. It is not easy,but we have to make it happen.”
    23. 23.  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
    24. 24.  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
    25. 25.  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
    26. 26.  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
    27. 27.  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
    28. 28.  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

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