Why Did Subhiksha Failed

Why did Subhiksha failed ?

Retailing  Derived from the French word

‘retailer’ which means,” to cut up".  It consists of the business activities

involved in selling goods and services to consumers for their personal, family, or household use.

Definition of Retailing   marketing channel and the point where

 “It is the last commercial link in the

products finally reach their users.”  “Retailing includes all activities directly related to the sale of goods or services to the ultimate customer for personal nonbusiness use.”  “Dictionary Definition: The selling of goods to general public.”

Retail Industry The share of retail trade in the country's gross domestic product (GDP) was between 8–10 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010.

35 % Growth

6 % Growth

Indian Organized Retail Industry

Indian Retail Industry  Commercial real estate services

company, CB Richard Ellis' findings state that India's retail market is currently valued at US$ 511 billion.  The Organized retail accounted for Rs

55,000 crore (about $12.4 billion) in the year 2006 and still its just about only 4.6% of the total Indian Retail Value that was about Rs 12,00,000 crore.

Prospects of Retail In India  1 million new jobs in organized sector alone in next 10 years.  India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent.  Also, organised retail, which accounts for almost 5 per cent of the market, is expected to grow at a CAGR of 40 per cent from US$ 20 billion in 2007 to US$ 107 billion by 2013.

The Case Study on Subhiksha

Subhiksha-The Introduction  Largest retail value chain in India with

1600 outlets started in 1997 .  From 150 stores in Sept 2006 all of which were in Tamil Nadu the company grew rapidly to over 1600 stores by Sept 2008 across the country.  The company’s investors include Wipro’s Azim Premji and ICICI Prudential Mutual fund apart from the ESOP Trust.

Business 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, has guided Subhiksha to deliver savings to all consumers on each and every item that they need in their daily lives, 365 days a year, without any compromise on quality of goods purchased.

Product Portfolio  Supermarket: The supermarket includes quality groceries, packaged foods, cosmetics and toiletries, household provisions, etc.  Fruits and Vegetables: Includes fresh fruits and vegetables sourced directly from farms on city outskirts by Subhiksha and made available to the consumers at very reasonable prices. Consumers get fresh produce atbest prices.

Contd…… Pharmacy: Subhiksha stores generally have a in store pharmacy which stores mostly basic medicines. All medicines are made available to consumers at a flat 10% discount. Telecom: Subhiksha is recently forayed into mobile retailer business and offers handsets, recharge cards and accessories from all leading cell phone manufacturer’s at lower prices.

Retail Strategy Subhiksha focuses on two factors for its model. These are called the two C's:  1. Criticality of Cost.  2. Convenience of Buying

Internal Analysis  Small Store/Cost Saving.  EDLP.  Lower Infrastructure Cost.  Centralized Purchasing.  Marketing Communication.  Introduction of Subshikham card.  Establishment of Home Delivery and

Online retail system.

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• • • •

• • •

In March 1997 opening of the first retail store in Chennai, with 5 lacs initial investment. March 99‐ 14 stores in Chennai. June 2000‐ 50 stores in Chennai, ICICI ventures joins Subhiksha. June 2002‐ 120 stores in whole of Tamil Nadu. June 2006‐ 420 stores in other big states in India namely Gujarat, Delhi, Mumbai, Andhra Pradesh and Karnataka. Feb 2007‐500 stores across country Dec 2007‐ 1000 stores across India October 2008‐ 1600 stores across India

SWOT Analysis STRENGTHS

WEAKNESS

• • • • •

• Lack of expertise in Indian Retail environment • Low grade lower management team • Strategy of debt‐led Rapid expansion on a small equity base • Long time taken in IT Implementation

 

Discount model Strong Top management team High Customer base High Brand Value Use of Information Technology

OPPORTUNITIES

THREATS

• World's most lucrative retail • market • Heavy Investment industry from • FII’s and Venture Funds • • Huge No. of customers

Economic uncertainty and Recession Strong Competitors at National and Regional Level Price war and shrinking margins

Competitive Analysis SR. BRAND NAME NO

OUTLET TYPE LEVEL OF OPERATION

OWERNSHIP

1

SPENCER’S

SUPERMARKET NATIONAL

RPG GROUP

2

RELIANCE FRESH

SUPERMARKET NATIONAL

RELIANCE GROUP

3

FOOD BAZAR

SUPERMARKET NATIONAL

FUTURE GROUP

4

MORE

SUPERMARKET NATIONAL

ADITYA BIRLA

Comparison of Subhiksha with other Retail  Product Range Outlets  Positioning  Store Format  Strength  Price

Reasons for failure of Subhiksha  Expanding the number of stores rapidly

without sufficient funds in hand.  Expansion of Stores without adequate

system control and IT Support.  Government Intervention.

Contd……

 Lack of strong HR policy and Staff.  Strong Competition.  Over confidence and Aggressiveness.

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