Yatin

Rediff.com has an interview with R.Subramanian, an IIT and IIM grad who is the Founder & CEO of discount retail chain Subhiksha which is today India's largest organized retail chain with over 500 stores. We allocated a Rs 5 crore (Rs 50 million) corpus to it and entered the retail business. There was a lot of thought process behind it. We wanted to attract not the top end customer but the aam aadmi. From our research of three months, we found that consumers prefer buying groceries from closer home. So, we decided to set up 1,000 sq ft shops all across the city and not a 10,000 sq ft big store at one location in Chennai. The next question was why would he come to our store abandoning the existing store? It had to be the price, because ultimately there is no difference between the branded products like say Boost or Surf or such things. So, we decided to sell branded products at a lower price

Subhiksha is a company that claims that they offer the lowest prices on mobiles in any city. I wanted to verify this and i placed a call to 60607777. This is the number listed on their web site and flashed every other minute on TV advertisements. The call was connected immediately, but i was forced to wait for 1 minute and 10 seconds as i listened to one of their ads. Just as i was about to hang up, a sales representative (Jagan) came online. I asked him if was their corporate policy to force an ad down the throat of every unwitting caller. He offered what can best be described as a half hearted apology. I let it go and i asked him the price of a Nokia E65. He put me on hold for a few seconds this time(thankfully). Imagine my suprise when he told that he would tell me the price only if i would provide him my contact details which included my phone number. I told him that i was not ready to divulge my contact details only to have annoying marketing calls. He told me that it was company policy that they would provide price details only if i was willing to provide my personal details. I asked him how it would be if retail chains adopted this policy for every customer visiting their store. He didn’t see my point and after 4 minutes and 38 seconds i hung up none the wiser. I would think ten times before i venture into a Subhiksha store the next time and certainly would not recommend it to a friend who asks me for buying

advice. A company that forces would be customers to part with personal details to provide public domain information has to rethink on their corporate policy with respect to the customer experience. Well, maybe.... Subhiksha has a tie up with mobile service providers where they assure them of a minimum amount of talk time for every call a customer makes to their well advertised number in return for a fee that helps offset thier lower prices... just maybe.... aaryesdee said: Jul 05, 2008 07:00 PM The worst shop business one could do. They are unprofessional. The material available in the store is very inferior. No hygiene, cleanliness of the store. Allmost all racks are empty. Subhiksha - They say, prior buying a mobile ,call them. If you attempt, you r the fool on earth. The number does not get connected nor anyone answer you. JaveedAhmedM said: Jul 05, 2008 07:39 PM I don;t think they are wrong.. Every Business Would like to protect its interests just like We want to protect our Personal information. If the customer is genuine he would divulge his Details to help them offer their services. I don;t think its unprofessionalism... I agree Subhiksha Store do collect lot of dust.. their most products are out dated..(Date of manufacture) mohanbal said: Aug 22, 2008 01:27 PM Subhiksha Mobile Store - Marine Drive, Cochin Good ambiance, nicely displayed.helpful sales team. was happy and purchased a brand new Samsung two-on, the packet was open but the senior person itself assured since it was first time they are getting it opened to cross check the contents was in order. Rest of the packing was in order.. Purchased 1 GB card also.. Happily went home and configured as next day was off thanks to All-India strike called by Left Front.

While configuring noticed one missed call other than the one which was checked, oops..it was showing the date as 14.08.2008 (I purchased the unit on 19.08.2008). Next day morning called the senior person and he said he will check and call me back. Yet to get my replacement and what they are saying the unit was used as demo piece for their ’’elite’’ customer, no wonder Subhiksha is selling at lower cost, it is as good as used and second-hand pieces. Has decided to approach consumer forum to get the replacement,meanwhile please be careful while buying anything from Subhiksha. Showing 1-3 of 3 Comments

FDA cancels Subhiksha packaging firms’ licence Cracking the whip on leading retail chain Subhiksha, Maharashtra's Food and Drug Administration (FDA) on Wednesday cancelled licences of its three packaging firms over hygiene issues at its warehouses. The

Food

and

Drug

Adminstration

(FDA)

finds

Subhiksha

guilty

of

unhygienic

godowns.

Subhiksha licence would be suspended for 20 days from August 20 to September 8. Subhiksha can now appeal to the division bench of Bombay HC. Stores across Maharashtra will have to remain shut for 20 days. Subhiksha says it will appeal to the High Court right away. The original FDA order was put out in May 2008. Original FDA order has said Subhiksha stores across Maharashtra will be shut for 10 days. This original FDA order was stayed after Subhiksha's appeal to the Bombay HC. It's the same order, which has resurfaced and now will be appealed against again by Subhiksha

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Reliance, Bharti and Subhiksha rat race

The big retail drive is on Companies like Reliance, Bharti and Subhiksha are in a race that is fuelling the real estate growth Mona Mehta Big retail is on a roll in India. Giants such as Reliance Retail, Bharti and Subhiksha are planning national roll outs of their retail outlets, with varying degrees of segmentation. As an industry, retailing could see investments of over $10 billion over the next three to four years and every crore of retail investment would see demand for 10,000 sq ft. Industry experts believe that even if only $2 billion of the projected investment materialises, it would mean that there would be a demand for almost 10 million sq ft in the next two to three years from retail alone. If all the planned retail investment happens, the space requirement would be 50 million sq ft. With organised retail contributing over 40% to the Rs 64,000 crore real estate sector in India, Gibson Vedamani, chief executive officer, Retailers Association of India says, “Over the past three to four years, the growth of retailing and the demand of retailers has motivated the realty sector to aggressively look at developing properties for retailing, specifically malls. Earlier malls were restricted to just shopping centres but now malls are considered the right profile to cater to shopping needs under one umbrella. Each and every need of customers right from their footfalls to quick turnaround at the cash counters should be met so that customers do not have to wait for long in the queue especially during weekends. Well, this can be done when the number of cash counters in hypermarkets are increased at every store level.” Bharti Retail Pvt Ltd—a wholly owned subsidiary of Bharti Enterprises—is planning to invest $2 to $2.5 billion by 2015 in setting up retail outlets in supermarket and hypermarket formats pan-India. Says Rajan Bharti Mittal, joint managing director, Bharti Enterprises, “We are looking at approximately 10 million sq ft of retail experience across all cities in India with a population of over one million. The 60,000 people we plan to employ, will include ex-servicemen and women and provide multifaceted career opportunities for the youth of India.” On the other hand, competitor, Reliance Retail Ltd, which operates 135 grocery retail chain stores called Reliance Fresh, has decided to invest Rs 25,000 crore by 2012 in its retail business. The investments would also be made in setting-up 400 small format durable outlets called ‘Reliance Digital’ in rural and semiurban markets. This will be the second major durable retailing initiative in the domestic market after competitor Tata Group’s Infiniti Retail-owned ‘Croma’. According to a Reliance Retail executive, “With rural markets already contributing 60% to the overall Cathode Ray Tube (CRT) TVs market, there is a good potential for categories such as music systems and DVD players to grow there.” Subhiksha, India’s leading retailer that runs the largest chain of supermarkets, pharmacies, mobile stores and vegetable stores has set up 760 stores across the country. R Subramaniam, managing director, Subhiksha told FE, “We presently occupy two million sq ft of retail space across the country and expect this to double this year. Apart from being operational in Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra (including Mumbai), Delhi, Haryana, Chandigarh, Uttar Pradesh and Punjab and smaller centres such as Meerut, Barielly, Karnal, which are not in the scanner of other organised retail, plans are on

the anvil to open Subhiksha outlets in Rajasthan, Madhya Pradesh, Kerala and Kolkata as well.” Subhiksha does not own properties, but operates them on 15-year leases. We have so far invested Rs 500 crore and expect to invest another Rs 500 crore in the next 18 months.” While Reliance and Bharti are open to buying properties at market prices, both on the ownership and lease basis, Subhiksha is taking properties only on lease basis. Nationally, the market price for buying properties on ownership basis is between Rs 3,000 to Rs 7,000 per sq ft, whereas that on a lease basis is between Rs 22 to Rs 55 per sq ft. For the small store format, Bharti Retail is also looking at partnering with existing local store owners across India through a franchise model. Reliance Retail, Bharti Retail and Subhiksha propose to serve all regular shopping requirements of an average Indian household. This will include all food and grocery categories, fresh fruits and vegetables, meat and poultry, dairy products, staples, FMCG and processed foods, electronics and appliances, clothing and footwear, furniture and furnishing, and other household articles. Bharti Retail will keep adding to the product portfolio in line with consumer aspirations, preferences and trends in the international market. Development of the mall industry depends on two key business sectors—the real estate as well as the retail. The demand for new retail spaces will be spurred on by such new retail ventures. Also, such large-scale retail forays tend to change and modify the governing rules, norms and, in some cases, even the tax structures of a country. These contribute to catalyse the retail industry growth further into a virtuous cycle ensuring that the demand for retail real estate is even higher in the medium term. Rajiv Bhatia, CEO, Inorbit Mall says, “One example is the Vaishali and Kaushambi area in east Delhi, which, after Gurgaon, has witnessed a huge surge in real estate activity following the announcement of the construction of a number of malls. Till some time ago, Vaishali and Kaushambi were considered to be the poor cousins of Noida and Indirapuram. But in the last six months, the area has witnessed a surge in organised retailing. Today it has several malls and multiplexes.”

Subhiksha to acquire Chennai retail network Subhiksha, India's leading food and grocery retailer, will acquire a majority stake in Chennai-based retail network Blue Green Constructions and Investments Ltd, the company said on Saturday.

The respective boards of Subhiksha and Blue Green will meet Monday to consider a merger of the two companies. The merged entity will be called Subhiksha Ltd. Subhiksha's promoter R. Subramanian said, “This transaction will ensure that Subhiksha has access to capital and will continue to be on the fast track of growth. It will also enhance value for our stakeholders and help us achieve our objective of becoming a $5 billion company. “We are planning an entry into consumer durables to further enhance Subhiksha's value proposition to the Indian consumer. The company plans to have two million square feet of retail space in this segment in the next year,” he added.

Why did Subhiksha go in for a reverse merger? In an interview to Business Standard, R Subramanian, Founder & CEO of value retail chain Subhiksha, on the company's recent move to go public via a reverse merger.

What happened to your IPO plans? There are multiple ways of raising funds. But since markets are changing, it is very difficult to structure capital raising plans in the current situation. However, we have good capital base and we will do whatever is needed for the company's growth. Since we have acquired a company now, we should go for a follow-on offer (FPO), which can happen anytime after the merger process is complete. How will inflation and high rates impact the retail sector? I see retailing of luxuries such as premium clothing and electronic gadgets growing at 10 to 15 per cent this year compared with 30 per cent earlier. I do not see much impact in food and grocery retailing.

Retail's Mr. No-Frills Shoppers should pay for the product, not the lighting and air-conditioning. On that simple premise, Subramanian launched a chain of discount stores, Subhiksha Trading Services, which today is 145-store big. By Nitya Varadarajan

Three days after Ramaswami Subra-manian opened the first Subhiksha store in Chennai's middle-class neighbourhood of Thiruvanmiyur, he was pleasantly surprised to find a big crowd gathered outside the store around its opening time. Subhiksha, which sells grocery and pharmaceuticals, was the first discount-store chain of its kind in Chennai, and true to its business model, all products were priced an average 8 per cent lower than the maximum retail price (MRP). And although Subramanian, its Managing Director, did expect a warm response to the chain from Chennai's thrifty shoppers, expecting people to literally queue up, as they had that day, was too good to be true. RAMASWAMI As it turned out, it was. The crowd outside was not of eager shoppers, but angry pharmacists who had gathered to protest against Subhiksha's SUBRAMANIAN cut-price strategy. It took Subramanian two-and-a-half hours to pacify the Managing Director, Subhiksha mob, but it did go away without inflicting any damage to the store. But that was not to be the end of Subhiksha's troubles. In days to come it would get visits almost every day from drug inspectors asking all kinds of questions, customers would suspiciously look at the expiry date on the products to ensure they weren't being sold outdated stock, there would be court cases slapped against it, and even Glaxo (Pharma) would drag the retailer to the Supreme Court to stop it from challenging Glaxo's right of refusal to sell to a retailer merely on account of discounts offered to the public-a case that already went in favour of Subhiksha in the lower court. (Glaxo went on appeal to the Supreme Court and lost.) "It took us two-and-a-half years to win our freedom to operate (the pharmacy business)," says Subramanian, who works six-and-a-half days a week, and more than 12 hours every day. The initial distrust and opposition had everything to do with the novelty of Subhiksha's retail model. In terms of its stores, it offered a much better shopping experience than the neighbourhood kirana stores, but at the same time was significantly cheaper than bigger retailers like, say, FoodWorld. That's why the drug inspectors thought Subhiksha was selling spurious/dated drugs and consumers thought they were getting products cheaper because they had turned bad. But opening a chain of no-frills stores-no air-conditioning, no fancy lighting, no touch-and-feel experience (customers have to ask for products at Subhiksha stores)-was a deliberate strategy. In 1996, when Subramanian, who grew up in Chennai, started looking at retail after having done a variety of things at a non-banking finance company (NBFC) called Vishwapriya Financial Services (it still is Subhiksha's promoting company), he didn't want to set up just another retail chain. He wanted to "pioneer a new trend" because of what he had found out about the retail industry: that the No.1 retailer makes the most money, the No. 2 makes some money, while the third (and the others) has to eventually shut shop. But what would lure customers into Subhiksha? That was a tough question to answer because there were an estimated 15,000 mom-n-pop stores in Chennai. Besides, while Chennai's mamis were willing to travel a great deal of distance to buy silk sarees or jewellery, they could not be expected to do the same for a packet of Surf or a bag of rice.

The answer, as the fast-talking Subramanian discovered, lay in creating a new hybrid model: One that had all the clout of a big retailer and yet was low cost and accessible enough to compete with the neighbourhood stores. No wonder, then, Subhiksha's business model is uniquely Indian. For starters, it doesn't focus on the rich, but the middle-class, upper and lower. Shops are located not on the main road, but just off it, to take advantage of vastly lower rentals. The catchment area of customers is rarely beyond a two-km radius, since its customers usually come on two-wheelers or on foot. Seems painfully methodical? But that's Subramanian. Says Sanjeev Bikhchandani, CEO of Naukri.com and his batchmate at IIM-A: "Unlike the others, he was always a person of regular habits, going to bed at 10 and getting up at five." Inventory management is austere, too. All goods are bought on cash to extract the maximum discount from suppliers; SKUs (stock keeping units, or the number of items on display) are restricted to the fastest moving ones of about 1,500. Most of the SKUs are bought directly from "Our strength was in pioneering new the manufacturer, cutting the intermediary out. A concepts. Once others followed, we would supply chain software, developed in-house, keeps lose the advantage, and move on" track of what's selling and what isn't. Management is divided into two simple sections: operations, which is centralised and looks after everything from ordering to accounting, and stores, which is responsible for all store-level activity. There's one manager for every three stores, and he reports to a chief manager responsible for business development, who in turn reports to a vice president. The VPs are responsible for sales targets. Last year, the chain raked in Rs 200 crore in revenues and net profit of Rs 3 crore, with 145 stores across Chennai (which has 72 stores), Madurai and Coimbatore (eight each), Trichy (six), and the rest of Tamil Nadu. By 2006, Subramanian hopes to have 366 up and running, including ones in markets such as Bangalore, Mysore, Mumbai, Gujarat, and Delhi. Says Bala Deshpande, Director, ICICI Ventures (it holds a 10 per cent stake in Subhiksha): "Few are capable of actually dirtying hands and building an enterprise from the scratch, since it calls for a totally different kind of psyche. Subramanian has that psyche." He wasn't thinking this big when he kicked off Subhiksha. In fact, he wasn't even thinking retail when he passed out of IIM Ahmedabad in 1989. After a two-week stint at his first employer Citibank, Subramanian joined his mentor (late) S. Vishwanathan, who then ran Enfield Industries. It was a BIFR company and Vishwanathan thought he could use Subramanian's help simply because although he was only 24, he had acquired quite a reputation at the B-school, where he was known as thalaivar (Tamil for chief) for consistently topping the class (he eventually won the gold medal). At Enfield, Subramanian helped professionalise a hitherto family-run set-up and rope in Eicher as a buyer. Says R. Hariharan, who was Executive Director at Enfield when Subramanian was the chairman's Executive Assistant: "I found his knowledge phenomenal-he could handle all issues...legal, financial, and operational with a finesse that was startling for one so young." By 1991, when Eicher was in place, Subramanian decided to quit and get into financial services. Once again, Vishwanathan decided to help him start an enterprise. Vishwapriya Financial Services was born. Among the first things that Subramanian did was to put together an impressive board of directors, including the former Chairman of LIC R. Narayanan, Justice G. Ramanujam (retd.) of Chennai High Court, Prof. K. Balakrishnan of IIM-A, and Andrew Yule Chairman K.S.B. Sanyal, among others. Given that Vishwapriya was a start-up, Subramanian had to figure out innovative things to do in the financial services business. Amazingly, he came up with a series of them, moving on to a newer service every time the bigger NBFCs and banks caught up with him. For example, he was the first to introduce debenture consolidation, the first to launch asset securitisation for retail customers, and the first to finance IPO (initial public offer) purchases by small investors. Says Subramanian: "Our strength was in pioneering new concepts. Once others followed, we would lose the first-mover advantage, and we'd move on." Is something like that likely in retail? "No," says Subramanian. "In Vishwapriya, we were late movers and small in size compared to banks, which can source money more advantageously. In

Subhiksha, we are the prime movers and have built a scale and advantage that competitors will find difficult to reach." It can't be ruled out, though. Besides, Subramanian is too much of a realist to let emotions get in the way of a good deal (should somebody want to acquire Subhiksha). Meanwhile, he's betting his company on a conviction that it's a no-frills discount chain that India's booming middle-class needs.

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Subhiksha Supermarkets Subhiksha was immensely popular in the South, particularly in Chennai, where it sold groceries and pharmaceutical products below the MRP. It expected to earn a total turnover of Rs 1,200 crore in 2008-09 as it planned to expand outside Tamil Nadu and Pondicherry. It planned for 550 stores in the next five years.

Subhiksha Retail Chain 5 Competition Bata India Limited was one of the largest retailers, with 1,600 footwear stores across the country, and a retail turnover of Rs. 6 billion in 2001. With almost a monopolistic presence in the organized footwear market until the 1980s, Bata was synonymous with footwear in middle-class India. The stores retail mainly Bata products, with a marketing arrangement with Lotto and Nike as well. Spencer & Company Limited was another large retail group in the country with supermarkets, music stores, and the beauty and health chain—Health & Glow. Food world was operated by Food World Supermarkets Limited, while Health & Glow by the RPG Group. K Raheja’s department store chain, Shoppers Stop, was the second largest retailer in the country and became in retailing operation an Indian success story. It also acquired the Crossword chain of bookstores. Kishore Biyani of Pantaloons launched his new-format shopping mall called Central Trent and opened the first Star India Bazaar. New generation shopping malls, such as InOrbit in Mumbai and Forum in

Bangalore, opened their doors. The year also saw a rapid scaling up of operations by players such as Pantaloon, Big Bazaar, Shoppers Stop, Lifestyle, Westside and RPG's Spencer's.

Reliance Fresh & Subhiksha - Supermarkets in India Reliance Fresh and Subhiksha - Retail Stores or Supermarkets in India -A Review Reliance Fresh and Subhiksha have opened up retail supermarkets selling fruits and vegetables in major cities of India. Recently, Bharti has tied up with Wallmart to open up supermarkets in India. This post is about supermarkets in India and their long term effects.

A few days ago, I visited the local Reliance Fresh supermarket that had just opened in my Delhi neighbourhood and this is what I observed 1. Range of Products - Regular vegetables, fruits, Reliances' own brands of packed pulses, Maggi products and Pepsi. 2. Prices - The price was marked in paisas just like at American stores. For example - Potatoes were priced at 5.90 per kg while onions were 15.90 per kg. Yeah right, what difference does 10p make? 3. Comparable Cost - The rate of vegetables like onions and potatoes were 10p less than that of local vegetable sellers. The rate of other products were

however much higher than they should have been. Seems like Reliance Fresh applied the same strategy that McDonalds uses to attract customers - ice cream for Rs. 7 and Cola for Rs. 20. 4. Customer Service - The staff in red shirts were mainly checking to see if people were shoplifting and did'nt seem to know much about the products or company. The guards kept yelling at everyone to have their bags checked before leaving. 5. Checking Out - There was a long queue that moved very slowly. VAT or value added tax was added to the bill which increased the cost of the vegetables just bought. 6. Parking - Absolutely zero parking. The guard was yelling at local rickshaw pullers to move away from the entrance. 7. Customers - were middle class folk from my apartment block. They kept touching and turning around each vegetable before selecting them just like they do at the regular vegetable sellers. This looked really out of place and added to a huge crowd. What is the future for retail supermarkets in India ? Well, Superbazaar was a government supermarket in the 1980's that closed down because of financial irregularities by employees and a lack of customers. Here's why I think Reliance Fresh and Subhiksha will go the same way 1. Operating costs are too high - Rent for shops at prime areas, salaries of atleast 15 people at each store, refrigeration, transport, electricity, advertising and losses through shoplifting have to be accounted for. The profits earned through sales will be barely enough to recover costs. 2. Indians are too cheap and thrifty - Most customers won't take the bait of cheap potatoes. They would rather buy one kg of potatoes from Reliance and other products from whichever vegetable seller or retail store is cheaper.

3. Indians like to bargain and bully - Bargaining and getting freebies like chilli or coriander is not allowed at supermarkets like Reliance Fresh or Subhiksha. 4. Type of Products - The potatoes and onions on sale were of a small size. Some vegetables looked like they had been sprayed with something to make them shiny and attractive. People usually don't buy processed foods like jam, sauces, cheese, noodles etc. because ' yeh cheez pet main jum jaata hain'. (harmful as it is not easily digestible) 5. Vegetables are not changed everday and are refrigerated at night. People are aware that the food is not as 'fresh' as that of the local vegetable seller. 6. Most Indians like to shop in privacy, so that 'nazar' or evil eye does not fall on the goods they buy. This, I think is the main reason why a majority of the crowd at Reliance Fresh is just looking around and not buying much. (like me)

Effects of Retail Supermarkets Like Reliance Fresh - It may put small vegetable sellers and retail stores out of business. I bet even Reliance does not want this because sales of more costly Reliance products like cellphones, Vimal clothes etc. will suffer. - Farmers are supposed to earn more as Reliance will buy directly from them instead of the mandi or wholesaler. Knowing the kind of cheats the Ambanis and Reliance are, I seriously doubt they will give the farmer a good price for

their produce. Probably, just a rupee or so more so that the wholesalers lose the good vegetables. - The government will benefit because vegetables will now be taxed. The initial days saw a huge rush as people came to see what Reliance Fresh was all about after recieving pretty invitations and shopping card offers from the company. A few weeks later the crowd has thinned out. The companies are declaring 'huge profits' but I doubt if they can maintain the momentum in the long run.

Special prices for mobiles at Subhiksha

Subhiksha Price - 8,079 Nokia 6233

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2 MP Camera VGA video recording (640 x 480) Music Player

Subhiksha Price Rs 16,315 Nokia N73M

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Integrated 3.2-MP camera (CMOS)

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Resolution of 2048x1536 pixels Stereo FM-radio High-contrast graphical display Bluetooth v.2.0 Full recharge of 2 hours

MRP Price - Rs 16,600

Subhiksha Price Rs 11,798 Nokia N70M

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TFT, 256K colors Bluetooth USB

MP3 Player Games Camera 2 MP, 1600x1200 pixels, flash FM Radio

MRP Price - Rs 12,200