Why Subhiksha was fail in

Indian Market?

Presented by :- Sanjay Navadiya

Raul Suvera
Who start subhiksha and when?

R Subramanian started a retail chain is called Subhiksha.

Indian Institute of Technology-Madras,….e
IIM
First employed in Citibank, then Enfield &
Eicher After that he started his first company called
Viswapriya
Subhiksha start In March, 1997, it opened first store in
Thiruvanmiyoor in Chennai with an investment of around
Rs 4-5 lakh (Rs 400,000-500,000)
the prices were low
1500 sq feet store,,,,,bigger than mom and pop store but
smaller than big bazzar
History
why they choose word subhiksha?

They choose the Sanskrit word Subhiksha

(prosperity) because
it reflects the Indian ethos and it is a word
that can be understood all over India.
our model is truly Indian.
Our theme was, why pay more when you
can get it for less at Subhiksha?
Cut cost pricing strategy

Subhiksha hed ICICI Ventures and

Wipro’s Aziz Premji as its investors.
Last year Azim Premji’ investment company,
Zash Investment Pvt Ltd, bought 10 per cent
stake in Subhiksha Trading Services worth
Rs. 230 crore by acquiring a part of ICICI
Ventures’ 33 per cent stake in the retailer.
Product Portfolios :
1. Supermarket: Includes quality groceries,
packaged foods, cosmetics and toiletries,
household provisions, etc
2. Fruits and Vegetables
3. Pharmacy: All medicines are made available
to consumers at a flat 10% discount.
4. Telecom: Subhiksha was entered into mobile
retailer business and offers handsets, recharge
cards and accessories from all leading cell
phone manufacturers’ at lower prices
GROWTH SNAPSHOT OF
SUBHIKSHA :
March 1997 - Opening of the first retail
store in Chennai, India with an investment
of about Rs. 400000 - 500000 (10000 -
12500 US $)
March 1998 - About 10 stores being
opened in Chennai City.
June 2000 - Reach the mark of 50 stores
in the Chennai region. ICICI ventures
joins Subhiksha.
2002 - Opening up of about 120 - 130 stores
in the whole of Tamil Nadu State
2004-05 - Decide to move out of Tamil Nadu
and expand to 5 other big states in India
namely Gujarat, Delhi, Mumbai, Andhra
Pradesh and Karnataka.
 2006 - Entry into the Subhiksha mobile shops
September, 2008 -1,600-odd stores across the
country in
MARKETING COMMUNICATION AT
SUBHIKSHA
Within the Above the Line activities
Subhiksha focuses on the use of
Television commercials, Press, Radio and
Outdoor activities. About 60-70% of the
spends a on TV and Press
INFORMATION TECHLOGY
Introduction of Subhiksham Card[ swip
card after purchanig and get discount]
Implementation of Home delivery System
Establishment of an Online retail System
1999,,,faild bec lack aware or lack of
infrastructure … less access of internet]
MODEL OF SUBHIKSHA
1. Criticality of Cost.

2. Convenience of Buying

 How to achieve the above 2 C’s:?

How to achieve the above 2 C’s:?
1. How everything is related to cost
savings: "Bachat mein Adhikar“
2. Edge over competition
Subhiksha has an edge over competition
by providing goods to the consumers near
their house and at a cheaper rate all 365
days.
 Lower Margins: 15 %lover ------ 20%
How to achieve the above 2 C’s:?
More savings to the customers
“On a yearly basis, Rs 48,000 (about $1200)
is what the average household spends on
items such as groceries, vegetables and
toiletries. This amounts to Rs 3,000-4,000
(about $100) per month, and as Subhiksha
offers an 8-10 per cent reduction in price on
the same items/brands as other shops, the
total saving is about Rs 400 ($10) a month”
How to achieve the above 2 C’s:?
Small Store/ Cost saving
The belief of Subhiksha is to set up non –
air conditioned small neighborhood stores
measuring around 2000 sq ft.
Centralized Purchasing
This gives them a greater bargaining
power and which helps them in getting
greater discounts from the manufacturers
and which they pass on to the consumers
TARGET MARKET

They realized that if they have to gain

volumes then the top end consumers will
not be the target, and so they chose to
focus on the growing middle class income
consumers generally referred to as the
"aam aadmi".
competition at the national level for
Subhiksha
Brand Outlet Type Locations Ownership
Name
Reliance Supermarket Across all Reliance
Fresh major
cities
Food Supermarket Across all Pantaloon
Baazar major
cities
 The major regional players that
Subhiksha is facing Competition are:
Brand name Outlet types location ownership
Food supermarket Banglore,delhi, Dfi group
World Chennai , Mumbai

Nilgiri’s supermarket Chennai, Nilgiri’s

Bangalore, Franchisee
Hyderabad, Pvt. Ltd
Pondicherry
small town of
Tamil Nadu
Adanis sm gujarat Adani Group
Star India hypermarket Ahemdabad, mumbai Trent(Tata
Bazaar Group)
Super sm delhi Department of
Bazaar Food &
,,,,,,spar ,,fbmall Public
Distribution
& Govt. of
turnover
2500

2000

1500

880/2305
1000

500

0
2005-06 2006-07 2007-08
Why subhiksha failed?
The first and big mistake committed by
the management of subhiksha is
expanding the number of stores rapidly
without sufficient funds in hand. They
thought of raising equality during
September -2008 but the things had gone
too far before they woke up .The global
markets were started collapsing and there
were nopossible chances of raising Funds
"Subhiksha tried to compete with
neighbourhood grocery stores on the
promise of discount on MRP, and to fulfil
this promise, while preserving the
required margin, they need to be able to
negotiate substantially lower rates with
suppliers."
.over expenditure in advertishment
Subhiksha Trading Services has come
under fire from television channels for not
clearing advertising dues that run around
Rs 8 crore.
 over expenditure in wages and rents
.
Subhiksha is belived to owe Rs 35 crore against
goods ,RS 8 crore against wages , and Rs20 crore
against lease rents .The company ,according to
the report ,is also carrying a debt of Rs700 crore
at an average interest cost of 12 % annum
Government internevation
Maharashtra FDA ,the state government’s
regulatory authority or food and drugs ,had
asked Subhiksha to suspend operation of its
warehouses at Bhiwandi (Mumbai)for 20
days as well as had cancelled licences of
three of its vender , charging that they had
failed to maintenance health and hygiene
norms as prescribed by the regulator
Strong competition
Reliance
Future group

The wrong assumption that telecom segment

is a sound ,and profit making segment
Lack of strong hr policy and plan…..no
communication top ,bottom and middle level
Subhiksha's operations came to a
standstill due to non-payment of salaries,
huge debt burden and arrears to suppliers.