RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION

RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION

- NISHANT CHAUDHARY

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RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION

DECLARATION
I make an affirmative statement to the effect ‘The information contained in this project is authentic and is not plagiarized or copied albeit inclusive of some points from relevant journals, books and websites for which due references have been given of the respective sources.’ I take responsibility for the genuineness of the information furnished in this project.

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-------------------------------------NISHANT CHAUDHARY B.COM(H)IIIRD YEAR ROLL NO-08/410 MAHARAJA AGRASEN COLLEGE

Ms. PRIYANKA KATYAL
MENTOR

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RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION

ACKNOWLEDGEMENT
I am grateful to our college, MAHARAJA AGRASEN COLLEGE, for providing an opportunity to prepare a project. I owe my indebtedness to Ms. PRIYANKA KATYAL, my mentor for providing her invaluable guidance, suggestions and encouragement, without which the project may not have taken the shape it finally, has. I look forward to your valuable suggestions regarding this project.

NISHANT CHAUDHARY B.COM (Hons) IIIrd Year ROLL NO. – 08/410 MAHARAJA AGRASEN COLLEGE

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...........................................................................................................................................27 SHUBHIKSHA’S life..........................................................34 4 ......................................................................................................................................................10 Retail formats in INDIA....................................................................29 SUBHIKSHA during recession..........................................................................................................21 Introduction....................................................................................................................10 India Retail Market .............................................................................................................6 Introduction..........Future...........6 Types of Retail Sectors.......................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................21 Case Study I – BIG BAZAAR............................................................................................28 SUBHIKSHA and expansion of stores.....................................................................................................32 CONCLUSION....................................................................................................................................................................................................................32 BIG BAZAAR and SUBHIKSHA .........................................................................................................................................17 Chapter 4...............................................................14 Challenges facing Indian Retail industry................5 Introduction.........................................................................32 OTHER RETAIL GIANTS: Takeovers and Alliances............................................................................................................25 Chapter 5..................................................................................................................................................................................................11 Growth of Indian Retail.......Statistics ........21 Target Audience...............................................................................17 INDIAN RETAIL & RECESSION...........................................................10 RETAIL INDUSTRY IN INDIA...........27 Introduction.............................................RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Table of Contents Abstract.............................8 Chapter 2..................14 Chapter 3................................................23 Supply chain...............................................................................................................................................................................................................................................................................10 Indian Retail Industry .........23 BIG BAZAAR during recession.....................................................................................................................6 RETAILING.............................................29 Chapter 6..............7 Marketing Decisions for Retailers...............................12 Major Retailors in India...........................................................................................5 Chapter 1............................................................................................................................................................................................................................................33 Bibliography....................................................................................................................27 Case Study II – SUBHIKSHA...................................................................................................................28 Cut Price Strategy.........29 Risk in Retailing and expansion ..........................................

Chapter 6 discusses the impact of recession on other retail giants as well and summarizes the future of Retail sector in India under present recession scenario. which discusses the Indian Retail Industry. Big Bazaar and Subhiksha). After introducing to basics of Retailing we move on to Chapter 2. we try to understand how Indian Retail Industry has stood up to Recession and what strategies they adopted and what its impact was. Further. Further.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Abstract The underlying aim of this report is to understand Indian Retail Industry. the growth that has been there over the years and what challenges does it face. Chapter 3 discusses the impact of recession on Indian Retail market. via case study of two giant Retail chains. Introduction The organization of this report is as follows: Chapter 1 describes Retailing in depth and different types of Retail sector. namely Big Bazaar and Subhiksha. through 2 case studies of big Retail chains in India (namely. 5 . the later part of the chapter delves into the growth of Retail Industry in India and the challenges it still faces. This chapter enlists some statistics about Indian Retail Industry. While Chapter 4 and 5 gives an insight into the steps taken during recession period and its impact. different formats that are followed.

The assumption of risk concerning the precise nature and extent of demand. Manufacture rs Retailer Figure1. someone who cuts off or sheds a small piece from something. It includes ∗ ∗ ∗ ∗ ∗ ∗ ∗ The physical movement and storage of goods The transfer of title to goods. if a manufacturer sells direct to the consumers that also is retailing. For example. “If the buyer in a transaction is an ultimate consumer. Retailing is the interface between the producer and the individual consumer buying for personal consumption. The provision of information concerning the nature and use of goods.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Chapter 1 RETAILING Introduction The word "Retail" originates from a French-Italian word ‘Retailer’. Figure showing relationship between Manufacturer and Retailer 6 . the seller in the same transaction is engaged in retailing”. grading and final processing of goods. The standardization. In general. the distinction of retailing is normally made on the basis to whom the products are sold. The provision of ready availability. Irrespective of who sells. The financing of inventory and the precise nature and extent of credit to consumer. the term “Retailing” refers to any activity that involves a sale to an individual customer. it is remarked. Therefore.

Chain/Multi ple shops c. Independ ent stores b. Figure showing the types of Retails 7 . Specialty shops Small Scale a. Hawkers & Peddlers b. Super markets Figure2. Vending machines c. Cheap jacks d. Departmenta l stores b. Street stall holders b. Discount houses d. Syndicate stores Large Scale a.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Types of Retail Sectors Retail Agencies On the basis of permanent Place of business On the basis of size Itinerant Retailers a. Street traders Fixed shop Retailers a. Cooperative s f. Mail order houses d. Market traders c. Goods dealers d. Second hand c. Higher -purchase and installments e.

8 . The product assortment must match the expectations of target customers in terms of breadth.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Different products involved in Retailing ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ Food Books & Magazines Fashion & Clothing Personal Care Optical Consumer Electronics Sport & Leisure Home Ware Footwear & Leather Toys & Games ∗ Jeweler & Watches ∗ Furniture ∗ Petrol Marketing Decisions for Retailers Retailers have to take marketing decisions in order to attract and hold customers. namely. middle income or lower income customers. price level. Product assortment and services decision: Retailers have to decide on three major product variables. 2. product assortment. advertising. Target Market decisions: Retailer has to define his target market. depth and quality of goods. Within the target he may encourage more profitable customer and discourage less profitable customer. A retailer must also decide the services to be offered. Store atmosphere is very important in retailing. These differences and similarities are as follows: 1. service mix and store atmosphere. Clear this definition of the target customers helps in taking decisions concerning product range. etc. A retailer may focus on upper income. But there are several differences and similarities in their decisions.

the product and service assortment and competition. Place Decision: In retailing location is highly important. 5.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION 3. Pricing decisions: A retailer’s price must be decided in relation to the target market. He may have to choose between high markup low volume pricing and low markup high volume pricing. Promotion decision: A retailer must use personal selling and other promotional tools to support and reinforce his image. 9 . 4. Mechanization and handling of goods is also important.

1 Over 100 malls of over 30 million sq feet of new shopping centre space are projected to open in India between 2009 and end-2010. 10 • .RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Chapter 2 RETAIL INDUSTRY IN INDIA Indian Retail Industry The Indian retail industry is the fifth largest in the world. the industry is expected to grow at a pace of 25-30% annually. the industry is getting more popular these days and getting organized as well.5 retail outlets per 1000 population. Comprising of organized and unorganized sectors. highest in the world 25-30% annual growth in retail loans and credit cards • The organized retail sector currently accounts for around 5 per cent of the Indian retail market. Organized Retail is predicted to capture 15 – 20% market share by 2010. Though initially. especially over the last few years. the retail industry in India was mostly unorganized. India retail industry is one of the fastest growing industries in India. India Retail Market .Statistics • 720 million Indians to join consuming age by 2010 • 55% of the Indian population will be under 20 years of age by 2015 • 32% rise in urbanization by 2008 • 10% annual growth in Retail market since 2000 • 7% of the population is engaged in retailing • A booming US$ 300 billion retail market in India 5. With growing market demand. however with the change of tastes and preferences of the consumers.

• • • Discount stores: these are factory outlets that give discount on the MRP. Category killers: small specialty stores that offer a variety of categories. they are individually handled retail outlets and have a personal touch. They provide products for reasonable prices. • Specialty stores: are retail chains dealing in specific categories and provide deep assortment. malls offers customers a mix of all types of products and services including entertainment and food under a single roof. Mumbai's Crossword Book Store and RPG's Music World is a couple of example. E-trailers: are retailers providing online buying and selling of products and services. snacks and other small items can be bought via vending machine. Hyper marts/supermarkets: A supermarket is a grocery store that sells food and household goods. most often self-service and offer a huge variety of products. Vending: it is a relatively new entry. in the retail sector. and of mid to high quality.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Retail formats in INDIA Following are some of the different Retailing formats followed in India. • Mom-and-pop stores: they are family owned business catering to small sections. • 11 . such as electronics and sporting goods. • Departmental stores: are general retail merchandisers offering quality products and services. Shopping malls: the biggest form of retail in India. This is also known as Multi Brand Outlets or MBO's. They are large. Here beverages. They are known as category killers as they focus on specific categories. People head to supermarkets when they need to stock up on groceries and other items. • • • Convenience stores: are located in residential areas with slightly higher prices goods due to the convenience offered.

the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country. India currently has the youngest population in the world. The median age for India is 25 years as compared to 28 years for Brazil.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Growth of Indian Retail India retail industry is the most promising emerging market for investment. In 2007. Graph showing the changing Demographic profile (2000 – 2020) 12 . the working population with purchasing power. Figure3. of the current 204 million households in India. In 2009. The composition of the Indian population is shifting towards the age group of 2049 i. 33 years for China and 38 years for Russia. As per a Mckinsey report. about 13 million households have the income to prop up growth of organized retail and this consumer segment is expected to grow at over 20% annually in the next eight years. Some of the reasons to which we can attribute growth of Indian Retail sector are as follows: 1. it rose to 12%. It is also expected to reach 22% by 2010.e. Median age Demographics favor growth of the retail sector in India as the size of consuming class or the people with the purchasing power is expected to increase.

Increasing instances of double incomes in most families coupled with the rise in spending power is further fuelling growth in consumption and in turn growth of the retail sector. This consumer segment has further boosted the growth of the modern retail. Graph showing growing disposable income in India (2004 – 2008) 3. Urban population that represents nearly 30% of the total population accounts for 45% of the personal consumption.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION 2. Census). Figure4. The growing economy has provided new employment avenues and the same have resulted in increase in number of people in the earners category. A larger number of households are getting added to the consuming class with the growth in income levels. 13 . Urbanization The share of the urban population has been gradually increasing from 23% in 1991 to 28% in 2001 (Source: IBEF. Rising disposable income India is the second fastest growing economy in the world. The urban population is projected to increase to 40% of the total population by 2020 and incomes are simultaneously expected to grow in these segments.

RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION 4. while in India it is as high as 10 percent. While mom and pop stores display few hundred units. bad roads. etc. have been contributing to increased logistic costs for the retailers. the logistics cost component to the total retail price is around 5 percent. 14 . Shopping convenience Apart from the population that has desire and ability to spend. This not only has an adverse affect on the margins but also results in cases of mishandling. The time constraint and the convenience of shopping with multiplicity of choice under one roof are the major drivers of organized retailing in the country. lack of strong cold chains. poor warehousing facilities. which also includes the retailer. Major Retailors in India      Pantaloon Tata group RPG group Reliance A V Birla group Challenges facing Indian Retail industry • Lack of adequate infrastructure facilities Underdeveloped supply chains. • Fragmented supply base The supply base is highly fragmented with a large number of intermediaries squeezing the margins of all involved. the other factors that have patronized modern retail or organized retail is the convenience of shopping and wide variety.000 SKUs (stock keeping units). organized retail owing to the size and scale of operation can stock around 5. Globally. theft and increased instances of shrinkage.

However. A large number of retailers have not been able to meet their stated expansion plans. store rentals were 300 to 400 basis points higher than even international levels.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION • Restrictions in Foreign Direct Investment Example: The organized retail space was expected to receive investments to the tune of USD 25 billion over the next 4-5 years. retail rentals also touched unsustainable levels eating directly into the profit margins of retailers. developers are likely to delay more projects in the near future. showing delay in plans because of Investment delays • Rentals: Skyrocketing to all time high As real estate prices skyrocketed. Retail rentals in Linking Road in 15 . Currently. significant delays in retail real estate development and opposition to organized retail have resulted in delays in investment. Figure5. with higher cost of funds and a slowdown in demand. Until a few months back. Example of Pantaloon.

South Extension in Delhi and Brigade Road in Bangalore have risen about 50 percent in the past 3 years.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Mumbai. Graph showing increasing Rentals and its impact Some of the other reasons are as follows: • • • • • • The tax structure in India favors small retail business High cost of real estate Dissimilarity in consumer groups Shortage of retail study options Shortage of trained manpower Low retail management skill 16 . Figure6.

All things considered. This was the scenario till a few months ago. Favorable demographics. easy availability of credit. Bharti and RPG diversified to add retail to their sector portfolio4. India’s retail journey seemed picture perfect with the most attractive ‘stops’ still unexploited and under-penetrated. Enter the global meltdown and India did not find itself completely insulated from its harsh effects. India’s own blue chip companies like Reliance. In this environment. almost all key industries in India have been negatively impacted by the slowdown and retail is no exception. Figure7. and large scale real estate developments were fuelling the growth of India’s approximately USD 25 billion organized retail market. The opportunity was there for all to see and India was the destination of choice for top global retailers. Graph showing industry wise impact of each sector 17 . steady economic growth.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Chapter 3 INDIAN RETAIL & RECESSION Impact of Recession – Retail and Other sectors In the past few years. As per the Cartesian survey. it was a good time for Indian retail.

Figure8. Graph showing the effect of Recession on Retail Penetration 18 . the happy grins are fast turning into nervous smiles. the heavy investments made during the boom period may weigh the retailers down.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION India’s retail journey in recession With the Q3 growth numbers of FY2008-09 at 10-12 % as against 35 % of previous year. While the sector is still registering decent growth.

Graph showing annual Net sales growth 19 . Figure9.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Disappointing Footfalls: According to KPMG‘s survey. 70 percent of the respondents stated that the slowdown has adversely affected their footfalls.

a large number of companies have been trying to reduce the inventory on their books and shorten working capital cycles. This in turn has resulted in liquidity pressures for many retailers. To free the cash that has been locked.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Liquidity under pressure The slowing sales are resulting in lower inventory turnover and increasing working capital requirements for retailers. Graph showing impact of liquidity pressure 20 . Figure10.

when the young. However. Since the size of the hypermarket was big than an average mandis. two more stores were added – one each in Hyderabad and Mumbai. Big Bazaar.” Though. when the company rewrote the retail chapter in India. The journey of Big Bazaar can be divided into two phases – one pre and the other post January 26th. Future Group. 2005. the first Food Bazaar format was added as Shop-In-Shop within Big Bazaar in the year 2002. first generation entrepreneur Kishore Biyani opened the country’s first hypermarket retail outlet in Kolkatta (then Calcutta). In the Same month. It is owned by the Pantaloon Retail India Ltd. accessory and general merchandise. “We initially decided to name the format as “Bazaar” because we had designed the store keeping the Indian mandi style in mind. Currently Big Bazaar stores are located only in India. • Mr.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Chapter 4 Case Study I – BIG BAZAAR Introduction • • Big Bazaar is a chain of department stores in India. the thought came to name it as “Big Bazaar”. cosmetics. with its wide range of products and service offering. • • Today. 21 . The idea was pioneered by entrepreneur Kishore Biyani. with the introduction of a neverbefore sales campaign “Sasbe Sasta Din”. the CEO of Future Group. It works on the same economy model as Wal-Mart and has considerable success in many Indian cities and small towns. • • Big Bazaar’s journey began in October 2001. reflects the aspirations of millions of Indians. we had freezed on the punch line “Isse Se Sasta Aur Achha Kahi Nahi” much before we met the creative agency to design the final logo of Big Bazaar. Big Bazaar was started purely as a fashion format including apparel. Kishore Biyani said.

ft. retail space and driving over 110 million footfalls into its stores. Figure showing Big Bazaar logo 22 . convenience and quality. Where Big Bazaar scores over other stores is its value for money proposition for the Indian consumers.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION • Big Bazaar is present today in 59 cities and occupying over 5 million sq. Future Group plans to have 300 stores and is expecting revenues of Rs 13. Big Bazaar is not just another hypermarket. The format is expecting the number of footfall in the stores to increase by over 140 million by this financial year. • It is the biggest and the fastest growing chain of department store. • Figure11. setting a new level of standard in price. It caters to every need of a family. has a vast understanding of the consumer’s insight. understanding customers’ behaviour’. The Group has not slowed down its expansion plans despite the fiscal woes in the economy present today. has inculcated the habit of ‘observing. • Kishore Biyani. the CEO of the Future Group. Future Group is confident of the Indian Retail Story.000 crore by year 2011. in every employee of the group. It is the destination where you get products available at prices lower than MRP.

Figure showing flow of Supply chain in Big Bazaar 23 . • Big Bazaar specifically targets working women and home makers who are the primary decision makers Supply chain MANUFACTURING FIRM C&F AGENTS BIG BAZAAR KIRANA STORES END USERS Figure12. • The large and growing young working population is a preferred customer segment.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Target Audience • Big Bazaar targets Middle and upper-middle class customers.

RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION BIG BAZAAR – Product Range ELECTRONICS FASHION & FURNITURE CHILDCARE OTHER BAZAAR JEWELLERY BAZAAR & BAZAAR SERVICES TELEVISION SETS WASHING MACHINES REFRIGERATOR PERSONEL CARE m BAZAAR MICROWAVES SMALL APPLIANCES LAPTOPS COMPUTER ACCESSORIES FOOTWEAR BAZAAR BEAUTY CARE MEENA BINDRA NAVARA LIVING ROOM BED ROOM KITCHEN DINNING ROOMS KIDS ROOM BEEN BAGS PAINTINGS DECORATIVE ITEMS KIDS WEAR TOY BAZAAR STATIONARY CHILD CARE MR.RIGHT BAKERY LOCK MART TULSI FUTURE MONEY And many more products…… 24 .

best possible discounts and mega offers were the highlights during these days. is "to give home makers the power to save the most and even the stores in the city don a fresh look to make customers feel that it is their day". 1 lakh for Rs.The aim. accessories and fashion jewelry and personal care product • MAHA BACHAT OFFER Big bazaar launched its special independence day offer of maha bachat for 5 days from aug 11 to 15 offering attractive offers on food items. ‘Sabse Sasta teen Din' on 26th jan. luggage etc.The offers were launched to cater to the customer need and demands. according to the chain. • SABSE SASTE TEEN DIN (BIG DAYS) Big Bazaar announced that its shopping event.garments.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION BIG BAZAAR during recession Why recession did not dent BIG BAZAAR???? Some of the reasons how big bazaar beat the recession and was able to maintain its customer base were the various marketing strategies which were adopted by it during that time. 99.The Wednesday Bazaar offered clothes. Rock-bottom prices.kitchenware.' hafte ka sabse sasta din” .furniture. • WEDNESDAY BAZAAR Big bazaar introduced a Wednesday bazaar concept. The most striking offer was the accident insurance cover of Rs. Over 50 lakh customers were expected to flock to the flagship Big Bazaar and Food Bazaar Stores and other Future Group retail formats.republic day across the 120 outlets and other group stores across 70 cities in the country. Special offers were created based on customer insights and past learnings. electronics. 25 . footwear.

Under the scheme old newspapers. utensils.200 disc at Big Bazaar on …… Bank Master Card . the management skills and al the above mentioned innovative ideas which helped Big Bazar to sustain at such tuff times like 2009 recession period. 26 . plastics. Big Bazar was not only able to retain its sale at the recession time but also increase its footfall. Big Bazar also managed to open more outlets in various cities and hence manifold its sales. Fair Price outlets. clothes. can be exchanged for a value against purchase of new products in their stores.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION • GREAT EXCHANGE OFFER Big Bazaar. home fashion.Debit Card on min pur of Rs.800.25/. footwear. by introducing such offers which consumers couldn’t refrain from. luggages and more. • SMS SCHEME Big Bazaar also offered schemes to the prospective customer through SMS.per coupon. resorted to one of the age old techniques to spurn its sale. toys. Big Bazar went one step ahead by introducing the concept of local stores. The value will be in the form of coupons which can be used by customers to get a discount of 25% over and above any special offers that are offered by the store. which was open from 14 February to 8 March 2009.B.” The recipient will have to show this SMS at the customer care desk and obtain 8 discount vouchers of Rs. Infact. etc. Further. Conclusion It was the funds. by opening K. The SMS would read like this: “Rs. Show this SMS at BB service Desk. This offer was valid on products like apparel. They announced a Great Exchange Offer.100/.each against a purchase value of Rs.

Figure 13. Promoter and managing director of Subhiksha trading services on the verge of bankruptcy was MR. Figure showing logo of Subhiksha 27 .R SUBHRAMANIAN • SUBHIKSHA means “giver of all good things in life” • Subhiksha is not just another supermarket.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Chapter 5 Case Study II – SUBHIKSHA Introduction • SUBHIKSHA was a chain of stores in INDIA • The founder . It caters to every need of a family. Where Subhiksha scores over other stores is its value for money proposition for the Indian consumers.

• Basically SUBHIKSHA wanted to “pioneer a new trend” because of what they had found out about retail industry: that No. From 14 stores. In 2004-05.1 retailer makes the most money. they decided to have 420 stores in places like Gujrat. the No.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION SHUBHIKSHA’S life • SUBHIKSHA with pioneering and giving new definition to the INDIAN retail industry. Subhiksha opened its first store at Thiruvanmiyoor in Chennai with an investment of around Rs 4-5 lakh/ with the theme.2 makes some money. Telecom companies are their role model they employed capable regional managers and expanded. it had 120-130 stores across Tamil-Nadu. SUBHIKSHA and expansion of stores In the year 1997. They decided to look at every part of India which is significantly literate and is a significant consumption market. while the third (and the others) has to eventually shut shop. Subhiksha started expanding rapidly. drugs and telecom across INDIA 28 . Delhi. When SUBHIKSHA entered the market there were already many big players in the retail industry. “why pay more when you can get it for less at SUBHIKSHA’S. Subhiksha started recruiting people in various regions. grocery. By March 1999. it was expanded to 50 stores by June 2000. they had to come up with an innovative approach to compete with them • They made an extensive research on customer behavior and found that offering that branded goods at a lower price than their competitors could make them stand in competitive retail industry. In the end Subhiksha operated over 1500 supermarket stores across more than 100 cities selling food. Mumbai. In the next 2 two years. In 2005 . Andra and Karnataka by 2006.

The big advantage we have is.was a deliberate strategy. We work with very good people and if something goes wrong. no fancy lighting and no touch-and-feel experience (customers have to ask for products at Subhiksha stores) . we try to take corrective steps. The management had committed some eventual mistakes which led the company towards the downward position. Consumers are smart and they are all price-conscious and they want to finish work as fast as they can. The first and big mistake committed by the management of Subhiksha was expanding the number of stores rapidly without sufficient funds in hand. and we have back-up plans in place. The global markets were stated collapsing and there were no possible chances of raising funds. the retailer could not keep pace with its growth postponing infusion of equity funds. and there are no worries about whether it would succeed or not. since its customers usually come on two-wheelers or on foot. we are not creating products. We are not producing movies. They don’t go to a provision store for fun. Risk in Retailing and expansion We are not mad risk takers. However. We do a lot of research before starting business in an area.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Cut Price Strategy Opening a chain of no-frills stores-no air-conditioning. The catchments area of customers is rarely beyond a two-km radius. They thought of raising equity during 2008 September but the things had gone too far before they woke up. SUBHIKSHA during recession Recession was the time when Subhiksha came to an end (2nd Feb 2009). as it happens with many growth stories. to take advantage of vastly lower rentals. 29 . but just off it. Shops are located not on the main road.

and Rs 20 crore against lease rents. 2. The company. Rs 18 crore against wages. Lack of strong HR policy and Staff--. 30 . This comes in the wake of the company holding up payments for two to six months against normal credit period of one month. 1. That’s why there was a huge Audit and abnormal losses in the system. when we were unable to tie up funds for our ongoing operations. 4. 5. And when they have started implementation of SAP the time has gone for survival of Subhiksha. according to the report.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION “We got into trouble during the second half of last year. have stopped supplying fruits and vegetables to Subhiksha’s outlets in the National Capital Region (NCR) surrounding the national capital. 2008) the company ran out of enough funds to run the organization . or vegetables market. Subhiksha is believed to owe Rs 35 crore against goods. Expansion of Stores without adequate system control and IT Support. That slowly started choking and has lead to paralysis of operations completely now. Subhiksha has been continuously besieged by a set of problems from all sides. Consequently. Subhiksha Trading Services has come under fire from television channels for not clearing advertising dues that run around Rs 8 crore. in the following month (October.Thereafter. Many wholesale suppliers in Azadpur subzi mandi.” said Subramanian.Due to this Shubiksha was not able to retain the talent which he initially bring into Junior. is also carrying a debt of Rs 700 crore at an average interest cost of 12 per cent per annum. Whatever was remaining with it is all family bound with no commitment policy. 3. Middle and high level management.

This. which was a huge drain on the company's finances. They should have gone for an IPO when the things were well and good to prevent such downfall. 31 . There are huge frauds while entering in to rental agreements by their own management people. Future Group has begun opening a new no-frills discount retail chain called KB’s Fair Price Stores. ambiance and size.Subhiksha Mobile stores. Thus sinking into unprepared conditions Subhiksha has to compete with its high profile competitors like RPG. If they had responded in right time they wouldn’t have been put through such bad phases. No control on inventory of mobile accessories and there stock value and were unable to circulate the working capital. to a format that is similar in concept to Subhiksha stores. There was no proper check and control on this cost though this is a very crucial part to defeat competitors and to gain profitability in future. The CEO never looked in to system losses arise from telecom. and profit making segment. 8. They were paying huge rentals for these stores. coupled with less than-expected footfalls. Reliance retail and Future group etc. the company has closed around 90 grocery stores across the country over the last one month or so. The wrong assumption that telecom segment is a sound. The company has also significantly reduced the inventory levels in its mobile retail arm . drove the operational costs to unsustainable levels 7. Reliance’s food and grocery format Reliance Fresh on the other hand is high-end in terms of display. The management frankly admits that their over confidence and aggressiveness are the main reasons for their loss.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION 6. The raise of the company thus gradually started sinking down step by step and now stands on the verge of collapse. Reliance Retail has set up 700-odd stores in the past two years. almost at the rate of one store per day. Meanwhile.

present across 67 cities of the country. In an exclusive interview with India Retailing. The model is low-cost and revenues from these stores have been the highest among all the modern trade players in the neighborhood space." Mall informed. Damodar Mall." "We have mapped 850 to 900 KB's Fair Price shops. we will keep churning old localities and getting into new ones. Further informing on Future Group's plans on its format — Big Bazaar — Mall informed that the company is targeting a total number of 350 Big Bazaar stores. by overtaking the Subhiksha." Denying recent media reports on closure of a number of KB’s Fair Price stores. The model is viable and a part of our expansion plans. we have opened another in the same catchments. the local market and renaming the same as KB Fair Price 32 . First. group customer director at Future Group stated. At present there are around 120 Big Bazaar stores in India. "The report was incorrect.Future Future Group is planning to open about 850 to 900 KB’s Fair Price shops. Mumbai and Bangalore. The locations have yet not been finalized.RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Chapter 6 CONCLUSION BIG BAZAAR and SUBHIKSHA . If we have closed one store in a locality. It is through the KB Fair price that Big Bazaar (Future group) has strengthened its market hold. although the timeline is not yet decided. but the retailer shall expand in the same market clusters it has a presence in. "We will expand KB’s Fair Price shops in select towns. it will be a concentrated approach in the markets we are already present in — Delhi. KB’s Fair Price is a business model where. Mall stated.

RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION OTHER RETAIL GIANTS: Takeovers and Alliances 33 .

livemint. http://www. http://www.com/Newsletter 5.com/subhiksha. MARKETING MANAGEMENT -C.pdf 7. https://www.indiaretailbiz.PennyStockChaser.in.wikipedia.com/SecureData/aci/Files/Indian_Retail_Mar09 .B.com/news.GUPTA 2.org/ 34 .RETAIL INDUSTRY IN INDIA AND IMPACT OF RECESSION Bibliography 1.aspx?topic=1&Id=4406 6. http://www. www.kpmg.indiaretailing.com/blog/category/indian- retalers/subhikshasubramanians/ 4. http://www.htm 3.

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