Reasons Behind failure of Subhiksha and studies across similar categories

Subhiksha -Introduction
Subhiksha food and grocery, small format, neighbourhood, convenience, discount retail chain R Subramanian, Founder, Promoter, and Managing Director of Subhiksha Trading Services Subhiksha in Sanskrit means the giver of all good things in life

diversified into medicine retail as well The USP of these stores were the discount pricing Eliminated the margins in the traditional supply chain consisting of the manufacturer-wholesaler/dealer-retailer network .       First outlet in 1997. Chennai The first venture was in grocery The branding strategy for this retail store was low-cost and no-frills Subhiksha sold all its products all the time below MRP Quickly.Thiruvanmyur.

Vice President Management Chief Manager Operations Stores Manager Manager Manager Store 1 Store 2 Store 3 .

From consolidation to Expansion 2005: Recruits personnel across the country .2004: change in principle.

TIME LINE : THE FALL October 2007 Subhiksha mulls a Rs.300 cr to keep aflots subhiksha enters negotiations with property owners .350 crore IPO to finance growth December 2007 Subhiksha shelves IPO in view of uncertain stock market conditions April 2008 Subhiksha plans private wholesale markets Sep 2009 Reports on subhiksha defaulting on vendor payments. employee salaries and wipro takes 10% stake in subhiksha Oct 2009 tabloids report problems in the cash flows at subhiksha vendors cutting off supplies cause Subhiksh stores to go dry subhksha defaults on rents for the stores Jan2009 R Subramanian admits subhiksha needs Rs.

Brand analysis of Subhiksha  Brand Image and Identity  Brand Positioning  Brand Strategy  Branding through Advertising .

jam.rice.) . butter . Colgate. dhal. Tide. oil. sauce.Merchandise Mix  Subhiksha had a wide range of products in its store . sugar. tea.cosmetics (like Ponds Dream Flower) .Mobile Phones . coffee . etc. Surf.toiletries (like Lifebuoy.

Reasons for failure of Subhiksha .

mobiles and electronics . consumer durables and IT Too fast too furious! .Unmindful Expansion ‡ Rapid store expansion ‡ Rapid increase of manpower ‡ From groceries and medicines .

Growth Without Consolidation  2004 marked a departure in Subhiksha philosophy from consolidation & growth to uncontrolled growth!  Very few stores would have been profitable in terms of cash flows .

Bad Retail Management  The focus was towards multiplying turnovers  Expansions happened without an eye to principles in retail and customer management  Low service levels and an unhealthy appeal to the customers  A subhiksha store often looked like a govt. uniform pricing store! .

Subhiksha worked on slim and zero margins.Balance sheets?  Uncontrolled increase in store and personnel were bleeding the treasury  Turnover being the mantra. often invoking the wrath of other players in the market  Cash outflows were high as it went on expansion mode but inflows were low as it operated on very low margins .

Mastering The Supply Chain  A walmart builds scale through integrated supply chain. not by being a re-seller  Bulk buying is not a source of advantage  In effect. subhiksha was being a reseller buying products from vendors and selling them at zero margins .

Lack of system support and IT control  Expansion of stores without adequate IT support  Faulty audit system  Delay in implementation of SAP .

Vendor management  Goods bought on credit from vendors at liberal credit terms  Holding up of payments for 3 6 months against normal credit period  Vendor s stop supply to Subhiksha outlets .

No competitive edge  Offered discounts as the only USP  Failed to understand customers .

Poor management system  No retention of employees initially recruited  No remittance to government  Huge frauds made by management people while entering into rental agreements .

with no control on inventory  Lack of manpower to handle diversity .Lack of focus  No focus on product range being offered  Sold handsets below DP.

Lack of maintenance of stores  Suspension of operations by government due to poor maintenance of hygiene norms  Perceived as a down market store .

Small format grocery retail  Unable to achieve higher margins  Strong competition from local kirana stores and vendors  Unable to face challenges due to small format grocery retail .


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