Subhiksha

Subhiksha is a retail chain owned and controlled by R Subramanian who lives on the philosophy of providing the service to customer at lowest possible cost. When R Subramanian became an entrepreneur and started a retail chain Subhiksha, there were not many entrepreneurs in India. In his family too, there were no entrepreneurs. After obtaining an engineering degree from the Indian Institute of Technology-Madras, he decided to join Indian Institute of Management Ahmedabad as he was sure about one thing -- that he would not leave India to go abroad. Ten years after Subhiksha was set up, the retail chain has around 500 outlets all over India which Subramanian wants to double by 2007-end Retail is India's largest industry, accounting for over 10 per cent of the country's GDP and around eight per cent of the employment. Retail industry in India is at the crossroads. It has emerged as one of the most dynamic and fast paced industries with several players entering the market. But because of the heavy initial investments required, break even is difficult to achieve and many of these players have not tasted success so far. However, the future is promising; the market is growing, government policies are becoming more favorable and emerging technologies are facilitating operations. Organized Retailing in India is gradually inching its way toward becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as seen in sprawling shopping centres, multi-storeyed malls and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban areas, along with

increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector in India First store of Subhiksha (no frills, discount retail chain) opened in Thiruvanmiyoor in Chennai with an investment of Rs 4-5 lakh. This store opened with an aim that it is a part of big chain , not an independent unit. Subhiksha is Sanskrit word meaning prosperity and as the word itself signifies it is prosperity for the consumer. Subhiksha is a deep discount store with a clear target of lowest prices. The first store set up with a target of 30-40 Lakhs goods sold per month could only manage Rs 5-6 Lakhs as the consumers believed either the products were seconds or defective. This paper further discusses the evolution of more stores as the time progressed. As the name suggest the tagline of Subhiksha Saving is my right , and Subhiksha is my pride targets middle , lower middle and upper middle class.The tag line signifies that there is a feeling of pride attached to going to Subhiksha for lower middle and middle class customers. On Subhikshas expansion plans By March 1999, it started expanding rapidly. From 14 stores, it expanded to 50 stores by June 2000. In the next two years, it had 120130 stores across Tamil Nadu. Another big thing was, in 2000, ICICI Venture invested in our company. Today, Subhiksha has 145 stores all over Tamil Nadu. Subhiksha tried that the moment they got into a city, they started as many stores as possible there. Only that made business sense. Then, till 2004, it made sure that it consolidated before it expanded, though there was a lot of pressure to expand nationally. It decided to look at every part of India which is significantly literate and is a significant consumption market. Subhiksha wanted to be everywhere. It looked at the telecom companies as its role model. They employed capable regional managers and expanded. Subhikshas business is also extremely local. They can't sit in Chennai and run a store in Chandigarh. It decided to have very good quality people to run the region, area, town and the store. In 2004-05, it decided to have 420 stores in places like Gujarat, Delhi, Mumbai, Andhra and Karnataka by 2006. In 2005, it started recruiting people in various regions. Today, it has 500 plus stores in all the places that it had planned. It will go up to 600-plus by the month end. It is already India's largest retail chain store with 500-plus stores. It plans to have 1,000-plus

stores by the end of this year. India is a large country and there are still opportunities to avail of. Though now, the thought of opening stores outside India is not tempting because there are enough opportunities in India. It may look at overseas markets too. Maybe later, after it opens 2,000 or 2,500 or 3,000 stores in India Subhiksha does a lot of research before starting business in an area, and it has back-up plans in place. Subhiksha work with very good people, and if something goes wrong, it tries to take corrective steps. The big advantage Subhiksha have is, it is not creating products. So there are no worries about whether it would succeed or not. Consumers are smart and they are all price-conscious and they want to finish the work as fast as they can. They don't go to a provision store for fun. On the entry of MNCs and Reliance in the retail market Everybody has been asking the management, are you worried about Wal-Mart coming to India? Ultimately Wal-Mart is also going to be run by people like them. Subhiksha does not worry about anybody's entry. There is a huge potential for growth in India. There is potential for another ten people to come in. Ultimately the share of the unorganized kiranas will come down and the share of organized sector will go up because of the efficacy in buying and distributing. Also, this is an extremely low margin business. Ultimately, everybody has to sell within the cost. It is not that Subhiksha are geniuses; Subhiksha have been in the business for ten years, and Subhiksha have made enough mistakes and learnt from them. Subhiksha made mistakes when it was small. The bigger you are, the mistakes will cost you more. There are two kinds of satisfaction Subhiksha genuinely believe that through efficiency, it is helping the consumers save more. Subhiksha is also happy that it is bringing in a model that is Indian, capable of supporting the middle class of India. Unlike Big Bazaar, its discount, food and grocery, retail counterparts, Subhiksha believes in setting up non-air conditioned small neighborhood stores (near the community) measuring around 2,000 sq.ft. in retail space. As such, while Subhiksha competes with big store chains on regular discounts, it competes with traditional father and son kirana stores on close proximity to its customers.

Subhiksha operates in four verticals fruits and vegetables, pharmaceuticals, FMCG and telecom. Beside loyalty discounts and regular discounts of 10% on medicines and 8 to 10% on FMCCG products. The retail chain also makes the Every Day Low Price (EDLP) offer to its customers, which is sustained through discounts obtained by the chain from direct supply arrangements with manufacturers, along with bulk purchase and cash transactions. While the discount model of Subhiksha is based on world famous Wal-Mart strategy, the carpet bombing model is based on the Starbucks strategy, in which the coffee retail chain opens a cluster of stores in close proximity to each other, in a geographical area which has high population density with purchasing potential. This enables the chain to cannibalize sales within its own network rather than allowing them to go to other individual stores or retail chains. Even, Reliance, so far seems to have followed a similar strategy having opened a Cluster of Fresh stores in Hyderabad and Jaipur. While, the decade old, Rs. 340 crore in turnover, Subhiksha retail chain, has invested about Rs. 300 crore on its first phase of expansion, the total outlay for 1,000 stores will be around Rs. 500 crore. ICICI Venture Capital holds 24% of the equity in the company. The company is mulling over making Initial Public Offering (IPO) in the second half of 2007. Task Subhiksha has now faced a lot of criticism for its non-friendly customer behavior and for not creating a good customer experience. In spite of all these criticism, it provides a great value to the customer for the. The reason being the customer in India is still very price conscious . He may go for window shopping in Luxurious malls but when it comes to core shopping for home, he prefers low cost and good quality products. The future competition is likely to bring more challenges and it is important for people at Subhikshya to develop a suitable retail management strategy for the future. If you are the CEO of this popular retail chain, develop a retail strategy for the next five years.

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References

1) http://www.domain-b.com/index.htm 2) http://www.subhiksha.in/