SUBHIKSHA-The Rise and Fall

Presented by

Prashant MishraRamkiran NanduriYoginder Sharma

Sanjeet kumar Jha

“Bachat mera adhikar Shubhiksha mera abhimaan”

INTRODUCTION

Subhiksha in Sanskrit means

“the giver of all good things in life”

Conclusion

INTRODUCTION

• Subhiksha which means prosperity in Sanskrit • The history of Subhiksha dates back to the year 1997 when Mr R.

Subramanian thought of the idea of entering into the Retail Industry in India

• Mission - to deliver consistently better value to Indian consumers, without any compromise on quality of goods purchased.

• Positioning - Low Prices, Trust, Savings• Retail Strategy - Criticality of Cost, Convenience of Buying

• Org Retail still in nascent stage• Accounts for less than 10% of the retail sales• Store which had a dramatic rise,• used defined strat effectively- commn ,card, central purchase , IT,

low cost

SCOPE

• INTRODUCTION • BACKGROUND

– INDRANAGAR STORE ,INDRANAGAR SUPERMARKET

• MANAGING STORE OPERATIONS– CATEGORY,MARKETING,THE CREW – MANAGEMENT,CUSTOMER SERVICE,LGS AND SCM

• HOSKOTE WAREHOUSE • CONCLUSION

Shubhiksha Background• Chennai based grocery & pharmaceuticals store• Founded by R. Subramanian in 1997 an IIT-and IIM alumnus.• Shubhiksha derived from the Sanskrit word,Subhiksham which means

‘’giver of all things good.• Subhiksha opened its first store in Chennai with 4-5 lacks investment with a clear idea

to become larger.• First year it opened 10 stores and by 2000 it had 50 stores in Chennai.• Next two year it had 120-130 stores across Tamil Nadu.

• In 2004, 420 stores all over Tamil Nadu & Pondicherry and reached 1000 retail outlets in 2008.

• Crossed more than 1000 store all over the India.• Revenue Rs. 2200 million• Aimed Rs. 2800 million by the end of 2005-6.

• Focused on the lower & upper middle class• Offer a better ambience than typical general

store• Prices are 8% less than the MRP• Inform customers about promotional offers• Store keepers help buyers in purchase decision

Strategy adopted by Shubhiksha

The Indira Nagar, Bangalore Store The first Super store opened in Bangalore. Store opened in 2006.it was 50 Meter from the main street which was a busy

commercial with department stores,superarkets,resturants,Banks etc. Operated on a 15 Years lease contract. Remodeled the Property according to their requirements. It had 2000 square

ft.area without any fancy fittings,flooring,or air conditioning unit. Out of 2000 square ft area,150 sqare feet each allocated to telecom and

Pharmacy,200 sqare feet allocated to Backroom store and office and rest available for supermarket.

Pharmacy had a sales of 3 Lacks, Mobile sales were 60-80 lacks per Month with a very low Margins.

Subhiksha bought Medicines in wholesale and sold to customers at 10% discount. They focused Telcome and Pharmacy business much closer as it has no extra burden to sell Product and to handle consumers.Minimus 2 people required to handle the store.

In Telcome Business they offered Electronic items like Handset, Accessories, charge cards, from leading Brands like Nokia, Samsung, Sony and selling with low margins .

Goods sold in Indira Nagar Market

MANAGING SUPERMARKET OPERATIONS

1. The supermarket stoked around 1,200 SKUs that could take approx 90% of the customer’s value requirements.

2. The store would stock only products of the top three brands in each product category (sunflower oil, detergent powder -1, etc.

3. In FMCG, 950 branded merchandise and private label SKUs were stocked while in grocery 150 branded and private label SKUs were sold.

CATEGORY MANAGEMENT

1. “EVERDAY LOW PRICING” model was always followed at the store.

2. It usually offered an average discount of 8%-10% on all the products irrespective of the quantity purchased with reference to the MRP.

3. The display at each SKU showed both the MRP and the Subhiksha store price so that consumers could compare prices while shopping.

4. The highest sales occurred in the first 10 days of every month. The store always offered some promotional schemes in that period to increase the footfalls.

5. Subhiksha periodically advertised through a local radio channel “Radio Mirchi.” not advertise through local newspapers and catalog mailings.

MARKETING

1. Cashiers handled billing and payment transactions.

2. CSRs were mainly responsible for store cleaning and hygiene, merchandising, and stock arrangements.

3. Sales assistants mainly interacted with customers and assisted them in the shopping process.

THE CREW

MANAGEMENT OF STORES

MANANGEMENT OF STORES

• Regional SBU structure with warehouse• BDM(Busuness development manager) controlled

6-7 stores• BDM reported to VP• BDM monitored sales and wastage• VP visited ever store once in 10 days

MANANGEMENT OF STORES

• Sourcing – Centralized for most items– Food & Vegetables local– Allowed for economies of scale– Got deep discounts on annual terms

MANANGEMENT OF STORES

• RETAIL OUTLET MANAGER(ROM)– Two shifts– Increases customer interaction– Maintain store hygiene– Manage personnel– Reduce food and vegetable wastage

MANANGEMENT OF STORES

• ROLE OF RETAIL OUTLET MANAGER(ROM)– Investment in inventory fixed– Op costs fixed

• Rental • Wages • Elect

– ROM could leverage sales and wastage– Imp since Subiksha op on low margins

CUSTOMER SERVICE

CUSTOMER SERVICE

• Used methods to reduce bill processing time– Bar code for branded FMCG products– Price tags for private labels– Pre packaged F&V items

• Internal target of 5 min for customer to go out of the store

• Experimented with two stage billing process in big stores

CUSTOMER SERVICE

• Phone order– 15 % sales– Rs 1000 min order– Upto 2-3 km radius

• Training of employees to tackle customers of different cultures and socio economic backgrounds

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

CATEGORY SKU(stock keeping units)

SALES REVIEW MBQ LEVEL(max batch qty)

A EACH 100 -125 SKU

80% SALES

DAILY REVIEW 3 DAYS OF DEMAND

B BI WEEKLY REVIEW

6 DAYS

C

D

E TO K FORTNIGHTLY REVIEW

15 DAYS

INVENTORY MANAGEMENT

MBQ LEVELS

0

2

4

6

8

10

12

14

16

A

B,C,D

E TO K

SKU TYPE

MB

QD

AY

SO

F D

EM

AN

D

•SKU BASED SYSTEM • INVENTORY BASED ON SALES VALUE /PD ie DEMAND/PD X PRICE/UNIT

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

HOSKETE WAREHOUSE BY EVENING

STOCK ISSUED FROM WAREHOUSE/TRNSFERRED FROM HUB STORE

AREA MIS HEAD BY AFTERNOON

COMPUTE STORE WISE REQMT OF EACH SKUROTATIONAL REVIEW AT EACH STORE

100 A ,125 B CLASS SKU EACH DAY PHYSICAL CHECK OF STOCK

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

• STATIC & DYNAMIC MBQ– By and large static MBQ– Took care of special schemes/price inc or dec– Dynamic MBQ in some stores

• eg 1 - 15 of the month higher inventory levels, • 15 – 30 lower inventory levels

– Festivals, special schemes accounted for while formulating MBQ

– Helped achieve lower average inventory levels

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

• Losses or shrinkage ratio– Mainly pilferage or breakage– Average 1.5% of total sales for indian retail industry

0

1

2

3

INDUSTRY

SUBHIKSHA

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

• Steps taken to reduce– Small store size helped– Unloading monitored by store manager and security

staff– 10% of store space allotted to storage– Monthly audit of store inventry– Staff trained to handle different types of inventory

• Subhiksha achieved low shrinkage cost of 0.25% of total sales

HOSKOTE WAREHOUSE

Located at 25 KM from Bangalore along with other established Warehouses.Capacity to Serve 80 Stores( 55-Bangalore & 4-Mysore). 66,000 sft.Lease Contract for 15 Years.Open 24 Hrs

The Hoskote, Warehouse

Business Volume Rs 80 crores/year.Rs 1 Crore Average cost of Inventory. Rentals : 25 Lacs/Year.Transportation 1 Crore/Year.

The Hoskote, Warehouse

Warehouse : Operations

Manual Indents passed to electronically to Warehouse daily (evening).Segregation, Batch Making, Sorting (A, B, C stores), packaging and dispatching were carried out manually. Stores dispatched next day afternoon

Warehouse : Transportation

Total 14 Vehicles, 3-4 Stores/Vehicle Third Party Contract.Fruits & Vegetable

dispatched at 6 am.After Noon FMCG Stores. Vehicles locked/Opened by Subhiksha Staff.

Supply Chain

Supply Lines

Grocery StoragePrivate Labels.Large Inventory.No Bar Coding.Strict Quality Control.

FMCG SuppliersSupplies : HUL-Daily, Nestle-once a weekBar Coding.

Mobile : SuppliersNo stocking in WarehouseSupplied in Motorcycles based on Hubs Indents.Less Transport Time & Nil cost of Inventory.

Warehouse Management

HRMContractual Workers.Quality training by Subhiksha.

Inventory ManagementCross Docking Point.Minimum Inventory mostly A-D Category Products.

Information TechnologyUsed MS Office for backend IT Ops. Took Long Time for operations and report generation.Internally Developed 3V2 Software for Stores.

(Customer Intelligence, Loyalty Cards)Planned for SAP R3.I MBPS Front to Backend connectivity.

Timeline : The Ascent of Stores

1997 1999 2000 2002 2006 2007 20080

200

400

600

800

1000

1200

No of Stores

Un answered Queries?

Is the SCM efficient?Scheduling and Planning of Staff in the the right Manner?Increase average Bill Size?Retain existing Customers?Competition in Organized Retail Business?

The Crash

Oct 2007 : Subhiksha mulls a Rs. 350 crore IPO to finance Growth. Dec 2007 : Subhiksha shelves IPO in view of uncertain stock market

condition. Apr 2008 : Plans Foray into East market : Plans Private wholesale markets. Jun 2008 : Subhiksha looks at Alternate routes to generate cash to fund

expansion. Sep 2009 : Reports of Subhiksha Defaulting on vendor payments, Employee

salaries/Wipro takes 10% stake in Subhiksha/Subhiksha hints at large format Consumer durables and IT stores.

Oct 2009 : Reports of problems in cash flows. Employees clamor for salaries. Vendors cut off supplies. Stores go dry. Subhiksha defaults on rents.

Jan 2009 : RS admits Subhiksha needs Rs 300 crores to keep afloat. Subhiksha enters negotiation with property owners on arrears and rent.

Timeline : The Crash

(a) Un mindful expansionStore 14-1000.Manpower.Product Categories, Groceries-Electronics.Huge Investments.

(b) Growth without ConsolidationDeparture in Subhiksha philosophy from Consolidation & Growth to uncontrolled growth.Very few stores would have been profitable in terms of cash flows.

(c) Lack of Retail Management Focus towards multiplying turnovers with minimal margins.

Lack of focus on principles of retail and customer management.

Staff service shoddy and lack of healthy appeal to customersLooked more like a Govt Store

Failure Analysis

(d) Mastering SCMSubhiksha only a re-seller no SCM.Downstream supply chain was not integrated.Bulk buying is not a source of advantage.

(e) Vendor ManagementBased on discounts and Credit from vendors.Vendors not happy with long credit cycles.

(f) Lack of Retail Management Focus towards multiplying turnovers with minimal margins.

Lack of focus on principles of retail and customer management.

Staff service shoddy and lack of healthy appeal to customersLooked more like a Govt Store

Failure Analysis

Failure Analysis

Only USP : Discounts/TurnoverRules not followed, Store keepers dishonestQuality of stores suffered.Local people with minimal training operated stores.No focus of Store Products. Credit Default caused Supply Breakage.Huge unsold inventories and nil required stock.Customer dissatisfaction.Reselling to other retailers to get higher turnovers.Lost customers as no goods in store.Lost Focus of customers.

Conclusion

Good Start with Customer Focus and Tend. Lost Focus of Customer as no of Stores increased.Quality unmanaged with volumes. Huge Credit from vendors reduced Sales.Lack of adequate Capital. Could not raise IPO due to market crash.Lack of principles of retail management.Subramanian and Subhiksha gave misleading statements about he health of the organization.

Conclusion

“A good Business Gone Bad due to Greed, Loss of Focus and Bad Management”

Thank You