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African Journal of Agricultural Marketing ISSN: 2375-1061 Vol. 2 (6), pp. 144-148, June, 2014. Available online at
www.internationalscholarsjournals.org International Scholars Journals
Author(s) retain the copyright of this article.

Full Length Research Paper

Unprecedented growth of organized retailing in India: A

case study on the rise and fall of Subhiksha Retail
Chains
Samir Deb Chakraborty

Department of Management Studies, Indian Institute of Technology, Delhi, India.

E-mail: [email protected]
Accepted 6 May, 2014

Organized retailing in India has reached a point of transformation after witnessing unprecedented growth
over the last few years. It has lot of potential for further growth and for penetrating into semi urban and
rural markets. Opportunities for retailing are increasing day by day due to changing customer behaviour,
technological developments and modified regularities by allowing more than 51% FDIs in retail sector.
India is a palace for all sizes, varieties and formats of retail sector. The country is a mosaic of wide
diversity-urban, rural, rich and poor customer base. Technological advancements have witnessed
phenomenal growth in retailing over the past few years. On the other hand, adoption of information
technology (IT) in retail business should be largely cautious, incremental and supportive of the
conventional operational functions rather than being drastic for successful implementation. The current
study is on Subiksha retail chains raise after expansion with significant reach across country-wide with
the application of IT and fall arising out of rapid expansion resulting in insufficient funds. Subhiksha has
made a grand entry into retail sector a decade earlier when the sector was on a boom but hit hard by the
.
global financial crisis during 2008 for further expansion. The authors have collected data by means of
observation and interviewing customers of various retail outlets at different parts of Hyderabad and
Secunderabad. To support the primary data secondary data is also collected from newspapers, journals,
websites, books and articles. The causes of failure that are identified are lack of skilled personnel, know-
how, poor implementation, coordination and improper allocation of funds.

Key words: Retail sector, information systems, point of sale, SAP, enterprise resource planning (ERP).

INTRODUCTION

Retailing is more of service than selling alone. Retailing is Includes sale, services and distributing to the end user.
the terminal point of marketing where the producer or Todays customers are getting attracted towards organi-
marketer meets with ultimate consumer for exchange of zed retailers with store dcor, cheering window shopping,
products and services with a motto of profit. Retailing point of sale, variety of merchandize, increased product
Samir 144

assortment and best quality services. Service in the retail derived from company confidential information by conducting
is generally customized and personalized. More custo- interviews with the middle and top level mangers of various retail
outlets. In order to combat the problems associated with the
mers are attracted towards shopping malls and organized
implementation of information technology the opinions of bankers,
retail formats because of their service feature. The quality top level managers in the form of interviews available with various
of services can be achieved through proper imple- reputed national news papers, websites are mentioned.
mentation of information systems with the support of well
trained and qualified personnel. No customer would like
to wait for long in queue for billing and collecting the Indian retail industry
items. Retailers are currently depending on itemized bar Indian retail is one of the fastest growing markets in the world. The
coding system with computerized software at the billing sector is experiencing exponential growth, with retail development
counters known as point of sale (POS) or check out. POS taking place not just in major cities and metros, but also in Tier-II
helps in taking orders, billing, purchasing and main- and Tier-III cities. Indian retail landscape is evolving from the brick-
tenance of inventory. Convenience is another factor which and-mortar model to adopt technology for connecting with
consumers and achieve complete seamless customer experience.
the consumers look out for. Convenience to the custo-
Currently Indian organized retail sector consists of 8% in the entire
mers and easy billing of the retailers can be possible retail industry. It may grow much faster than traditional retail. It is
through technology that uses radio frequency expected to gain a higher share in the growing pie of the retail
identification (RFID). Cost of inventory is the important market in India. The Indian retail market, currently estimated at
factor at organized retailers. Retailers are able to reduce $490 billion, is project to grow at a compounded annual growth rate
the inventory cost by following just-in-time (JIT) techno- of 6% to reach $865 billion by 2023. The organized retail is
estimated to register a growth rate of around 25% by 2020. With
logy in collaboration with their suppliers. They can also growth in the E-commerce industry, online retail is also estimated to
provide efficient supply chain services through third party touch US$ 70 billion by 2020 from US$ 0.6 billion in 2011. The
vendors. Integrated ERP system enables retailers in Government of India (GOI) has approved 51% foreign direct
proven customer centric methodologies, extensive market investment (FDI) in multi-brand retail and increased FDI limit to
research, front end and back end store systems, mer- 100% in single brand retail and for cash and carry (wholesale)
chandizing, and long-term relationship with customers. trading and exports. Emerging organized retail outlets and higher
disposable income of consumers makes the middle and upper
middle classes inclined to purchase from these stores (Srivastava,
2008). Retail chains like Subhiksha (Apna bazaar in Hyderabad,
Objectives of the study Andhra Pradesh) entered with gorilla marketing strategy to capture
a good market share with cost effectiveness strategy but failed
1. To study the importance of information systems in before customers realized its presence in Andhra Pradesh.
retailing.
2. To study the growth and expansion strategies of Subhiksha retail chains
Subiksha retail store.
3. To find the causes of failure of Subiksha retail stores in Subhiksha is a small format, neighborhood, convenient and discount
India. store that offered a product mix (Table 1) of food, grocery, medi-
cines, telecom and other products under one roof. The name
Subhiksha is taken from Sanskrit that means prosperity as it
Scope of the study reflects the Indian ethos and can be understood by every Indian,
with the tag line why pay more when you get it less at Subhikha. It
opened its first store in the year 1997 at Thiruvanmiyoor in Chennai
The current research information technology in Indian with Rs. 3-4 lakhs an initial cost out lay, aims to 500 stores by 2007
retailing - issues and challenges, a case study on rise covering more than 100 cities all over the country and wants to
and fall of subhiksha retail chains is confined to the twin double the outlets by the end of the year 2007. They focused on low
cities of Hyderabad and Secunderabad. This study mainly prices with high sales and have an image of being a best place for
good buys. They also adopted every day low price (EDLP) strategy
focused on the strategies of subiksha retail outlets and to achieve economies of scale. It even competed with neighborhood
the reasons for its failure in spite of the use of modern grocery stores on the promise of discount on maximum retail price
methods like ERP systems, best marketing practices like (MRP) by negotiating substantially for lower rates from suppliers by
everyday low pricing (EDLP) pricing and early entrance in paying cash. The most important target market for Subhiksha was
to the market. aamadmi that is lower and middle income people and the slogan
for it you can never get products cheaper than at Subhiksha. Table
1 shows the product mix.
MATERIALS AND METHODS
Three key differentiators of Subhiksha
The present study is a qualitative research. This paper attempts to
review some examples by which information technology is playing a Product mix: Subhiksha sells a mix of FMCG, fruits, vegetables,
key role in providing quality services and quick delivery. It explores pharmaceuticals, telecom products and accessories. These product
the reasons for change of customer behaviour and assessing the lines constitute the bulk expense of any average household.
use of emerging information systems for improving effective Deep Discounting: Subhiksha offers its consumers low prices,
customer service. The current study is based on observation and which are consistent and cheap. A consumer can save close to
interviewing customers of various retail outlets. The data is also Rs400 every month by purchasing their households at Subhiksha.
 145 Afr. J. Agric. Mark.

Table 1. Product mix.

FMCG Pharmacy Mobile

Groceries Fresh Fruits and Vegetables products Items Instruments

Pulses, Vegetables
Tomatoes, Potatoes, Green Soaps, Mobile
Grains, Medicines,
vegetables etc Detergents, handsets,
Spices, Atta, Health
Fruits Shampoos, and other
Oils and beverages, etc.
Apples, Oranges and other Brooms, etc. accessories.
other groceries fresh fruits.

Branded Products: Subhiksha did not compromise on neighbor- With the help of information technology retailers are now offering
hood presence and caters to brands that the consumer prefers to value-added services to transform shopping into an inclusive and
buy. These factors gave them an edge over other retail competitors. enjoyable experience. Fast customer services, digital channels of
distribution, free on board pricing, stock availability check make the
retailers to focus on well being of the customers and in turn earn
Issues in Indian retiling - Post information technology higher profits.

Inventory management is the key area of success

Modest adoption of customer loyalty programs (CLP)
Management of inventory at the store is a key focus area for all
retailers. There is an increasing evidence of a partnership between Few retailers have a rich customer database to reach out their
the operations and finance functions with both process and policy individual customers. Not many retailers are maintaining an inte-
being tuned to inventory management. Perpetual stock takes are grated loyalty program. Even today they use the phrases rewards
outsourced to specialist firms by an increasing number of retailers program and loyalty program interchangeably not recognizing that
who seem to have reaped significant benefits from this move. they are a part of a continuum. Customer segmentation is another
Retailers are also looking at decreasing shrinkage levels by important area that retailers have to focus on the modern retailing.
focusing on process, policy and technology initiatives. Visual Retailer must have processes across the following six segments
merchandising (VM) viewed as additional revenue driver. It is being like customer service, inventory management, marketing, relation-
viewed as a function that should drive sales rather than just ship management, visual merchandising, people management and
enhancing the look of the store. To this end, some retailers are space management reveal ample scope for improvement and good
starting to correlate the performance of specific VM displays with customer loyalty.
the sales of the respective categories. It is interesting to note that
value retailers had a significantly higher process maturity than their
People management or human resources management
department store and fashion counterparts. Space management
tools are slow to take off for large format lifestyle retailers, space
The successes and failure of every business depends on the
efficiency assumes great importance, and, given the high real
people working for it. Retailing is not an exception to it. People
estate cost, slight deviations can significantly affect revenues.
management has emerged as yet another strong theme, with
retailers making renewed efforts to engage, train and retain key
employees at the store front. Customer service, attending queries,
Below the line (BTL) marketing is the way forward helping the customers, educating the customers are the services
expected from the store staff. Employees are the final link in the
Below the line marketing is emerging as a strong focus area for retailing process to customers and service interaction is the final
retailers. Catchment initiatives are considered as important across moment of truth for retailers. Retention of key employees is
retail segments to arrest declining sales from the store. Store recognized by the industry as being important for sustained store
managers are increasingly pushing the strategies to catch customer growth. This is a function of human resource policies involves
and enhance the level of satisfaction to each customer. Weak store training, incentive management, engagement, career planning and
expansion and strong focus on optimization of existing investments, progression.
market acquisition through new store launches has taken a back
seat, and store profitability has become the top objective. While
store managers are being trained and measured on store Retail life cycle
profitability, there is also a need to tighten central functions.
Retail stores also pass through stages of growth and decline called
as retail life cycle David Gilbert (Retail Marketing Management
Value added services in retailing 2003-Pearson Edition). The life cycle of retail stores depends on
the effectiveness of well formulated and well implemented customer
In todays competitive retail environment, businesses need to offer target strategy by keeping customer loyalty. The retail businesss
an expanding set of retail value added services (VAS) at point of outcome depends on customer targeting, customer retention,
sale in order to increase store traffic, satisfy customers and customer profitability, and customer satisfaction. The life cycle of
generate additional revenue. Evolving consumers behavior has retail stores can be extended through successful implementation of
dramatically impacted the way retailers are delivering products. information technology for customer relationship, merchandizing,
Value- added services offered by retailers are more likely to human resource, and supply chain management practices. As
cultivate strong customer loyalty providing a competitive advantage. shown in Figure 1.
Samir 146

retail outlets are benefiting from information technology. The

enterprise resource planning solutions help all sizes of the
companies by designing sales modules, relationship management,
POS system, and shipping orders. Information technology is
extremely valuable function by providing a direct link with the
accounts receivable and inventory modules (Randy and Michael
November, 2006). The company decided to invest more on effective
ERP like SAP and has taken long time to implement than expected
accompanied by many problems like lack of technical expertise and
system users.

Challenges faced from competitors

Subhiksha faced competition from strong multinational giants like,

Reliance, More, Fresh@Heritage, Big Bazar and many more local
kirana stores. The strategies adopted by these organized retailers
Figure 1. Retail life cycle like -ambience, display, availability of merchandize, window shop-
ping, free on board pricing are not followed by Subiksha. Table 2
shows the comparative analysis of reputed retail stores at Film
Nagar and Hyderabad.
Challenges in Indian retiling - Post information technology
Challenges from poor marketing decisions
In India, economics of small-format organized retailing is very
challenging due to strong competition from neighborhood kirana With increasing customer awareness, retailers should offer unique
stores and vegetable vendors. Subhiksha did not compete with the or special assortment of goods that suits the demands of the
neighbour retailers and left the market before customers felt its customers at lower prices than its competitors. No customers want
presence and before it could achieve the target of doubling the to pay more for the same product. Products were not available at
stores across the country. It failed to deliver the services and had the stores due to lack of stock or it could not make consistent
gone into severe debts. decisions on promotional services, product assortment, store dcor
and service levels. It did not focus on frequent festive and promo-
tional offers from time to time to attract and retain the customers.
Expansion strategies Rapid expansion of Subhiksha retail
chains
Challenges from location and layout decisions
Started expanding rapidly from 14 stores to 50 stores in 2000, it had
130 stores across Tamilnadu by the end of 2002. Rapid growth of Location and layout plays an important role in the success of every
telecom sector in India made them to go into the deeper parts of the retail store. Though there are number of stores located in major
country to attract literates and middle class segment. They even places they not in proximity to the market and there is low focus on
expanded their stores into Gujarat, Delhi, Mumbai, Andhra Pradesh target customers. Lack of parking place, poor visibility of
and Karnataka by recruiting people in various regions and had 500 merchandize, improper maintenance of breadth and depth of the
plus stores by the end of 2005. It was considered to be India's stores has created lot of problems.
largest retail chain store with 500 plus stores and plans to have
1,000-plus stores by the end of the year 2007. It was looking for a
gross turnover of Rs4300crore with 2300 stores. However the
growth was fuelled from a small net base of Rs250crore. FINDINGS OF THE STUDY

The organized retail sector in India can expect to witness

a second big revolution in the not too distant future in
Fall of Subhiksha retail chains
spite of setback faced due to several reasons. The oppor-
The promoter of Subhiksha Mr.R.Subramanian has 59% equity and tunities in food and grocery retail in India are immense
there were no traces of liquidity crisis faced by the company, till and constitute about 69% of Indias total retail market.
October, 2008. It was only in the month of November, 2008 the Though, there is scope for growth of organized retail
management admitted that there was a severe liquidity crunch with sector in Indian retailing, Subiksha was not able to
mounting debt and unpaid employees and suppliers. The problems encash those opportunities due to improper decisions.
are also related to competitors, marketing, information technology,
Any retail sector that intends to enter into the market will
location and layouts. As shown in Figure 2.
make a thorough research before its entrance. Subhiksha
did lot of research and felt that customers were price
Challenges from implementation of information technology conscious, prefer to a convenient store to buy the needy
products with specific purpose and not for fun. Inspite of
We are facing a lot of difficulty in accessing data across different
regions using the local ERP system Ankur Saigal, Vice-president
its research, it faced lot of problems like lack of sufficient
(Tech) and Subhiksha Trading services. Wide spread retail chains funds for expansion cropped up by un-mindful expansion
rely on information technology as it plays an important role for spree across different parts of the country with improper
speed and accurate service to the customer. Even small individual selection of ERP systems. Other reasons for failure are:
 147 Afr. J. Agric. Mark.

Challenges faced
form competitors

Challenges faced Challenges Challenges posed from

while implementing faced by marketing decisions
IT Subhiksha

Challenges faced from

location decisions

Figure 2. Challenges faced by Subhiksha

Table 2. 4 Ps - Comparative analysis of reputed retail stores at Film Nagar, Hyderabad

Subhiksha Reliance Retail

More Supermarket Fresh@Heritage
Supermarket stores
The merchandize Not very wide range Wide range that includes Merchandize includes
includes of merchandize but Groceries, FMCG, Groceries, FMCG,
FMCG, Groceries, includes Groceries, Vegetables, Fruits, Vegetables, Fruits,
Products
Fruits Vegetables, Fruits, Own manufactured Dairy Reliance mobile
Pharmacy, Mobiles FMCG and Products, Pastries and other Handsets, SIM cards,
and other Products. Vegetables ready to eat items. Steel and plastic items.
Promotion Not that effective Not that Effective Effective
Pricing EDLP pricing effective Normal Normal Normal
Stores are located at Stores are located at
Stores are located at
most of the places in most of the places in
Stores are located at different different places in the
Place the city and more the city and some of
places in the city only. city and in other
than hundred cities in the states in the
states in the country.
the country. country.

are- discount pricing with thin margins, poor inventory Indian population may follow a rising graph helping the
management like managing inventory at two extreme newer businessmen to enter the India Retail Industry.
ends. Some stores were having high inventory levels and
some others were with no or low stock. Bad history of credit
defaults that led to supply breakages as they acquire entire
merchandize on cash basis. It entered into the market Limitations of the study
with gorilla strategy and tried to be the number one in
every place in the country. Out of the total stores The study is limited to twin cities of Hyderabad and
established only few stores were profit generated and Secunderabad. This may not represent the true picture of
rest were not that much profitable. It moved across the total population. The findings are derived by analyzing
different sectors such as medicines, grocery, IT, mobile, the data collected from the respondents and every care
than others very fast than competitors. Global economic has been taken to avoid their biased opinions. Still there
meltdown, labling its own products, going for wrong IPO in was an ample scope for biased opinions which will affect
2007 but shelving in view of uncertain market conditions were the results of the study. The data collected for the study is
other reasons for the failures. The growth pattern in limited to the selected retail outlets but not for the whole
organized retailing and in the consumption made by the retail sector in twin cities.
Samir 148

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