Subhiksha Failure

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These views & reasons expressed below are through follow ups of the newspaper reports and conversations from sources from the industry and employees at Subhiksha. • Reason 1 : Unmindful Expansion Across states from South to West and North and East  Rapid store expansion Rapid increase of personnel From groceries and medicines  Mobiles and Electronics  Consumer durables and IT (Too fast too furious!) Huge investments and cash flows … • Reason 2 : 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 • Reason 3 : Whither Retail management The focus was towards multiplying turnovers! Expansions happened without an eye to principles in Retail and Customer Management Staff service was shoddy and stores lacked a healthy appeal to Consumers A Subhiksha store often looked like a Government uniform Pricing Store! • Reason 4 : Profit and Loss? Balance Sheets? Cash Flows! Uncontrolled increase in store and personnel were bleeding the Treasury Turnover being the mantra, Subhiksha worked on slim and zero margins, Often invoking the wrath of other players in the market Thus Cash outflows were high where as inflows in terms of margins were non existent • Reason 5: Mastering the Supply Chain A Wal Mart builds scale through integrated Supply chain, not by being a re-seller! Downstream supply chain was not integrated. 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 • Reason 6 : Managing Vendors! Subhiksha tried to build scale on bulk Quantity purchases from vendors and a liberal credit term extended to them Your vendors only have a limited leash...expecting huge credit cycles to make up for your RoIs is hardly “good” vendor management •Reason 7 : Inventory management! Credit defaults caused supply breakages Hence it led to...
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