Subhiksha Case Study
SUBHIKSHA CASE STUDY
Subhiksha is India's largest retail chain -- or some would prefer to say "it was." Over the past few months, the network of neighborhood discount shops has been coming apart at the seams. Most of the outlets are now closed. The company -- Subhiksha Trading Services -- has been unable to pay salaries and statutory dues for the past few months. With the unpaid security agency staff also not reporting for work, many of the stores have been vandalized. "The properties have become vulnerable targets," founder and managing director R. Subramanian told The Financial Express. The vandals, he said, could include "disgruntled vendors, employees, anti-social elements taking advantage of the situation, and even owners of the real estate" rented by the retail chain.
STRATEGIC ISSUES
Lack of demand is the major problem," says Mathew Joseph, senior consultant with Delhi-based think-tank the Indian Council for Research on International Economic Relations (ICRIER). "Real estate prices are falling, and organized retail would like to wait until the bottom is reached. Finance is also difficult to come by in the context of falling demand and low profitability as banks are becoming risk averse." Gibson Vedamani, director of the Retailers Association of India (RAI), adds: "Like everyone else, the business groups in modern retail have been hit by the global recession by way of a credit squeeze [and a lack of] funding and working capital. The slump in real estate has been a big issue. Those who had big expansion plans had [acquired] real estate earlier at much higher prices. They are now re-looking at their expansion plans and renegotiating the rates."
The future of the kiranas caused so much concern that the Union Commerce Ministry appointed ICRIER to do a special study to find out the impact of modern trade on these small outlets. The ICRIER report, released in the middle of last year, found that it was "a positive sum game in which both
Subhiksha is India's largest retail chain -- or some would prefer to say "it was." Over the past few months, the network of neighborhood discount shops has been coming apart at the seams. Most of the outlets are now closed. The company -- Subhiksha Trading Services -- has been unable to pay salaries and statutory dues for the past few months. With the unpaid security agency staff also not reporting for work, many of the stores have been vandalized. "The properties have become vulnerable targets," founder and managing director R. Subramanian told The Financial Express. The vandals, he said, could include "disgruntled vendors, employees, anti-social elements taking advantage of the situation, and even owners of the real estate" rented by the retail chain.
STRATEGIC ISSUES
Lack of demand is the major problem," says Mathew Joseph, senior consultant with Delhi-based think-tank the Indian Council for Research on International Economic Relations (ICRIER). "Real estate prices are falling, and organized retail would like to wait until the bottom is reached. Finance is also difficult to come by in the context of falling demand and low profitability as banks are becoming risk averse." Gibson Vedamani, director of the Retailers Association of India (RAI), adds: "Like everyone else, the business groups in modern retail have been hit by the global recession by way of a credit squeeze [and a lack of] funding and working capital. The slump in real estate has been a big issue. Those who had big expansion plans had [acquired] real estate earlier at much higher prices. They are now re-looking at their expansion plans and renegotiating the rates."
The future of the kiranas caused so much concern that the Union Commerce Ministry appointed ICRIER to do a special study to find out the impact of modern trade on these small outlets. The ICRIER report, released in the middle of last year, found that it was "a positive sum game in which both