Subhiksha Failure

Topics: Reliance Industries, Reliance Fresh, Retailing Pages: 4 (1073 words) Published: August 18, 2009
Subhiksha in Sanskrit means “the giver of all good things in life”. They have made an extensive research on customer behavior and found that offering the branded goods at a lower price than their competitors could make them stand in the competitive retail industry.

In the year 1997, Subhiksha opened its first store at Thiruvanmiyoor in Chennai with an investment of around Rs 4-5 lakh, with the theme,” why pay more when you can get it for less at Subhiksha”

The expansion of the stores:
1. By March 1999, Subhiksha started expanding rapidly, from 14 stores, it was expanded to 50 stores by June 2000. 2.In the next two years, it had 120-130 stores across Tamil Nadu. In 2004-05, they decided to have 420 stores in places like Gujarat, Delhi, Mumbai, Andhra and Karnataka by 2006.

Subhiksha is currently operating over 1,500 supermarket stores across more than 100 cities selling food, grocery, drugs, and telecom products across INDIA.

Riding on the back of rapid expansion, Subhiksha’s turnover grew from Rs 330 crore in 2005-06 to Rs 833 crore in 2006-07, and then to Rs 2,305 crore in 2007-08 (year ending March 31, 2008). Likewise, having grown from 150 stores in September, 2006 in Tamilnadu to 1,600-odd stores across the country in September, 2008, Subhiksha has been the envy of its competitors. By the end of this year, it was looking at grossing a turnover of Rs 4,300 crore from 2,300 stores. Interestingly, all the growth was,however, fuelled from a small net worth base of Rs 250 crore having equity component of Rs 180 crore (face value of Rs 32 crore).

Turndown began at Subhiksha:

The management has committed some eventual mistakes which have led the company towards the downward position. The first and big mistake committed by the management of Subhiksha is expanding the number of stores rapidly without sufficient funds in hand.

They thought of raising equity during last September but the things had gone too far before they woke up. The global...
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