Subiksha Case Study

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THE RISE AND FALL OF SUBIKSHA
Introduction
The Indian Retail Industry is the largest among all the industries. It accounts for over 10 per cent of GDP and around 8 per cent of the employment. It has come forth as one of the most dynamic and fast growing industries with several players entering the market. But all of them have not yet tasted the success because of the heavy initial investments that are required to break even with other companies and compete with them. India is the country having the most unorganized retail market. Traditionally it is a family’s livelihood, with their shop in the front and house at the back, while they run the retail business. More than 99%retailers function in less than 500 square feet of shopping space.
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Subhiksha in Sanskrit means “prosperity‟. The name inspired trust and its customers relied on it through all times to deliver larger savings as compared to any other retail chain. Their vision was to deliver consistently better value and savings to all consumers on each and every item that they need in their daily lives, 365 days a year, without any compromise on quality of goods purchased.The key features of Subiksha were low prices,savings and trust.Subiksha entered into the major segments of retailing namely: Fruits and Vegetables,Pharmacy, FMCG products, Groceries and also mobile phones. The target customers were upper and lower middle class people. Hence it offered goods at discounted prices similar to Every Day Low Pricing (EDLP) founded by Walmart. The main reason that attracted the customers was that they got discounted prices for all items on all days irrespective of the size of the…show more content…
In 2000 during its first phase of expansion the first round of funding of INR 15 crore from I-ventures was received.In 2004,it received the second round of funding.By the year 2006, the no of stores had reached to a 1000. Expansion continued without sufficient capital backup with debt to equity ratio being high. By 2008, while major players were struggling to start new stores , Subhiksha became the largest retail chain with 1480 stores stretched in 110 cities across the country.The expansion helped in the company‟s turnover with a continuous rise from INR 330 crore in 2005-2006 to INR 2,305 crore in 2007-2008 to a projected INR 4000 crore in 2008-09.The financial woes worsened when it was unable to pay around 15,000 employees for over 6 months.No banks came to the rescue because of the economic downturn.The top executives had left the company and the security agency personnel responsible left with no protection left for the various stores and warehouses leaving around 600 of Subiksha stores ransacked. The overambitious plans landed the company in a debt of INR 7
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