Hopping across to the nearest super market has ceased to be an inhibition even for an average Indian middle-class as the benefits they offer vis-à-vis a local kirana store are increasing by each passing day. The reasons if we evaluate are simple. With retail getting more and more organized in our country, a lot many players are recognizing the potential household products have.
No wonder, retail guru Kishore Biyani has his foothold not only in the apparel and lifestyle sector with Pantaloons, but also occupies a major mind of recall with regards to the mother of ‘all purpose stores’ in India with Big Bazaar. Apna Bazaar, Sahahari Bhandar etc have been in existence since ages. Modern retail is bringing with it new players who go a step further in offering customers with additional discounts coupled with excellent service and many more product offerings. The majority of players are regional but here again the magic of retail is gradually driving players to gain a national footprint. The latest to do this is Subhiksha.
Starting its journey in 1997 with a single store in South Chennai, they gradually expanded into other areas of Chennai and then the rest of Tamil Nadu. Till late last year, Subhiksha had nearly 140 odd stores in Tamil Nadu. Talking about the same, R Subramanium, managing director, Subhiksha Trading Services Ltd., says, “From then on, we put together an aggressive expansion plan and when others were still talking about the benefits of retail, we had opened nearly 450 odd stores across key markets such as Delhi, Bangalore, Hyderabad, Mumbai, Ahmedabad, Baroda, Vizag and Vijaywada.”
Before entering the genre of super market, the people behind Subhiksha had an option of creating a niche for themselves in the software sector. Explaining why retail was chosen over IT, Subramanium says, “The logic was that in 1997, we thought with most big players in software predating us by at least 10 years or more, we would be too late to enter the industry – we thought we would be quite early in retail and get the same head start of 10 years. The ideology behind starting Subhiksha was based on two things – to show that things could be done differently from what the rest of the world does and that we need not copy the western market and secondly to ensure that the benefits of organized retail went beyond the high end affluent consumer and went to the aam aadmi as well.”
Currently, Subhiksha is expanding its operation in Maharashtra with lightening speed and the TV commercials and radio campaign are complimenting the same. Pinakiranjan Mishra, Partner, Risk and Business Solutions, E&Y says, “Subhiksha has plans to set up close to 200 stores in Maharashtra in 2007, out of which about 100 would be in Mumbai. If media reports are to be believed, they have already set up about 75 stores by the first week of January. This is quite impressive by any standards and if they are able to grow at this pace, they will have a strong market presence. Apart from low prices, they also offer free home delivery and if they make this into a successful model, they have a distinct edge over others.”
Sharing his views on Subhiksha’s entry, Atul Takle, Head – Corporate Communications, Pantaloon Retail (India) Limited, “We do not see Subhiksha’s entry affecting us. They are largely in the food area, whereas Big Bazaar is an all purpose store with over 200,000 SKU’s. A customer walking into Big Bazaar meets his expectations of good quality at great prices as well as a variety of products.”
Commenting on this, Mishra adds, “The models of Big Bazaar and Subhiksha are quite different and so is the value proposition — apart from the fact that they both provide “convenience” and “value”. I guess both will exist together in the immediate future as Indian still do not do bulk purchases, especially of fresh food items. So, while Subhiksha would probably score high on accessibility and convenience, Big Bazaar would score as a one stop shop with better deals.”
Apart from home-delivery, Subhiksha has introduced good discounts for their customers.
“We offer genuinely-sharp discounts and the lowest prices in town, significantly lower than those offered by Big Bazaar, Apna Bazaar etc. In fact, we offer discounts as much as 3-4 times those offered by some of these stores. Also, our discounts are not seasonal and not limited to a few products. We have many more stores in comparison to others, for instance, we operate in Delhi out of more than 110 locations and in Mumbai out of 74 locations. This is being expanded further,” explains Subramanium.
“We prefer going the lease-rental route. The reasons are simple, we have greater control on the operations this way and given that we do not have to incur an additional margin to the franchisee, we manage to keep our costs low. This in turn enables us to offer truly low prices to our customers,” he further adds.
Operating in four verticals – fruits and vegetables, pharmaceuticals, FMCG and telecom — the mode of operation at Subhiksha is minus any frills and for obvious reasons as the aim is to offer good discounts. Elaborating on discount retailing, Subramanium says, “We feel strongly about bringing true value to customers through discount retailing. There are lots of retailers who claim to offer discounts. But the moments you look behind the surface, you will realize that offering discounts and true value to customers is restricted to promise of low prices on one particular day or festival days. More over the promise of large discounts is restricted to at best 10 per cent of the merchandise. Rest of the things actually sells at very close to MRPs. So the customer is actually misled into believing that she is getting large discounts whereas she may be actually getting at best an average discount of 2-3 per cent. In true discount retailing, the customer must be offered deep discounts and genuinely low prices that enable them to save money.
Also, the discounts must not be restricted to specific days or specific items. Subhiksha follows the EDLP (every day low price) approach where we actually offer the lowest prices every single day of the year on everything that is sold from our stores.”
Talking about the no-frill, no-glamour mode working for Subhiksha, Subramanium says, “Customers are extremely smart. They go to the glamorous options like hypermarts and malls far away from their houses for entertainment once in a while. For day to day buying of household provisions, groceries, toiletries, medicines, fruits and vegetables, etc they still prefer to go close to their houses or order on the phone. With time at so much of a premium, buying the same soap, the same detergent or refined oil, is an activity that most individuals want to spend less time on. They would rather spend time on more pleasurable activities. Who, in any case, is looking for ambience to buy the same old toothbrush or toothpaste? Therefore, no-frills stores such as ours that offer the same basics do very well.”
With over a million sq.ft in space across the country, the minimum size for a Subhiksha store is 1,500-2,000 sq.ft. Scouting for a suitable property is a known nightmare but for Subhiksha it has been a smooth journey so far. Subramanian says, “So far, we have not had any serious issues. Our stores are located in neighborhoods where finding space is not as much a constraint. We base our search on finding the right size (1,500 – 2,000 sq.ft) properties close to where our target customer catchments are, those that are available on a long-term lease.” To further ease the cost, Subhiksha has opted for lease-rental route.
Talking in length about their expansion plans which happen to be noteworthy, Subramanium shares, “In the first phase of our expansion we have invested nearly Rs.300 crore and now have over Rs.450 crore. These include over 100 stores in Delhi, 40 stores in Bangalore, 30 stores in Hyderabad, 30 stores in Ahmedabad, 14 stores each in Vizag and Baroda, 74 stores in Mumbai and many stores in the rest of Andhra Pradesh, Gujarat, Karnataka, Tamil Nadu etc. In our second phase of expansion we will be investing an additional Rs.200 crore and expand into Punjab, Haryana, Western Uttar Pradesh, Maharashtra and West Bengal among other states. We plan to open an additional 500 stores by the end of 2007, making the Subhiksha chain over a 1,000 store strong. ICICI venture is the financial partner and the banks are UTI Bank, HSBC Standard Chartered, HDFC Bank, Kotak and ICICI Bank.”
With campaigns like ‘Bachat mera adhikar’, Subhiksha is all set to convert the local kirana store customer into a Subhiksha customer and this will be the case for any new entrants as well, as they will all together give stiff competition to our local grocer. Mishra is of the opinion, “Whether we like it or not, local kirana will be affected, probably they will become more customer oriented. Already in Mumbai you see examples of local kiranas doing up their stores and fixing air conditioners. So several will transform and survive and many will probably shut shop. Those that are successful will drive their business through better knowledge of customers and a more personalized service. For example, they will bundle their home deliveries with products they do not sell at all. So when you order groceries, you can also order food, or medicines, etc that they will buy and send to your home. May be several such stores in a locality will collaborate to cut delivery costs and capture customers. My belief is that they will also differentiate on quality on specific products with some smart sourcing, so consumers might go to specific stores, if they want better rice or atta. ” Sharing his views, Takle adds, “Local kirana stores will continue to be major players. Formats like Big Bazaar are visited once in a week or fortnight, whereas the kirana is still the place to go on a daily basis.”