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Subhiksha Managing Store Operations Case Solution

Solution Id Length Case Author Case Publisher
2785 1403 Words (7 Pages) Janat Shah, Rahul Patil, Trilochan Sastry Indian Institute of Management-Bangalore : IMB323
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Subhiksha invested Rs. 4.5–5 lacs to open its initial store in Chennai's Thiruvanmiyoor with the intention that it would eventually become a node in a bigger network. It opened 10 outlets in the Chennai area in its first year of operation. Subhiksha has also begun offering steep discounts on pharmaceuticals. With 50 locations throughout Chennai by the year 2000, the company has achieved remarkable growth. By the end of the next two years, it had opened 120–130 outlets throughout Tamil Nadu. Its primary area of concentration was Tamil Nadu until 2004.  

The next thing Subhiksha did was examine every educated and economically significant region of India. It now had over a thousand locations across India. To attract more consumers to its supermarkets, Subhiksha began selling fruits and vegetables. The company reasoned that shoppers were more likely to make purchases of F&V if they were readily available. Subhiksha began selling cell devices in 2005 in response to the explosive expansion of the mobile phone market.

Following questions are answered in this case study solution:

  1. What is the business model Subhiksha?

  2. Identify key challenges faced by Subhiksha.

  3. How is Subhiksha different from a regular Kirana store or the grocery section in Big Bazaar?

  4. Subhiksha had been facing "serious problems" in 2010. What might be the reasons behind this?

Case Study Questions Answers

1. What is the business model of Subhiksha?

Subhiksha was a network of "no frills" budget stores that originally sold only food and vegetables before expanding into the mobile phone and pharmaceutical industries. The hub and spoke model relied on a centralised purchasing system and warehouse that dealt directly with businesses to minimize double billing and lengthy disputes with suppliers. As its trade with other FMCG businesses was primarily fixed, it capitalised on the substantial savings it gained from bulk purchases by focusing on the regional level. Its locations used a uniform ELDP pricing structure for the many products they sold, with discounts ranging from 8 to 10 percent off the manufacturer's suggested retail price.

While fast-moving consumer goods (FMCG) occupied 70% of shelf space in an average small store, the profitability gained from this category was lower than those obtained from mobile and F&V categories. The retail strategy was successful in "the Indian way," catering primarily to those in the middle and lower middle classes. Most of its stores were strategically placed along major thoroughfares in residential neighbourhoods, furthering the company's customer service emphasis. Subhiksha has a policy of rapid and spontaneous growth, going from 10 to 1000 stores in 8 years.

The Indiranagar market stocked various food and beverage options in conjunction with fast-moving consumer goods (FMCG), groceries, and private-label products. The F & V products took up 30% of the store's floor space, while fast-moving consumer goods (FMCG) and basic grocery items were kept at 70%. There weren't many businesses in the vicinity because it was in a residential area. The store catered to locals so they wouldn't have to worry about finding parking, unlike other groceries where consumers were compelled to drive toward the store.

2. Identify key challenges faced by Subhiksha.

The following are some of Subhiksha's most pressing problems.

  • Subhiksha expanded into mobiles in 2005 on the theory that Nokia was more successful than HUL. But by 2008, when the first widespread adoption of smartphones began, it was no longer a practical option to keep selling mobile phones from the shop. Attempting to boost traffic by promoting this specific line of goods was doomed to failure.

  • Despite their low-profit margins, seventy percent of Subhiksha's retail space was devoted to fast-moving consumer goods (FMCG). More than 90% of customers' needs were met thanks to the store's 1200 SKUs. Substantial logistical and financial factors compromised the long-term viability of this.

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