Subhiksha Managing Store Operations Case Solution

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.