“We believe in discounting the whole store”

IIPM : EXECUTIVE EDUCATION

R. SUBRAMANIAN, FOUNDER & MD, SUBHIKSHA

In a free-wheeling conversation with 4Ps B&M’s pawan chabra, R. Subramanian, Founder & MD, Subhiksha shares his views on the changing retail scene in India...

How is Subhiksha different from other retailers in the country?
Subhiksha has an Indian model of retailing. That means Subhiksha does not have a business model which has been copied from abroad. In fact, we don’t believe in a model in which we sell 20 items and give only two items at a discount and the rest 18 at a normal MRP like many other retailers in the country are doing. Rather, we at Subhiksha believe in discounting the whole store so it does not matter to you if you come to us today, tomorrow, or for that matter even a month later. You will always find our prices much lower than other retail chains in the neighbourhood. And this Indianised model of retailing is working very well in the country. We believe that hypermarkets are still not suitable for the Indian market and vouching the fact you can see many more retailers are now moving towards the Subhiksha way of retailing in the country. The product offering at a lower cost is the competitive edge that Subhiksha has over its competitors. We certainly offer value for money to the Indian consumers.

What is the current turnover of the company and what are your expansion plans for Subhiksha?
We currently have 1,580 stores in the country and we are planning to reach a figure of 2,200 by the end of the current financial year. This number includes both departmental and mobile stores. Well, as far as our turnover is concerned, we had clocked a figure of Rs.23 billion last year and this year we are hopeful of reaching somewhere between Rs.40-45 billion.

What about your expansion plans in the consumer durables arena?
We are planning to open 150 consumer durables stores by the end of the current financial year and we will be investing Rs.6 billion in this venture. But our competitive edge will remain the same as we will be aiming at providing goods to the consumer at the lowest price available in the market.

It’s often said that Subhiksha’s store ambience is not up to the mark when compared with others. What do you have to say on that?
I will not say that the statement is completely false but it’s our deliberate strategy. Certainly our stores are not air-conditioned but then you should understand that we are catering to the consumers at the bottom of the pyramid. Here the consumer is looking at lowest prices and not whether the store is air-conditioned. However, our stores are still clean and tidy and better than the kirana stores.

What’s your take on the power of in-house brands? Do you think in-house brands can pose a threat to external brands?
There is no denying that in-house brands are more profitable but you cannot sustain without external brands. As far as Subhiksha is concerned, in-house brands comprise 20-25% of its total turnover. We focus on doing in-store advertising for our in-house brands as it definitely influences the buying behaviour of the consumer.

What are your plans for the IPO? Can we expect it by the end of this financial year?
We are not coming out with an IPO; rather we would be merging with a company called Blue Green Constructions, which is a listed entity on the Madras Stock Exchange. Following that the company will be renamed as Subhiksha India. We have already bought a majority stake in the company earlier this year. For the financing part, FIIs are more than willing to invest in our company. So as such there is no problem of cash crunch.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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