Subhiksha: Closing in on the customer

The company is rolling out convenience stores at a blistering pace in a bid to take on the ‘kiranas’

Most youngsters of today must have heard tales from their grandparents on how they would walk miles to the ‘mandi’ to save that extra anna. The next generation moved on to the neighbourhood ‘kirana’ stores, and couldn’t do without delivery at the doorstep. Today’s shoppers are spoilt for choice; they have big spacious hypermarkets to shop in or if that’s too far away, the ‘kirana’s’ just around the corner. And now, they have neighbourhood convenience stores like Subhiksha.

If the pace of its rollout is any evidence, the Chennai-based retailer could give mom-and-pop stores, a run for their money. From just 120 outlets in March 2006, most of which were in Chennai, the company’s chain of stores will grow five-fold to 650 outlets this month. Today it has 74 stores in Mumbai and more than 100 outlets in Delhi. Says Mohit Khattar, president, marketing, “By the end of the year we should have almost one thousand outlets and this could double to 2000 in two years.” The retailer believes the company’s turnover could hit Rs 2,000 crore in a year’s time from Rs 350 crore currently.

Khattar says Subhiksha’s taking on the ‘kiranas’ and targeting the Rs 2,000-3,000 that households spend every month on food and toiletries. He’s also clear that the chain does not intend to target the more affluent households.”Our outlets are not destination stores like those located in malls,” he says. The shops are not air-conditioned and about 1,500- 2,000 square feet in size. Most do not allow consumers to walk around and browse; consumers have to walk down a single aisle and in many shops, can’t turn back. Subhikhsha’s value proposition: provisions that are a good 10 per cent cheaper than those available at the ‘kiranas’. And home delivery to boot. That’s going to be the long term differentiator. Says Khattar, “We offer the lowest prices across products, not just on 50 or 100 items and we’re cheaper than supermarkets or kiranas. Our customers should easily be able to save around Rs 700-800 every month on a bill of Rs 4,000.”

What Subhikhsha believes will work for it are the attractive prices that are available throughout and not just on some days of the week. It hopes to attract a large portion of the total food and grocery spends, which are estimated to be as much as 40 per cent of total spends. Some of the stores also stock medicines and telecom products. Gibson Vedamani, chief operating officer, Retailers Association of India, likes the strategy. Says he, “They have positioned themselves on the value-for-money platform which is a strong property and will help them attract consumers quickly.”

To be able to sell to customers at attractive prices, Subhikhsha needs to build scale quickly. Today, the company has a total floor space of 1.3 million square feet; by the end of 2008-09, it hopes to be able to increase this by at least two and half times to around 3.25 million square feet. Industry experts point out that since the company is not banking on experience shopping and relies on its low-cost advantage ,it has to scale up before hypermarkets enter the game as they will offer consumers both the experience and good prices.

Says Harminder Sahni, principal associate, KSA Technopak, “Subhiksha largely caters to a segment driven by price. Hypermarkets could be cheaper and Subhiksha will be squeezed between the experience stores and the hyper markets.” Vedmani agrees. “When hypermarkets enter they will pose a huge threat. But if the company can scale up quickly, it will be able compete with the new entrants,” he observes.

As of now though, Subhiksha’s stores are doing brisk business. In fact, the demand, says Khattar, has been overwhelming and there have been times when stores have run out of stocks.He’s busy making sure that the shopshelves are full. That should make sure the stores too are full.

Source : Business Standard