Monday, July 10, 2006

Retail - Subhiksha widens footprint

Even as Reliance, the Goliath in waiting draws up plans of a massive entry into retail, there are some players who are creating their own markets. In the area that I live in Bangalore, a new Subhiksha a low margin retail format store has opened.

They are positioned as your neighbourhood kirana store with self service and home delivery options - that offers low(er) prices. The interesting thing is that everything in their store, and I mean everything is sold for below the MRP. This is how the kiranas have always done their business - so this about taking their war to them. Subhiksha also has discount pharma and a vegetable and fruits outlet.

When they launched in the area near us, assuming this is how they launch elsewhere, they made a small but significant splash. Door to distribution of membership cards, using the discount pharma (10% off MRP on everything, unlike your friendly neighbourhood pharmacist who charges "Local taxes extra" on the MRP) to attract customers to the other two (groceries and convenience store). With their home delivery option, in time, they may well cause a significant shift from the kirana.

Subhiksha still not have the reach (in terms of number of stores) or the width (they cannot stock as many different items as the local kirana guys) and are also quite constrained by the weights and measures (they sell their stuff packed, so you cant buy 250 grams of something if their package is half a kilo) - but within these constraints, they are a force to reckon with. Today, I would prefer to go to a retailer who bills me (and therefore I hope pays taxes) and someone who gives me more value for money. Therefore, if the impact is severe enough, kiranas may move away from some of the brands and move into the "loose" "niche" space.


Ullas said...

Subhiksha seems to be following the successful Margin Free Market Model in Kerala.

During my recent visits I found multiple
Margin Free Shops around my town although I ended up going often to posher supermarket which had much more variety of goods.

Neelakantan said...

That seems to be a common problem. Variety surely seems to be lower in these shops.

patnaik said...

Dear Sir,
one of my frnd use dt work in subhiksha retail.he told me that there is no holiday in subhiksha for 365 days including may day & not only that the work starts on 8.30 AM and ends up at 11.30 PM.R these is fair?Can an employee handle tha work for entire 365 days without no weekly halfs.

Pradeep said...

Dear Mr. Patnaik,

For your information nobody can work 365 hrs a day, I work for a retail company. So I know how it is handled.

People are required to come in shift duties and that too only of 8-9 hrs and everybody is given weekly off. In retail nothing can be closed even for a day.

Hope you take my point.


Pradeep Shukla

Aniket said...

Nice article,

But now there seems to be new piece of legislation 10,000 sq. ft. plus shops on gricery etc. taking permission from local municipality.
Now again scope for corruption is introduced here.
And before protecting small kirana shops why not make them a part of the tax net.
The govt. should use this opportunity to regularise these small retailers first.

Your comments please.