Initial phase The first outlet in Chennai which opened in 1997 was opened by R Subramanian with a team of youngsters

all of them had little or no retail experience, the retail business opened with an USPof low prices and with high neighborhood focus. By March 1999, there were 19 stores andSubhiksha started breaking even. More important fact was that volumes picked up and theconsumers were responding to the format. The 50 shop level was reached in year 2000 and it was retailing groceries and medicines in a big way; this is when ICICI Ventures decidedto pick up 10% stake in Subhiksha for Rs. 15 Crores and this gave the retailer enhancedreadability in the market. This fund came in handy, Subhiksha decided to expand beyond Chennai into rest of Tamilnadu. Expansion spree Cash flows were now at reasonable levels and the net worthgrew to Rs. 23 Crores.By 2004, Indias retail sector started seeing a high level of activity and Subhiksha decided toexpand nationally and scale up at a rapid pace. The management faced a dilemma whether toexpand sequentially i.e. one state at a time or parallel many states simultaneously, they selectedthe latter. On an average 60 to 70 stores were added in a month and the pace of the roll out wasunimaginable. In September 2006 the store count was 160 but by March 2007 they were at 670stores and by March 2008 they were at 1,320 stores and soon by September 2008 they touched1,650. Scorching pace considering 1500 stores were added in just 24 months.R Subramanian, while speaking as the keynote speaker at an annual retail measurementconference4 organized by AC Nielsen in Mumbai (2004) said if possible, I would like to expandand have more outlets, as an analogy he quoted the Indian Postal Service who have PostOffices present in Urban & Rural India, he said Post Offices number more than 150,000 in Indiaand they could be one of the benchmark for Subhiksha. Among the reasons he cited for slower expansion is the amount of litigations Subhiksha faced his discounting model had enraged theretail trade especially in Chennai and many cases were filed against Subhiksha and R.Subramanian in fact even some Government run institutions like the Tamilnadu Co-operativeMilk Producers Federation Ltd had reportedly filed a case since Subhiksha used to sell their Aavin branded products like Ghee and Butter at 10% lower than the MRP (maximum retailprices) printed on the packs creating issues and lower sales in the Aavin outlets and with their other channel partners. The Ascent-In a nutshell 1st storein Chennai in 1997 selling groceries & medicines(investment of 5 lakh) March 1999: 14 stores in Chennai. June 2000: 50 stores in Chennai. 2000: ICICI ventures invest in Subhiksha. 2002: 120 stores across the state of Tamilnadu. 2004: change in principle from Consolidatation toExpansion. 2005: Recruits personnel across the country. End 2006: 420 stores in Gujarat, Tamilnadu, Delhi,Maharashtra, Andhra Pradesh & Karnataka. Feb 2007: 500 stores across the country. Sept 2008: Crosses 1600 stores across the country. Turnover2305 Cr in financial year 2008(profit 19 Cr.). Expansion plan in founders own words-Excerpts from an interview with R. Subramnian By March 1999, we started expanding rapidly. From 14 stores, we expanded to 50 stores by June 2000. In the next two years, we had 120-130 stores across Tamil Nadu. Another big thing was, in 2000, ICICI Venture invested in our company. Today, we have 145 stores all over Tamil Nadu. We saw to it that the moment we got into a city, we started as many stores as possible there. Only that made business sense. Then, till 2004, we made sure that we consolidated before we expanded, though there was a lot of pressure on us to expand nationally. We decided to look at every part of India which is significantly literate and is a significant consumption market. We wanted to be everywhere. We looked at the telecom companies as our role model. They employed capable regional managers and expanded. Our business is also extremely local. We can't sit in Chennai and run a store in Chandigarh. We decided to have very good quality people to run the region, area, town and the store. In 2004-05, we decided to have 420 stores in places like Gujarat, Delhi , Mumbai ,Andhra and Karnataka by 2006. In 2005, we started recruiting people in various regions. Today, we have 500 plus stores in all the places that we had planned. It will go up to 600-plus by the month end. We are already India's largest retail chain store with 500-plus stores. We plan to have 1,000-plus stores by the end of this year.

India is a large country and there are still opportunities to avail of. Though now, the thought of opening stores outside India is not tempting because there are enough opportunities in India. We may look at overseas markets too. . . Maybe later, after we open 2,000 or 2,500 or 3,000 stores in India. Major factors contributed to Subhikshas success Careful selection of store location to save on rent: Subhikshas stores were located in residential areas where rentals were typically 30%-50% lower than high streets. Traffic into the stores was not affected by the back-street locations because most of Subhikshas business was derived from local residents, who were well aware of the stores presence. SKU ( Stock Keeping Unit) control: Subhiksha stocked only the 70%-80% most frequently used household items, and for each category only the top oneor two brands were stocked. This practice ensured high inventory turnover and efficient shelf-space management.For select product categories, Subhiksha was developing private label items to increase customer choice. Eliminating the middlemen: Subhiksha purchased in large volumes directly from wholesalers and received quantity discounts. Just-in-time inventory management: Subhiksha stores carried very small inventories. The bulk of the inventory was stored in a central depot, serving all stores in a city. Using computerized just-in-time inventory management, at the end of each day each store uploaded re-stocking requests to the central depot; the data was processed overnight and the exact amount of inventory was delivered the next morning before the store opened. Value-adding services but bare-bones operations: To increase customer loyalty, Subhiksha offered a loyalty programme and home delivery service (via bicycle). Due to low labour costs and store proximity to customer residences, each store was able to offer delivery service for next to nothing. IcIcI ventures Investment In subhIsha Between 1997 and 2000, RS built a chain of 50 stores across Chennai and he was beginning to plan a more aggressive growth strategy that was contingent on raising outside capital.Familiar with the ICICI brand name, RS contacted ICICI Venture to explore his financing options. Among many investments it made during the technology bubble, ICICI Venture invested 150m Rupees (Rs) (about US$3.4 million) in Subhiksha in June 2000 for 15% of the company. Bibliography The Global Economic Impact of Private Equity Report 2008 www.rediff.com/money www.economic times.com