Subhiksha must adopt a franchise model, but first it needs money real fast!!!
And industry experts believe that the retailer will have some tough time finding the desired funding. Under the new plan, the company also plans to fire some from its current workforce of 15,000 employees (both direct and on contract).
When B&E interacted with Subramanian last year, the company was targeting a store count of 2,300 and a turnover of around Rs.45 billion, which now certainly seems to be a distant dream for the company. Even if Subhiksha is able to arrange the desired liquidity it will not be easy to gain supplier’s confidence. The company may lose some of them even as it starts clearing outstanding debts. One only realises the true value of credibility when it is lost.
The basic problem with Subhiksha’s business model is that even after being established on the ground as a successful model in the Indian market, they missed out on the critical aspect of raising liquidity. Big retailers like Bharti, Future Group, Reliance Retail et al, have already realised the potential of Subhiksha’s business model and announced ventures on similar lines. But Subhiksha should opt for a franchisee model once it survives this period. Going for a franchisee model will definitely improve the growth of the company and it will emerge as a much stronger player in the industry. It should not worry about loss of control in such a model, since no frills models can survive on sub-optimum service levels. And for a man like Subramanian who likes to try new things and has seen many ups and downs in his business, trying a franchisee model will be a useful advice, as there is a low fear of failure.
When B&E interacted with Subramanian last year, the company was targeting a store count of 2,300 and a turnover of around Rs.45 billion, which now certainly seems to be a distant dream for the company. Even if Subhiksha is able to arrange the desired liquidity it will not be easy to gain supplier’s confidence. The company may lose some of them even as it starts clearing outstanding debts. One only realises the true value of credibility when it is lost.
The basic problem with Subhiksha’s business model is that even after being established on the ground as a successful model in the Indian market, they missed out on the critical aspect of raising liquidity. Big retailers like Bharti, Future Group, Reliance Retail et al, have already realised the potential of Subhiksha’s business model and announced ventures on similar lines. But Subhiksha should opt for a franchisee model once it survives this period. Going for a franchisee model will definitely improve the growth of the company and it will emerge as a much stronger player in the industry. It should not worry about loss of control in such a model, since no frills models can survive on sub-optimum service levels. And for a man like Subramanian who likes to try new things and has seen many ups and downs in his business, trying a franchisee model will be a useful advice, as there is a low fear of failure.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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