The retail price war: Subhiksha ready to fight it out with Big Bazaar

Subhiksha, the 10-year-old Chennai based supermarket chain, has been preparing to take on the big retail giants ever since, last year, it stepped out of its shell and established a nationwide presence. Subhiksha now hopes to gain an edge over its competitors on the basis of its age-old premise – offering products at prices that are 8-10 per cent less than the maximum retail price (MRP).

Subhiksha can afford to do this because it obtains goods directly from the manufacturer, as opposed to from the wholesaler/distributor. This allows it bigger profit margins, a portion of which is passed on to the consumer by way of lower prices.

“There is a myth prevalent amongst consumers that they should cough up the MRP, which is not true,” says Mohit Khattar, president, marketing, Subhiksha. “The MRP includes the various retail margins, which customers need not pay.” In an effort to educate consumers about this and raise their level of awareness, Subhiksha has launched its first pan-India communication effort, including a TVC, press and outdoor ads, and below-the-line efforts (such as banners and leaflets).

“As people work hard for their money, it’s only fair that they’ll want their money to work hard for them, too,” says Thomas Xavier, national creative director, Orchard. Therefore, the protagonists have been shown to be demanding and asserting their right to save.

Khattar claims that Subhiksha allows a household to save around Rs 400 every month on its basic necessities. “On a yearly basis, Rs 48,000 is what the average household spends on items such as groceries, vegetables and toiletries,” he says. This amounts to Rs 3,000-4,000 per month, and as Subhiksha offers an 8-10 per cent reduction in price on the same items/brands as other shops, the total saving is about Rs 400 a month. But how much would Rs 400 a month matter to the ever growing affluent middle class?

“Rs 400 amounts to significant savings for some,” replies Khattar. He explains that Subhiksha’s communication is not just about cutting down on expenses, but more a ‘Why should I pay more?’ premise.

When it comes to the price war amongst retailers, Big Bazaar has been quite upfront about its ‘sabse sasta’ or ‘lowest price’ premise for quite a while now. With this communication, Subhiksha has taken the ‘Big Bazaar Challenge’ head on. “If you ask me, Big Bazaar’s promise can be questioned; the goods there aren’t cheap by any standard,” Khattar argues. “We sell around four-five times cheaper than Big Bazaar.”

While those are Khattar’s views, one can’t dispute the fact that Big Bazaar has the first mover advantage when it comes to the ‘lowest price’ premise. “Yes, while it came out with this earlier, Big Bazaar is more of a ‘once a month’ store for people who don’t stay in its vicinity,” says Khattar. He adds that while the ‘Big B’ can’t boast of being a neighbourhood store, Subhiksha, with its vast network, can.

At present, Subhiksha has around 450 stores across Delhi, Mumbai, Bengaluru, Ahmedabad, Vadodara and Hyderabad, and plans to take the toll up to a thousand by the end of 2007. In Mumbai and Delhi, Subhiksha has around 74 and 100 stores, respectively. Further, it offers home delivery of purchases.

According to Subhiksha executives, every city in which the supermarket has a presence has registered a 300 per cent increase in footfalls and a 145 per cent growth in sales since the initial campaign was launched.

© 2007 agencyfaqs!