After deciding to stop selling fruit and vegetables at its stores, food and grocery retailer Subhiksha has now postponed plans to open consumer durable outlets. In a telephonic interview with Raghavendra Kamath, Subhiksha Managing Director R Subramanian said that retailers need to readjust the pace of their business, given the current market conditions.
Why you have put off your plans to open durables stores?
We will open them in four to five months. We are acquiring nearly 2 million square feet of space for this venture, with a monthly bill of Rs 10 crore and have been negotiating with developers for the last three to four months.
We thought we got them at good prices, but August prices cannot be called good in November given the current market conditions. We are expecting a further crash of 35-40 per cent in rentals. It makes sense to wait for some more time if you make a savings of 20-30 per cent on your rental costs.
But you had mentioned earlier that you were bullish on store expansion given the fall in rentals?
We are still bullish on expansion, but we are waiting for the property prices to crash further.
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Why did you stop selling fruit and vegetables at your stores?
Fruit and vegetables is a neutral margin business and we keep it to draw traffic to our stores. Besides, fresh produce retailing is a very regional opportunity.
Are you selling a stake in the firm?
No. It is the worst time for sellers right now. Instead, you will see us looking for opportunities after six to nine months.
How is the ongoing fund crunch impacting your operations?
There is pain in the business when you expand and bank credit is difficult to come by. Everybody has to readjust the pace and speed with which they are growing.
Once you know where you can make money and where you cannot, you can adjust your business. Things were much difficult in September and October. Now, it is much better. We will wait for another two to three months to decide how to go about it.
Are you relocating or closing down any stores?
When you have 1,500 stores, it is all part of the business. If you pay Rs 40 per sq ft and get a deal for Rs 30 next door, we will definitely shift.