There have been similar stories of brands - retail brands & chains who are very successful when they start. We have Vishal Megamart, which was started by Mr. Aggarwal from scratch. As he was successful in creating one Megamart, he started to expand by opening various shops. After a while, the big expenses of these new stores was bigger than the contribution they gave. Soon Debt began to mount and he had to sell it to TPG. Then there was also Gini & Jony which is a children's clothing brand. It too was successful, until it created a number of stores and expenses & debt mounted. They too had to restructure their loans.
And even bigger example is the Retail Chain - Subiksha. Mr. Subramanian started with one store in Chennai in 1997 and was expanded to 420 stores by 2006. It was one of the major retail chains in 2008. His philosophy was simple. He did not want the stores to be expensive. So, all the supermarkets were somewhat cramped & there was no AC. He gave reason that this will reduce the expenses which can be passed on to consumers by giving the material at discount. Guess what ? It was closed in 2009 due to severe cash crunch.
This is a tale of many a companies. Companies try to expand without being too sure of the revenues. Often the downfall is coincided with the economic downturn which reduces the revenues and hence increases the debt burden. If you run continuously without practice, you do get tired and exhausted. Instead, run & take break then again run. Similarly, you need to stabilize your business at each stage, so that it does not explode and come in the debt trap.
And even bigger example is the Retail Chain - Subiksha. Mr. Subramanian started with one store in Chennai in 1997 and was expanded to 420 stores by 2006. It was one of the major retail chains in 2008. His philosophy was simple. He did not want the stores to be expensive. So, all the supermarkets were somewhat cramped & there was no AC. He gave reason that this will reduce the expenses which can be passed on to consumers by giving the material at discount. Guess what ? It was closed in 2009 due to severe cash crunch.
This is a tale of many a companies. Companies try to expand without being too sure of the revenues. Often the downfall is coincided with the economic downturn which reduces the revenues and hence increases the debt burden. If you run continuously without practice, you do get tired and exhausted. Instead, run & take break then again run. Similarly, you need to stabilize your business at each stage, so that it does not explode and come in the debt trap.
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