INDIAN HYPERMARKETS

Singh's Supermart Ltd., a chain of hypermarkets in mainland India, of which 51% is owned
by its founder Mr. Singh, 35% by a private Chinese firm and 14% by an American firm, was
established in 1992 with the development of ideas like globalization and liberalization. In
India, it began with a single store in an opulent part of Delhi and has enjoyed the lion’s share
in the retail industry since then (in Tier-I cities). Singh's Ltd, by far, owns the largest store
chain (in terms of area covered) in India, with 30 outlets operating across the 7 Tier-I cities of
the country including Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, and Ahmedabad.
Singh's stores provide a one-stop-shop for all daily needs – including groceries,
confectionery, cosmetics, over-the-counter drugs, and other FMCG products – across several
international brands. The products offered are often exclusive in nature and thereby, the
prices charged for such products are higher than the market rate. All stores are owned and
operated by Singh's on a standalone basis and are located in posh residencies with frequent
customers. The operations including purchases, pricing, marketing, location, staffing, and
training are centralized and are the corresponding decisions taken by the Board of Directors
at the Delhi Head Office. Although this results in delays in decision-making, the
consequential action plans are effective and uniform. Due to the advent of convenience
retailing in India and the rising popularity of such hypermarkets around the globe, Singh's
stores were able to acquire a major chunk of the market and experience years of unabated
expansion.

THE GROWING RETAIL INDUSTRY

Since the beginning of the 21st century, the country has witnessed an unstoppable wave of
rapid urbanization, with the corporate lifestyle spreading its wings in Tier-II and Tier-III
cities. The urbane culture has opened up a market for convenience retail and one-stop
shopping which was earlier serviced by ration shops and single-brand retail stores. The rapid
growth will make this industry worth more than $1 trillion by 2026. The flow of foreign
direct investment in the retail sector is estimated to be $50 billion until 2020 owing to the
relaxed FDI norms, favourable government policies, and enhanced market space.
Patel's, an Indian hypermarket chain, capitalized on this shift by franchising its stores in Tier-
II and Tier-III cities. It provides infrastructure, back-end technology, and an established
brand name to the franchisees who operate the stores in high-density localities. The quantum
of operations, revenue, and services vary from store to store depending on the locality and
income of the residents. Patel has created a network of retail stores with high-end products
available at affordable rates.

The boom of the e-commerce industry has disrupted the services and sales of hypermarkets
like Singh's in Tier-I cities with a substantial customer base now being serviced by e-retailers.
E-commerce companies comply with Just-in-Time inventory and thereby, bare minimum
costs allowing them to penetrate the markets with cut-throat prices.
Primarily because of the Coronavirus pandemic, Consumers are preferring to stay at home
and purchase online. They intend to return to their old shopping habits, but because of the
recent developments, many other alternatives have opened up for Customers to buy even the
cheapest of products by sitting at home. Due to limited stores, lack of workforce, short
supply, and governmental regulations Singh's is facing ever-increasing competition looking
to serve an almost saturated customer base. Owing to higher costs, Singh's cannot charge
prices any less than the competitors.

In a recent address, the Prime Minister of the country, too, appreciated the fast-growing
chain, Patel's, that is supplementing the government’s efforts to harmonize the socio-
economic differences among states. However, his speech was also marked by a sense of
disappointment towards Chinese companies, with the main contention being their focus on
already developed Tier-I cities and because of the recent Indo- China clashes.

These are some of the problems that exist from the bird’s eye view of the industry.
Meanwhile, the Board of Directors at Singh's Ltd, Delhi, has decided to raise additional
capital to expand their stores in Tier-II and Tier-III cities and also diversify into more
products that will cater to the target market. Since they were considering private Chinese
Investments, they have been communicated a word of caution by the market research team of
a rising Nationalist sentiment and hatred towards a specific country.
They have been presented with the following numbers to provide a snapshot of the internal
problems of the company:

Concerned by the declining market share and profits, the Board of Directors has appointed
your team of consultants to identify the underlying problems and formulate a comprehensive
plan that aims towards rectifying it. You must go through the industry and company
information and provide specific solutions to the various problems. Also, mention how
should the company raise funds to meet the requirements for additional capital, whether
through Indian Market or via International Market. Solutions must be backed by proper
analytical tools and should ideally help your client retain its market share and improve its
current financial performance and market position.