Sahara’s Q Shop network shuts down due to lack of supply


While promoter Subrata Roy is still in prison, the Sahara Group’s problems continue to escalate – some of its activities have stalled and dues are piling up due to a lack of cash.

Roy, who has been in Tihar prison since March 4, 2014, spoke to employees on Monday via video conference, seeking to allay doubts.

He asked employees to keep morale up and keep working, assuring them that he would be released from prison soon, two people familiar with the call said. “Please don’t feel humbled by the current situation. We’re going to grow the business 20 times more than it is today, ”Roy told employees, according to one of the people named above.

“Yes, he has interacted with employees in order to raise funds to stimulate business,” said a spokesperson for the company in response to a question from Mint.

The task may not be easy, however, as many of the group’s activities, including its retail business, have come to a standstill.

The company has stopped manufacturing and supplying products to franchisees in its Q Shop network for almost six months now, said several franchise owners Mint spoke to.

Almost 15 franchisees Mint spoke to confirmed they were no longer operational as they had not been supplied in the past 4-6 months.

Most of them said they canceled their investments in the business due to a lack of clarity from the business.

“There has been no supply from the company in the past four months as they are facing a shortage of funds,” said Krishna Murari Gupta, a franchisee who believes the current bad phase of the company will take. end once Roy is released on bail. After that, he will focus on manufacturing and sourcing again, he added.

Other franchises are not so optimistic. “How can a business operate without inventory. We have been out of stock for months; the business is dead now, ”said Neetu Sethi, a franchisee since 2013. She said she stopped following up with the business because no updates were forthcoming.

The group spokesperson acknowledged that supply to Q Shop franchisees had been hampered, but added that the group was committed to the company. “We have faced a shortage of supplies, which could have hampered the business of our franchisees, and we are aware of this,” said the spokesperson, adding that the losses suffered by franchisees will be compensated.

Sahara launched the Q Shop in August 2012 and currently has a network of 800 franchisees.

A year after its launch, the company said it plans to grow to 10,000 franchisees by April 2014. Franchisees have paid the company more than ?? 2.5 lakh in advance.

The company supplied these franchisees with more than 700 products, which included everything from soaps and detergents to bottled water, pickles, mixer-crushers and ceiling fans.

But early on, expansion and large product listings were a problem.

“The challenge is not a question of funds, but of competence,” said Arvind Singhal, president of Technopak Advisors Pvt. Ltd, a retail consultancy firm, while explaining that the business was not a viable proposition to begin with. “It is not possible to be a producer of so many categories of consumers and also to retail them.” Plus, retailing isn’t easy. High overhead costs, strict regulatory policies, and diverse consumption patterns across different geographies are all factors that make it difficult for any retail business to scale up.

A slowdown in the economy over the past two years has only added to the pressure on most retailers and led to consolidation in the sector. May 4, Bharti companies announced the merger of its retail operations Bharti Retail Ltd with Kishore Biyani’s retail operations Future Retail Ltd. In November, Biyani acquired the retail business of Nilgiris, a supermarket chain specializing in the manufacture and operation of convenience stores operated by franchises.

Sahara has filed a defamation claim in a Patna court against the Mint editor and some journalists over the newspaper’s coverage of the dispute between the company and Sebi. Mint disputes the case.

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