Yesterday we finalised the sell off deal for S&D Retail.

Some recent developments helped us decide in favour of it. This sell off comes at a time when we are not even infinitesimally small compared to what we had set out to do. So why are we selling it off? Reasons are aplenty – mostly its the lack of funding (in the wake of) and entry of players like Reliance.

Its been a nice learning experience – and a journey of self-discovery. I will briefly talk about them. (If you are interested in our story, or want to talk about retail industry, or food manufacturing – knowledge or contacts – you are most welcome to take it up offline with me.)

Some personal thoughts (For budding entrepreneurs or for anyone who cares to spare a moment) –

1. The first business you get into should not be highly capital intensive.
There is nothing wrong with Starbucks or Walmart, they are a great business, but the only way you can expand is by setting up one more shop. That means ‘capital’ – lots of it. Unless you have other businesses generating money for you, its not the kind of business you should be into. Reliance and ITC can do it, coz both have huge cash cows pouring money for them.

2. This applies even more if your margins are low (as in Discount Retail).
Self-explanatory – With low margins, there won’t be enough of internal accruals to help fuel the (‘capital-intensive’) growth. The only way you can grow is by raising external funding.

3. And even more if the industry/sector is opening up.
If the business is highly capital intensive, and has low margin as well, then growth will be organic in absence of external money. Now in addition to the above two, if the sector happens to be one that is just opening up, then there are companies (well known and well established) with tons of cash who are waiting for the sector to show potential before they make the classic ‘land-grab’ move. Microsoft waits till Blackberry proved that mobile does have the kind of potential that would interest Microsoft, and now they are moving in. Here in India, Reliance and ITC are in a Microsoft-like position – lots of cash and highly agile.

There will be exceptions. But as I said, just thoughts – not to suggest that it must not be done, but to suggest thinking before it is done.

Ok, what else? As we draw near the end of this 2 yr stint, there are a few things that I can be blatantly proud of. Three things come instantly to my mind –

1. Feel Proud of – The fact that we set sail and went ahead.
Back then it was a big step for me – to leave a nice-paying job in US and return to India. From a field I loved to an industry completely unknown to me. But as they say, the only way you learn to fly, is by leaving the ground. Two years back it felt like venturing into an unknown world – software to retail, Charlotte to Chhibramau. Today I think, it was the most important journey I have taken.

2. Feel Proud of – The brand we built.
Believe me, getting into the mind of the rural customer is a formidable challenge. If you think its easy then either you have not done it yet, or you are a superman, or a case study for the IIMs & the ISB.

If you can sell to rural customers, then cities are a breeze! Its not just easier in cities, its easier by an order of magnitude. We always felt good about this fact. We thought, “We are honing our sales skill on rural customers, while the bigger guys (Big Bazaar, Food World etc) are doing the same in cities. When we move out into the cities, it will be much easier for us, and when they move to rural towns it will be much difficult for them.” Sales people from any FMCG company will vouch for that. But we did it. By turning some well accepted norms upside down, we did it. Not surprisingly, it is the brand name we have built that we are getting the premium for in this deal. 🙂

3. Feel Proud of – Our negotiation skills.
Actually it was something we had to learn – we had no choice. Initially we managed discounts from our margins, but soon had to negotiate our way through. Today our discount are fuelled by our ability to purchase inventory at prices significantly below the market rates. Most of our competitors have often wondered ‘How can they sell so low?’ Negotiations; it has helped us sell at discount while still maintaining the same (and at times even better) margins.

Next few days, work. Then one month vacations!

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