August 24, 2010

Varkeys Supermarket: Is end nearby?

Varkeys Bakery and Supermarket went out of stock for more than two weeks. Customers were returned saying there are some supplier issues which have been sorted out. According to media reports, Varkeys is facing liquidity crunch. Varkeys is reported to have 59 stores across Kerala in different formats generating Rs.180 crore in turnover. Varkeys is now looking for PE funds, which would be slightly difficult to come by as they have failed in an earlier attempt and there are cases of Subhiksha and Vishal Retail winding up or looking for fund infusion.

Varkeys is the pioneer in organised retail in Kerala and is known for quality of products they sell but utmost professionalism was always missing. It is widely believed that rapid expansion has brought Varkeys in to this soup. Competition also is hardening with new organised players coming every now and then which includes Margin Free, Reliance and Big Bazaar. There are also neighbourhood stores morphing in to supermarket, as they are adapting to the evolving scenario. Every one is churning good revenues, but sustainability comes with profit which is marginal in this industry. For Varkeys, competing with all of them is a challenge.

Probably it's time-up for Varkeys. They have revived few stores now but Onam season had passed by then. The need of the hour is a professional management team and consultants who can adopt global benchmarks and practices in the Kerala scenario. The brand still hold its fort on 'reputation', but 'dependability' is in question.

63 comments:

  1. How has Varkeys been unprofessional? I find that hard to believe that this is the case as for decades they were the number one supermarket chain in Kerela. People used to flock to their stores and love their cakes. They started from humble beginnings and as i understand a family business.

    I guess its easier to kick a dog when it's down. What ever happened to customer loyalty? Or hell, being proud of a brand re. what it has achieved being faced with limitations. Correct me if I am wrong, but Varkeys were one of the first supermarkets that thought like other supermarkets in different parts of the world and brought that professionalism to Kerela retail. They have their own training centres and employ hundreds of people. I sure hope its not the end of a brand that serviced thousands of people.

    ( And no, I do not work or am part of Varkeys )

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  2. I agree with you on many parts. I love this brand but they lack 'utmost professionalism' Like you said, they are the pioneers, but they are not able to sustain when national retail brands are invading Kerala. We have to understand the context that they still enjoy high reputation and reliance wanted to acquire Varkeys.

    I would say they didn't change when times were changing. Margin Free is able to keep their operation mean and lean and is able pass some benefits to customers while Varkeys could not. When Reliance and Big Bazaar had AC stores, Varkeys didn't adapt. So Varkey's was neither there nor here and tried to occupy a space that is in between.

    They didn't focus on their Bakery segment when we have many stand alone chains of Bakery coming up across Kochi and Kerala. They didn't come out with a Cake brand when we have many that sell in large quantities during Christmas. There is a lot of science that go behind every minute detail of a retail store that will induce consumer spending. I can say Varkeys didn't understand most of them. I can go on but will stop with one more. They branded their In House products (private labels) as ALPRO. According to me, they could have at least tried a better name there?

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  3. I dont know how Varkey's came to such a state of affairs - but I have heard people say that Varkey's got entangled in real estate investments, which crashed in 2008-09. Then they ended up with severe cash flow issues.
    Emke Group is planning to invest in a big way again in Kerala, with Kochi as focus. Emke's Lulu Hypermarkets, which is all set to debut in Lulu Mall in Kochi, is planned to expanded seriously across state. From a friend of mine, I understand, Lulu is final stage of negotiations with a leading Kochi based retail chain for its take-over after latter posted huge loss last year.

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  4. Raj, I have heard the same and some more. It seems they made a huge investment on a piece of land in Thrissur and cash is stuck there I am told.

    Another interesting thing I have heard is they tried and failed to run a school in UAE.

    One thing is true. Employee salaries are delayed up to two months and stocks are not getting replenished often.

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  5. i guess most of the things that have been mentioned above are baseless

    they have not invested in real estate nor have they channelised their money in to anything else

    i work with varkeys and i stand with them

    they have real ethics and to the bes of my knowledge they will not cheat anyone

    i feel everone should stand with them in times of crisis

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  6. I was in Varkeys, and left last year ( before the actual crisis arise, now working in a supermarket in Middle east). I believe i can rejoin the group very soon.What I felt that varkeys professionalism is equal to lulus or much higher than that (we should have to compare with kerala market). So lack of professionalism is not the case behind this. branch expansion is one thing that may be actual case.many of the newly added stores were below brake-even line. and School in uae, real estate business etc all are stories. And from my colleagues what I know that, varkeys still have the customer support. very soon they will be back on track.

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  7. Mannaaaaaaaaaaaaankatta!

    Most of the branches are open only 2-3 days a week n they have nothing stocked.

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  8. I want Varkeys to come back to main stream. Some of the good they had cannot be found in any other super markets even now.

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  9. i pray and pray that varkeys come back , I HAD THE CHANCE TO MEET THE DIRECTORS ONCE WHEN THEY WERE AT THEIR PEAK


    WHAT GENUINE DOWN TO EARTH PEOPLE

    GOD BLESS THEM

    GOD SHOULD INTERVENE AND HELP THEM OUT

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  10. I heard the shop in Palarivattom is shut!

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  11. Hey
    Yes, it is very true that Varkeys have a lot of admirers. Im one of them. And i visited their various branches even after they were into the crisis just to make sure that they were not going to perish forever. As everyone here said, let us hope and pray that it will rise as a brand once again. And if EMKE group has plans, and if the brand name is to be retained as such, i am sure Varkeys will sore to new and greater heights. The real cause for the downfall of any business cant be accounted to any single factor. Something very wrong must have happened.

    Joseph

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  12. Im also a true admire of VARKEYS.I pray from my heart that it should come up and start soon.We the people at VYTTILA do miss V MART a lot

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  13. i just love varkeys

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  14. cerin pathrose
    any hope for varkeys

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  15. I do not think. The fact that there is no buyer or investor coming speaks volumes about the ill health of Varkeys.

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  16. nw the kadavanthra store is alive!!!

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  17. even their pvtm shop is vry much alive now.

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  18. I do not think that competition was ever an issue for the supermarket, i believe that retail giants like reliance were not able to set foot in kerala till Varkeys had issues. They offered the best customer service than any other supermarket that i have been to in kerala. Customer service was always their key to success. I believe their moto was "Customer is King". I pray that the chain of supermarkets are back on track.

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  19. I have started shopping at Varkeys again guess should stand with them in their testing times
    God save Varkeys coz its our brand Keralas brand

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  20. I've been a big time fan of Varkeys especially Thrissur and Cochin...Sad to see this plight and hopeful they wull come back with a bang!! Let's pray for its return.

    Sanish Nair

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  21. Cerin any idea about varkeys
    Will govt help one of the last few brands we have after the sale of asianet

    If you have any ways pull out VARKEYS

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  22. I liked your request. If I could, I would have used all my means to revive this much loved brand.

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  23. So u mean to say no option!!! some sops some relaxations from bank or govt should help

    I'm very sure the directors wouldn't have misused a single penny maybe overexpansion did all the harm !!

    Chief mininster!! pls do something for this keralas maybe last brand

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  24. I strongly agree with the above opinion, Everytime I come down from states , I rush to Varkeys You get everything there small shops with everything neatly arranged

    I guess its more of the atmosphere, love, care , I believe its run by a God fearing family how they came into such situation is Sad

    I'm going back with a heavy heart eventhough I purchased from palarivattom

    Mind you don't compare varkeys with wall mart they are different formats nobody even acknowledges you there

    Mr Cerin please forward this to the chief minister

    Maybe you could do a bit to save Keralas Varkeys


    Hope Varkeys stays with the same management when I come back


    Mr Cerin pls do something

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  25. I came to know that Major of the shares of Varkeys took over by Birla Group.

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  26. The long wait is over. varkeys opening again with a big bang - jointly with Birla group. Kudoos to the owners of this wonderful team!!!

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  27. thank God!!! Varkeys will be back soon!!!

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  28. http://economictimes.indiatimes.com/news/news-by-industry/services/retailing/varkeys-in-sellout-talks-deal-in-2-weeks/articleshow/9093100.cms

    The above Economic Times report indicates the prospect of such a deal. Careful reading will reveal that Varkey's will lose management control and thus it would be the end of the brand Varkey's. Hope the buyer can at least offer the same customer experience.

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  29. No it is a 50%-50% stake deal.As per deeccan herald . chennai it is learnt that Varkeys will be as powerful as before but only it will lose a few milk teeth but that is desirable, To grow over petty hurdles.The employees will not be retained since More has its own selection process and hr wings.
    Only the assets and inventory is valued and will be paid for.More will refurnish the shop and use the godown and office location facility of Varkeys that is the best for any sector.Further mangaement will be on 50=50basis aswell as profit sharing. Meanwhile more is certain to loose some of the flab of varkeys i.e excess stores at undesirable points and unviable locations. So out of a total of 50 stores only 40=42 will be saleable.this is the ground reality.Pray that the managemant board decide to recall the past performing supervisors,cashiers and other retetion staffs. This will accrue the market credibility of varkeys as the customer support and attention so popularly synonymous with Varkeys reatil store will be justified.

    Siju

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  30. Shiju, that's a good update. Then this can be a joint venture, which is quite uncommon in the sector. If it happens, I think this would be a win-win deal for both.

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  31. Cerin
    I had been following your blog althrough
    Why are you worried about customer satisfaction now ???
    When you said they have no ac
    They have no proffesionalism
    Bad name like alpro

    I have seen these varkeys brother work like dogs all thru day and night

    Their turnover had touched 175 crores last year

    When they had a problem we all pointed fingers

    I'm of the opinion that we don't deserve their hard work love care
    Forget customer satisfaction


    I stand by the person who said CM help

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  32. Vital Stasistics==In Public interest by Varkeys management

    Varkeys has 3 type of store
    --1==small--500sq.ft to 2500sqft i.e.shops
    ---2==medium-2500sq ft to 3500sq fti.e.-superstores/supermarkets
    ---3==large--3500sqft -7000sq ft or< hypermarkets

    No. of shops
    small--30-
    medium--15
    large--5

    turnover stastics based on 2009 annual sales report
    as submitted too income tax department(Govt.of Ind.)
    small shops daily turnover--60000
    " monthly "------60000*30=1800000
    medium shops daily turnover---1.,50000(1.5lacs)
    " monthly"-------150000*30=4500000
    large shops daily turnover---400000
    " monthly "-------400000=12000000
    30 small shops==1800000*30=54000000(5.4cr)
    15 medium shops=4500000=67500000(6.75 cr)
    5 large shops=12000000=60000000((60 cr.)
    so total turnover--5.4+6.75+60=73 crores monthly
    annualy=876 cr..

    anonymous

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  33. Anonymous, arguments like this are most welcome as that only can make all of us understand things better.

    I was not talking about 'customer satisfaction' but 'customer experience'. I would think the customer will be more or less equally satisfied with new buyer. By customer experience I mean, things Varkey's pioneered that particularly caters to Kerala Market like a fish shop, bakery, tea/coffee vending machine, availability of unique Kerala food items and some foreign products which NRIs have been used to. Now I do not think these will be available in other stores, which is exactly the reason why we were preferring Varkey's.

    Their fish store had been a revelation. I started frequenting Varkey's after they started fish shop as I can avoid bargaining with sellers and cleaning & waste disposal at home. A completely new experience and value was offered to me and I believe to most of us. What happened next was amazing for Varkey's. We will go there to buy fish and while we wait to get this done, we will make some purchases at the store.

    On AC, I was particularly comparing with Margin Free stores. Margin Free stores always offered better discounts and savings to customers and that is their Unique Selling Proposition [USP]. They didn't have AC, are congested and resembled like a market. Here Varkey's were losing their USP. They charged MRP, didn't have ACs and their new stores were congested.

    On professionalism, their state of affairs now is the indication of their lack of 'utmost professionalism'.

    Walmart, the biggest retailer in the world ranks among top for revenue but they do not rank among top for profits. Retail is always a high revenue sector with marginal profits, except for few formats. An equally sized SME in manufacturing sector could make a net profit of 30 crore. So 175 crore may look big but in the sector it is still small.

    The very fact that we read, write and closely follow Varkey's show how much we love them for what they offered us. It is granted that we criticize them when they make a mistake like we criticize our favourite film star for doing a bad job.

    CM or government should not offer any help other than acting as a facilitator to help them come out of the crisis. We need to understand and accept that Varkey's lost out in a play which was fair and square to everyone involved. Varkey's will deal with it. This is not a school exam where after we fail, government gives moderation marks for us to pass.

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  34. I infact feel graetly disappointed by the stastics report. It feels that the accountant there was overwhelmed with remorse so much that he added a 0or 00 and the consequent figuring became 868 cr instaed of the factual 100-150crore range that is true of the annual tr. of Varkeys. Please be aware Varkeys was a leading job provider in Kerala region especially in Metros like cochin, trm, calicut,trichur etc.But the loosening of grip has graetly hampered the job market as of now. We hope the new vision of MOre group will bring sunshine and glory back to the recessing supermarket industry.All pray that the takeover and makeover become nice plans in furthering the cause of customer orientation and dual benefit to customer and the owners collectively. Let this be a lesson to all that believe in fast glory at the cost of financial burdens.debts Let more recover the ROI and then we will see a new era in consumer spending since kerala is suppose to have bank deposits worth 2 lac crore for the population of 3 cros

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  35. Cerin

    I have one thing to ask you ? Which business did well last year I'm into business I did very badly in the construction sector luckily for me I had invested in some land sold it to stay afloat

    I'm sure reliance retail more would all have reported huge losses

    I feel they went wrong in their time of expansion

    Happened to read somewhere varkeys were the only profit making chain in india

    If you talk about reliance more n varkeys in one breath its never a level playing field

    Reliance had closed many shops too these companies are all flush with fund

    What will happen if fdi opens in retail? do u think any local shops wud survive?

    We are becoming a huge capital market walmart has already stated they don't need profits for the next 15 years

    What would poor retail shops do ??? Where do they go ???

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  36. Very true varkeys expanded at the wrong time

    My equipment supplies business also recorded huge loses

    In dubai things are more tough I guess especially getting your money back after u have supplied

    Small timers I guess its time up for us

    Maybe come back and start money cheating which is the best and most professional way to make money in KERALA

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  37. Yes, cheating seems to be the best business in Kerala with so many gullible people!

    I would say most of the business did well last year. In all sectors there could be few rotten tomatoes. It is sound business strategy and risk appetite that makes the difference.

    The smartest of the lot in retail sector in India would be Trent from Tata group. They are probably the only profit making retail chain with a national spread. Yes, Varkey's must have been making profits.

    Closing shops are sometimes a good thing to do. It could be done in a professional way. These big shots work with numbers and metrics. They set themselves realistic targets and if they feel it is not being achieved, they will take the tough call of closing it. While investing for that shop itself they would have calculated how much loss they can afford, if things go wrong.

    Opening FDI is good. Good for customers, farmers, producers, employees, investors and the overall economy. Local shops will survive if they adapt. They will have to ensure a personnel service to customers which a large retail chain can never offer. Developed countries are an example where big and small are surviving, if they are offering value to customers.

    The scenario is actually getting interesting for small timers. Look at Kudumbasree products in Kerala. Here are small timers bringing good money to their home everyday.

    Small timers have to find a niche (unique) area where they can only serve customers well and not big companies. An example is a full service independent restaurant. There are successful restaurant chains but they can never offer an experience like an owner managed restaurant. If you still have doubt ask about or experience Zains hotel in Kozhikode.

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  38. Cerin

    Big shots are very good in not paying on time

    Suppliers need to get back their money on a stipulated time

    I said I'm a small timer but was doing brisk business

    The number of bills unpaid is enormous and I can't sustain if you gat your money after the stipulated time you are on a loss maybe my turnover is the same profits have eroded

    I guess we will end up being a capitalist market

    Opening up of fdi is not all that great we have a vegetable farm and a retail chain was supposed to procure you could check if its still in place its all bogus

    They all make a lot of sound nothing happens

    I prefer local vendors anyday anytime

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  39. Probably, these big shots were bullying you. I can easily say that you could've stopped supplies, which also is not a right decision many times. I think you should take a call at some point in time saying, I can afford to take this much risk only, you pay me now.

    I will give two real examples. One is a person known to me who was supplying rava and atta to Varkey's. He ran a credit of more than 5 lakhs with Varkey's. Where does he go now to collect it?

    Another is a garment trader from central India. He supplied garments and materials to a new shop started by a Gulf returned keralite, on credit. The very next month when he came to the shop, it was closed as there was no business. Owner was no where to find. Interesting factor is this supplier has been coming to Kerala for almost 30 years now. He invariably supplies on credit to few shops every time. Some flourish and some others close. It is a business risk that he takes.

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  40. Cerin
    Prime minister had categorically said he won't allow fdi to act in a monopoly way

    I'm trying to tell you its already like tat as you quoted about the garment supplier he took a risk

    Every business is risk and hard work once these big shots find ur kind of dependent they make you
    slog

    I still feel what went wrong with varkeys was their time of expansion especially during recession was not correct

    I still feel the brand value is intact anybody in kochi calicut and trichur would vouch for them.

    I feel its a part of you maybe we all grew up seeing varkeys so can't live without it maybe a habit to be frank and precise


    I MISS VARKEYS

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  41. May be varkeys is now a priest with a highhanded virgin on a silhoutte,waiting to become a master piece as painted by leonardo da vinci-- I mean the first touch of gentleness in lost paradise .
    It is not getting real.

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  42. Cerin
    When are the shops going to be open again??

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  43. cerin,

    wait for two weeks ..varkeys will back to track with 3to 4 outlets intially under the same management& ownership. till that time every one can gosip

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  44. Madhu

    I would be extremely happy if it would be the same management and ownership

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  45. Cerin

    One last arguement from my part

    As you had said fdi is good , why is the govt insisting on an investment of 500 crores? Could you tell any retail chain which has that turnover apart from the national players

    Is it good for small timers or big timers .Maybe one of the reasons why I said we are a capitalist market now

    The investment criteria itself would wipe out small timers

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  46. Madhu seems to have some insider information. Let the good news come out.

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  47. On FDI, i would say government should not stipulate such limits. But that is the way things work in our country. Politicians can only fill their kitty if such stipulations are there.

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  48. Thank you atleast you agreed to me on this I'm happy !!! Things are difficult for small timers ,
    That's the Real Picture ,

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  49. Madhu

    We all are waiting
    we don't see any improvement

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  50. Cerin

    Any idea what is happening ? When are we going to see Varkeys back on track

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  51. Hi to Cerin and all others in this forum.
    Many of the discussions in this forum well covered the real feelings of common man. I mean the ultimate Keralaites thoughts. I don’t want to come back to Varkey’s issues again. But rather I would like to address a forthcoming but not yet addressed issue of ‘SMART MAFIA’. You may wonder what is this! Right?. Yes, I want to bring all of your attention to a serious issue of our present days. It is all started since long time, but no one noticed yet? I wonder!. But our previous C.M. well understood this issue in year 2008. All of our SME entrepreneurs are going to get affected with this SMART EMKE idea! Everybody knows that the promoter don’t have required funds to complete this project. And they were in the verge of abandoning this SMART Kochi project. If they withdraw, they are the only people going to get the real benefits out of that! But actually who is going to get affected by their withdrawal? The real SMART MAFIA only. EMKE is investing big money in Kochi. A whopping Rs. 3 billion! A wolf in sheep’s skin! Most of the money pumping into Kerala, especially into Kochi SMART project is TAINTED money. Money belong to ex. Rulers, who amassed this money while their dictatorship in their countries, like Mubarak, Bin Ali and etc. Also a big fanatic agenda working behind all of this. Dear Kochi, you are going to get Financially raped by this ‘ME Goons’! All Kerala brands, even Indian brands and SME investors are going to get effected. But still we roll our red carpets to this SMART MAFIA. I stop here. Think about this issue. How big is the impact that is going to happen in Kochi?. Just remember one thing, when a popular uprising happened in Oman, in particular Sohar, the local residents first burned the LULU Hypermarkets (http://www.youtube.com/watch?v=9h8pcfmu4Pc). Rest is history.

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  52. Cerin

    ANY CLUE ABT WATS HAPPENING WITH VARKEYS

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  53. It looks fishy for everything related to Smart City. People need to be cautious. There is a definite possibility for all what has been commented just before.

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  54. All Varkey's stores are closed as always. I stick to what has been said earlier. Their accounts may not be in a promising shape for somebody to invest or buy Varkey's.

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  55. Me enjoying the Varkeys cake !!!!!!!!!!
    Their shop in kurukancherry trichur is open !!!!!!


    whooosh its such a releif to shop in VARKEYS

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  56. Whats the status now.. I think all of the closed shops are remains unoccupied now also. What about Private Equity investment proposals?

    Deepak R

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  57. I believe it's all over for Varkey's. It must be a closed chapter. We should not expect investments or buyouts to happen now.

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  58. This comment has been removed by a blog administrator.

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  59. Whats happening with kishore biyani and BIGBAZAAR??? Still remember those days when everyone read and used to get inspired by reading the book he authored THIS HAPPENENED IN INDIA !!!!

    He was literally asking or pleading Carrefour for a buyout.Now whats your take about bigbazar?? unprofessional? lack of managerial skills? MISMANAGEMENT ?

    Now we have reliance and more in retail and i wont be surprised of a day when they own every business in India

    We are talking about debts of 8500 crore for Big bazaar and debts of 20 crores for varkeys in the same breath!!!! A level playing field huh ???

    we are talking about Varkeys and bigbazaar competing with each other and we also know reliance and more have never made a profit
    i hope and pray Lawson takes up bigbazaar coz i have invested in pantaloons share many like me must have invested

    we have subiksha vishak who have failed !! i strongly feel spencers is also following them so many spencers have closed

    WHERE ARE WE GOING ???

    I STILL FEEL VARKEYS WAS THE THE BEST

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  60. Too many questions...

    I believe Kishore Biyani is a maverick and timed his sale well. He sold Pantaloon and Future Capital in last month. This means he has cut down his debts by selling non-core business. I think he will now be focusing on other formats, particularly Big Bazaar. I believe Big Bazaar is doing well and is probably the best in Indian industry after Trent (Tatas).

    Biyani, ventured in to lot of things. Before he made a mess of all, he is selling what he cannot grow further. That is a smart thing to do in business. With these two deals he has cut down his debts by around Rs.2000 crore.

    Industry is still evolving. Only the tough with deep pockets and good management can survive. I will say Reliance has not started yet. Everyone is waiting for the FDI limit to be increased. Once it is increased, it will be a fight between Tata, Reliance, Birla, Bharti, and Biyani's Future group with their international partners among Walmart, Tesco, Carrefour, Metro, Spar, Target, Ocado and more.

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  61. VARKEYS IS BACK,VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,
    VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK, VARKEYS IS BACK,VARKEYS IS BACK,

    LETS START SHOPPINGFROM OUR FAV PLACE

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