7Avenues Model

From: Sandeep Saxena

Sent: Friday, 10 October 2008 20:09

To: 7to9 Retail Team

Cc: 7Avenues Team; 7Avenues Website

Subject: 7to9 Retail Grows despite Market Uncertainties

Dear 7to9 Retail Team,

As you might be aware, reading in newspapers and on television, there is a massive global financial and business downturn.

For those who are not aware, some of the biggest names in the global financial industry, like Lehman Brothers, Washington Mutual have gone down, and other financial giants like AIG and Wachovia are at risk. Banks and Financial Institutions in Europe and Asia are also impacted.

Even in India, things have taken a serious turn this week:

Manufacturing growth has slowed down to 1.7% last month , which means a sharp decline in real economy
Stock markets have registered the largest ever fall in a week and that too by a massive amount
Many financial companies and real-estate companies are openly talking about a liquidity crunch, which in turn, is resulting in longer transaction cycles.

Further, you might be aware of developments visible in the retail industry around us:

Subhiska has passively shut down almost 50% stores and we market sources say that they have not paid rents and salaries for 3 months.
Indiabulls retail venture has shut completely
Other major retailers are in similar modes
However, you will observe that small grocery shops etc are still buzzing with activity and getting ready for Diwali (this is after all the biggest consumer buying season in India, similar to the ThanksGiving and Christmas Holidays in America and Europe)

How are we faring? Where are we in all this?

We may be one of the few organized Indian retailers, or maybe the ONLY retailer, worth some size that has registered revenue growth for last 2 months (around 25% growth) and we are set for more growth in the next 3 months. Note that this growth in revenues is coming from the same base i.e. on same stores. So its arising from improvement in operations and better customer relationships.
We have paid all salaries and rentals in time, unlike our more known competitors.
We are getting more and more job inquiries from employees of other retailers who are scaling down.
We have expanded staff to plan for growth, and we are in process of giving Insurance (very few Retailers have done this) and have registered the ESOP plan for employees (we are the first Retailer in India give ESOPs to employees at all levels).
We have continued on Gofrugal ERP implementation and not put it off, because strength in back-end process and systems is critical for sustainable and profitable growth.
And we are actually rolling out a couple of new lines of business to serve our customers better.

However, we are not untouched by these tough times. Our incoming investments have taken a dip in the last couple of months, but still the above is true. Why?

Because:

1. We don't fool ourselves, with unrealistic rental rates (like some competition signed-up using funds from Financial Institutions), with short term focus on employees and customers, and giving incomplete picture in reports. Every rupee we spend comes from our own pockets because we are the owners of this company.

2. Our true friend and investment has been our customers. Our growth plan revolves around our customers, trying to offer them a range of products and services. So we must keep that focus and it will pay rich rewards. Lets continue to have "best customer service" as a our top priority.

3. We have kept an eye on profitibility gap and have quickly moved to consolidation mode, to get over these tough times.

I know that you all value this job, team and the fact that we are much more professional company. It depends upon each one of us to perform with full enthusiasm.

Actually, we are soon poised to go against the tide - we are planning to re-open 2 stores once the GoFrugal implementation gets over, and we are ready to start 5-6 more stores after that.. It will be a major change in our capabilities.

So please tighten your belts. We have a point to make for people watching the Indian Retail Industry, that we are the only retailer geared to scale up significantly.

It will be fun and great challenge to perform in these times. Its once in a lifetime kind of opportunity.

Warm Regards,

Sandeep Saxena

CEO, 7to9 Retail and MD, 7Avenues

Cell: +91-9752030660