More than costs, though, it is the supply chain that is Subhiksha's biggest challenge today. With customers often not able to get what they are looking for in the stores, the retailer risks putting them off forever.

As E&Y's Mishra points out, "A store has to deliver on time and in the right quantity, otherwise it will lose customers. As it is, the customer base for a neighbourhood store is a highly loyal one and it is difficult to wean away customers from the local kiranas."

Subramanian admits this has been an issue, with availability of stocks down to a low 68 per cent just a few months ago. "It's better now at about 80 per cent," he claims.

The problem appears to lie in its decision to keep inventories lean - just 18 days against an industry average of 30-35 days. At times, it's "too lean, almost skinny", as an industry watcher points out. Khattar points out that some consumer product suppliers are taking time to adjust to its quicker schedules. That could be an issue, agrees Mishra.

"Even in mature markets, the fill rate for big FMCG firms is only around 95 per cent. In ours, it could be 60-65 per cent," he points out.

Still, that only means Subhiksha needs to work that much harder to ensure its supply chain remains seamless. Khattar agrees. He points out that the company has recently implemented SAP enterprise software systems in a bid to streamline processes further.

Photographs : Manan Vatsyayana/AFP/Getty Images