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Fabindia case study (2)
1.
FabIndia – Retail
and Marketing Strategy September 9, 2012
2.
Confidential Table of Contents
SECTION TITLE PAGE 2 OVERVIEW 6 3 RETAIL AND BUSINESS STRATEGY 17 4 MARKETING STRATEGY 24 5 DISTRIBUTION AND SOURCING STRATEGY 37 6 COMPETITIVE LANDSCAPE 46 8 SWOT 52 CAS-COD-Prez-Date 2 Copyright © 2009 Monitor Company Group, L.P. — Confidential
3.
Confidential Company Overview Fact Sheet
The Company FabIndia Business Fabindia is India's largest private platform for products that are made from traditional techniques, skills and Description hand-based processes Business Segments • The company operates through three segments – Fabindia stores, Wholesale Exports, and Institutional Sales • Fabindia’s first retail store opened in New Delhi in 1976. Today, Fabindia has 141 retail stores across India and 1 store each in Dubai, Nepal and Italy. • The product range consists of garments for men, women, children and infants; garment accessories; home furnishings – bed, bath, table and kitchen linen, upholstery fabric, curtains, floor coverings and a range of non textile products like furniture, lights, lamps and stationery. In addition to handcrafted clothing and home furnishings, Fabindia’s product line includes organic foods and Personal care products. • Fabindia exports to over 33 countries worldwide, to wholesalers as well as retailers. Products include home linens as well as garments. Revenues 350 Cr – 500 cr(as its privately held hence exact numbers were not available) Staffing Marketing Focus Fab India’s marketing strategies are focused on the company’s basic philosophy that there was a need for a vehicle for marketing the vast and diverse craft traditions of India and thereby help fulfill the need to provide and sustain employment. Retail Strategy Focus Competitors Clothing: Very little competition from organized sector, primary competition is from small regional boutique players such as Kilol, Anokhi, Cottons Organic Food and Furniture: Several organized chains such as Godrej’s Nature Basket in food. Primarily unorganized sector in Furniture CAS-COD-Prez-Date 3 Copyright © 2009 Monitor Company Group, L.P. — Confidential
4.
Confidential Company Overview Evolution
FabIndia Evolution • Founded in 1960 by John Bissell to market the diverse craft traditions of India, Fabindia started out as a company exporting home furnishings. The first Fabindia retail store was opened in Greater Kailash, New Delhi fifteen years later. • By the early eighties, Fabindia was already known for garments made from hand woven and hand printed fabrics. The non-textile range was added in 2000, while organic foods, which formed a natural extension of Fabindia’s commitment to traditional techniques and skills was added in 2004, with personal care products following in 2006. Handcrafted jewellery was introduced in 2008. Present Situation • Today, with a pan-India presence, Fabindia is the largest private platform for products that derive from traditional crafts and knowledge. A large proportion of these are sourced from villages across India where the company works closely with the artisans, providing various inputs including design, quality control, access to finance and raw materials. • The company now plans to scale up Number of stores. A critical part of that expansion plan is to take the brand to tier 2 and 3 cities through a new format called micro stores. These are smaller stores, which do Rs. 50 lakh turnover a month, about 600-800 square feet, work on a single shift and are not open on Sundays. • Add new product lines such as furniture, jewelry and personal care products and even organic food “FabIndia brand is much bigger than the size of the company and continues to grow” CAS-COD-Prez-Date 4 Copyright © 2009 Monitor Company Group, L.P. — Confidential
5.
Confidential Company Overview Product Mix
WIDTH Home Garments Body Organic Food Furnishings (70%) Care (3%) (2%) (25%) •Women’s wear •Upholstery and Body wash Cereal curtains (30%) D •Indian (30%) Shampoo Honey E •Bed linens (30%) P •Western (20%) Soap Preservers T •Table and bath H •Men’s wear (28%) linens, floor Jams coverings (20%) •Accessories (15%) Relishes •Furniture, Lighting, •Infant, Kids, teens Home accessories Coffee (7%) (20%) •Maternity wear Source: Qualitative Interviews from Store Manager CAS-COD-Prez-Date 5 Copyright © 2009 Monitor Company Group, L.P. — Confidential
6.
Confidential
RETAIL STRATEGY CAS-COD-Prez-Date 6 Copyright © 2009 Monitor Company Group, L.P. — Confidential
7.
Confidential Retail Strategy Store Mix
• Premium • Regular Type of Stores • Concept • Online • Self owned & leased Stores Ownership • Joint Venture in Italy • Franchisee in other Foreign Countries • Heritage Landmarks, Destination Stores Location & Ambience • Aesthetics connection to all things natural • Uniforms conveying their ideology Staff • Routine Visits to supplying weavers and training programs CAS-COD-Prez-Date 7 Copyright © 2009 Monitor Company Group, L.P. — Confidential
8.
Confidential Retail Strategy Store Location
Location – Up market, Chic, High Footfalls areas Ishanya Mall, Pune Khan Market, Delhi Mega Mall, Gurgaon CAS-COD-Prez-Date 8 Copyright © 2009 Monitor Company Group, L.P. — Confidential
9.
Confidential Retail Strategy Store Décor
Store Decor – Clearly highlights the natural organic theme CAS-COD-Prez-Date 9 Copyright © 2009 Monitor Company Group, L.P. — Confidential
10.
Confidential Retail Strategy Product Assortment
– Within the store Product Assortment – Highlighting the newly launched product line at the entrance Traditional Mainstay(Clothing) still occupy the majority spaces in most of the stores CAS-COD-Prez-Date 10 Copyright © 2009 Monitor Company Group, L.P. — Confidential
11.
Confidential Company Overview Involvement of
Store Staff in Merchandising • Allotted a budget for ordering goods and operational expenses • Budgets: Store Location, Previous year’s Sales, Entrepreneurial other macroeconomic indicators Store Managers • Interacts regularly with the merchandisers at the HO • Stocking plans Mystery Shopper • To control the quality of sales process and Program customer service CAS-COD-Prez-Date 11 Copyright © 2009 Monitor Company Group, L.P. — Confidential
12.
Confidential
BUSINESS STRATEGY CAS-COD-Prez-Date 12 Copyright © 2009 Monitor Company Group, L.P. — Confidential
13.
Confidential BUSINESS STRATEGY:
FOCUS 2012-13 Fab India’ s Regional Diversification Business Programs Expanding into new product Develop retail stores based categories such Furniture on region/genre and Organic Food Rapid Expansion into newer cities Global Expansion Plan to open 40-45 micro stores* Adapting to the local culture & every year expansion into areas with large Indian Diaspora such as South Africa, Bahrain etc Infusion of Funding To aid the rapid growth, FabIndia will raise equity either through IPO or Private Placements Micro stores have a monthly turnover of 40-50 lakhs only and occupy an area of less than 800 sq ft CAS-COD-Prez-Date 13 Copyright © 2009 Monitor Company Group, L.P. — Confidential
14.
Confidential BUSINESS MODEL FabIndia’s
Strategy FabIndia has based its strategy on the following: • Focusing on net margin of 8% and above(nearly three times more than the industry average) • a supply chain network of more than 40000 handloom weavers and artisans • training its employees to understand the importance of being friendly Business Model • FabIndia's relentless focus on effective direct SCM forms the core of its business model. • Follow a social, partnership based procurement process • Its strategy is to procure products directly from rural weavers and also making them direct shareholders in the company Fab India’s SCM • Predominantly rural suppliers Model • Two level of suppliers; national and region based • Most of the regional suppliers are illiterate hence a major chunk of them have no/sketchy written agreements • Company has a lot of goodwill in rural areas • As they procure directly from rural artisans hence profit margins are much higher than competitors • No goods are returned to suppliers even if the supplied goods do not match with design brief given to them. Very often payment is in the form of cash • Fabindia helps in arranging micro finance to these artisans • Trust rather than agreement is driving force for managing supply chain process • Store managers and staff continuously give feedback about customer preferences and feedback to supply chain and design team • However, not all the feedback is passed on to artisans and rather Indian styles and patterns are encouraged CAS-COD-Prez-Date 14 Copyright © 2009 Monitor Company Group, L.P. — Confidential
15.
Confidential Distribution Channel Supply Chain
Management Fabindia manages a direct and effective SCM with more than 40000 weavers and artisans CAS-COD-Prez-Date 15 Copyright © 2009 Monitor Company Group, L.P. — Confidential
16.
Confidential BUSINESS DEVELOPMENT STRATEGY
ANSOFF MATRIX Existing Products New Products Existing Markets MARKET PENETRATION PRODUCT DEVELOPMENT • FabIndia has changed its selling strategy over the recent few years by selling some of its trendier • FabIndia has been experimenting with new products merchandise at a slightly higher price, thus enhancing such as brass items and wooden artifacts for which it higher margin products has developed 44 new product range • FabIndia is planning to remarket and expand its home furnishings range New Markets MARKET DEVELOPMENT DIVERSIFICATION • It has plans to open stores in new markets such as • The company has also ventured into healthcare with its South Africa and Bahrain teeth-whitening ayurvedic product • Fabindia plans to increase its presence in B-category towns by opening ~40 micro stores this year CAS-COD-Prez-Date 16 Copyright © 2009 Monitor Company Group, L.P. — Confidential
17.
Confidential
MARKETING STRATEGY CAS-COD-Prez-Date 17 Copyright © 2009 Monitor Company Group, L.P. — Confidential
18.
Confidential MARKETING MIX
Description Product • FabIndia is India's largest private platform for products that are made Existing Markets from traditional techniques, skills and hand-based processes. IT offers has a huge portfolio of products. Its merchandise offers an assortment of grocery products as well as a wide variety of other goods. • Fabindia's products are natural, craft based, contemporary, and affordable Place • Today, Fabindia has 141 retail stores across India and 1 store each in New Markets Dubai, Nepal and Italy. • Fabindia has decided not to expand through the franchisee route in the domestic market as it feels that it will dilute the brand Price • FabIndia does not offer discounts or sale on its products • However, after the launch of high ticket items such as furniture, it offers easy EMI options Promotion The company never advertises aggressively but makes people talk about the product and shopping experience CAS-COD-Prez-Date 18 Copyright © 2009 Monitor Company Group, L.P. — Confidential
19.
Confidential BRAND STRATEGY
Customer Profile A delighted Customer is our Best Brand Ambassador” 15% Repeat USP : quality of the fabric and the cultivated image of ‘Indianness’ Existing Markets customers Does not follow any customer acquisition strategy: focuses on 85% Other customer retention Key element: word of mouth publicity ( Zero advertising except print ads during promotions ), advertorials, mobile marketing, in-store New Markets posters Mystery Shopper Program: to check the customer satisfaction level •Motivating factor for the customer: quality and consistency of product and the service •Over 83% of Fabindia’ s customers go back satisfied, with 58% being highly satisfied with the brand and its offerings SOURCE: Interview of Mr. William Bissel, MD, Fabindia published in The Economic Times, Jun 2011 CAS-COD-Prez-Date 19 Copyright © 2009 Monitor Company Group, L.P. — Confidential
20.
Confidential CUSTOMER SHOPPING EXPERINCE Since
Fabindia relies so heavily on Existing Markets Word of mouth publicity, we conducted a market research of prospective customers to New Markets understand their behavior and here are the findings….. CAS-COD-Prez-Date 20 Copyright © 2009 Monitor Company Group, L.P. — Confidential
21.
Confidential CUSTOMER SHOPPING EXPERINCE
• 70% of respondents were above 30 years of age Demographics • 60% - Females, 40% - Males Existing Markets • 90% - Word of mouth Brand Awareness Sources • 10% - Print Media • 80% Extremely Satisfied New Markets Product Ratings • 10% Satisfied but consider them pricey • 10% Not Satisfied • 75% Delightful • 15% Good Shopping Experience at the Store • 5% Average • 5% Needs improvement • Only 30% shopped online Online Spending Behavior • Out of 30%, only half of them had purchased online from Fabindia, but preferred coming to store for shopping CAS-COD-Prez-Date 21 Copyright © 2009 Monitor Company Group, L.P. — Confidential
22.
Confidential WHAT BRINGS THE
CUSTOMERS TO FABINDIA PRIORITY FACTORS* SATISFACTION Existing Markets Quality of Fabrics Range of Garments Available Range of Garments Available Price of the Garments Price of the Garments Quality of Fabrics The Fabindia brand Location of the Store Traditional work Designs/Colors of Garments New Markets Natural Fabric ( eg. Cotton, Linen) Service provided by Staff Location of the Store Store Ambience Service provided by staff Display of the Garments at Store Display of the Garments at Store Store Ambience *Not in any particular rank CAS-COD-Prez-Date 22 Copyright © 2009 Monitor Company Group, L.P. — Confidential
23.
Confidential
ONLINE STRATEGY CAS-COD-Prez-Date 23 Copyright © 2009 Monitor Company Group, L.P. — Confidential
24.
Confidential ONLINE STRATEGY FOCUS
Focus on Foreign Markets Options for Internet 2nd and 3rd Campaigns tier towns Online Strategy Partnership Time Harried with major Upwardly online Mobile retailers CAS-COD-Prez-Date 24 Copyright © 2009 Monitor Company Group, L.P. — Confidential
25.
Confidential ONLINE EXPERINCE
“ Although I am very tech savvy yet, I would prefer the warmth of the store and touch & feel of Fabric over online shopping. Online is just not personalized enough” A loyal customer CAS-COD-Prez-Date 25 Copyright © 2009 Monitor Company Group, L.P. — Confidential
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Confidential
LEARNINGS • Create an exquisite, high quality and exclusive product • A price point that defines that exclusiveness yet not out of reach of common man • Operate at a niche market with limited accessibility that builds an aura • Never advertise but make people talk about the product and shopping experience CAS-COD-Prez-Date 26 Copyright © 2009 Monitor Company Group, L.P. — Confidential
27.
Confidential
Q&A CAS-COD-Prez-Date 27 Copyright © 2009 Monitor Company Group, L.P. — Confidential
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