Fabindia case study (2)

FabIndia – Retail and Marketing Strategy

September 9, 2012

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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

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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


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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”


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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

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RETAIL STRATEGY


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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


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Retail Strategy
Store Location

Location – Up market, Chic, High Footfalls areas

Ishanya Mall, Pune Khan Market, Delhi Mega Mall, Gurgaon


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Retail Strategy
Store Décor

Store Decor – Clearly highlights the natural organic theme


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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


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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


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BUSINESS STRATEGY


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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

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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


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Distribution Channel
Supply Chain Management

Fabindia manages a direct and effective SCM with more than 40000 weavers and artisans


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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


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MARKETING STRATEGY


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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


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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


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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…..


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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


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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

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ONLINE STRATEGY


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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


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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


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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


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Q&A


Fabindia case study (2)

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