1. BUSINESS PLAN
Handbags and Shopping Bags from Fabric Waste
BY
SRIKANTH S
JANANI V
Students of Thiagarajar School of Management,
Thirupparankundram,
Madurai - 625 005
Guided by
Dr. P. MOHAN SUYAMBURAJ,
Professor,
Thiagarajar School of Management,
Madurai-625 005
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2. Table of contents
S.No Title Page No
1 Context 3
2 Rationale 3
3 Objective 3
4 Category size 4
5 Category growth 4
6 Methodology 5
7 Market analysis 5
8 Industry analysis 6
9 Existing players 8
10 Financial Analysis 8
11 Marketing channel 9
12 Conclusion 10
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3. 1. Context
There are considerable numbers of urban poor women who don’t earn livelihood due to their
constraint to stay at home. At home, they lack relevant skills and resources (both monetary
and business development related) to start micro business of their own. Women who stay at
home have very few available livelihoods to pursue, e.g. pickle making, stitching,
embroidery, precious stone scrubbing, etc. Most of these livelihoods require skills and
resources to start with. For example, stitching and embroidery require relevant skills and
minimum infrastructure to be pursued as livelihood. On other hand, livelihoods which require
low level of skills and infrastructure e.g. pickle making, vegetable trading and bead
sequencing carry very low incomes.
2. Rationale
There is need for exploration of an alternative livelihood in slum areas for women, who are
constrained to stay back at home. Such women cannot pursue livelihood as a construction
worker, domestic help or sweeper as these livelihoods require outdoor activities. The need is
for such a livelihood which is flexible enough to be pursued from home, apart from being
remunerative enough to be pursued by women for additional income for family.
It has been years since the government put a complete ban on the use of plastic carry-bags all
over the nation. It came into effect since August 1, 2010. The prohibition applies to
manufacturers, storage, import, sale and transport of plastic carry-bags. No shop-keeper,
retailer, trader, hawker or vendor is allowed to supply goods to customers in plastic carry-
bags.
The ban of plastic bags in the market has given rise to a business opportunity to introduce a
substitute to plastic bags. A cloth bag fits well as a substitute for plastic bags. It is more
preferable when compared with plastic bags due to its longer durability.
As a matter of fact, retail stores have started charging an amount (Rs. 2 per carry bag) in
order to prevent the usage of plastic bags.
3. Objective
The objective is to explore ‘Cloth handBag and shopper’s bag manufacturing’ as an
alternative livelihood that can be pursued by urban poor house wives, who cannot pursue
other livelihoods due to lack of skills & resources, both monetary and otherwise.
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4. 4. Category Size
Estimated at Rs 2,000 crore
Urban India is estimated at Rs 1,470 crore a year.
39.7 per cent of the total bags market and is valued at Rs 585 crore.
Volume
0.63 Crore units a year, which is 46 per cent of the total market for bags in terms of
volume.
5. Category growth
Women's handbags market in India
The women handbags market in India is estimated at Rs 2,000 crore. It is projected to grow at
about 15 per cent annually in the next five years to Rs 4,000 crore.
The key growth drivers are: increasing number of working women, their rising incomes,
increasing fashion consciousness and aspiration levels, and growing influx of foreign brands.
The Majority of the market (about 70 per cent) belongs to unbranded products, including
local or regional brands. However, going forward the growth rate of the branded segment is
estimated to be much higher (about 25 per cent) than the overall market.
The fairly established brands include Hidesign and Da Milano. Other brands such as Calonge,
Blue & Blues and Crew Republica are relatively new in the category.
More and more consumers today prefer to shop handbags from organised retail. Retailing of
handbags at airports is on the rise due to increased travel by the potential consumers.
The market for ladies handbags in India
The total value of the bags market in urban India is estimated at Rs 1,470 crore a year.
The market for ladies handbags/purses in India is 39.7 per cent of the total bags market and is
valued at Rs 585 crore.
The total volume of the ladies handbags/purses market in urban India is estimated at 0.63
crore units a year, which is 46 per cent of the total market for bags in terms of volume.
On an average, men spend Rs 750 per unit while buying handbags for ladies, but when
women shop for them, they tend to spend a lesser amount, that is, Rs 565. Most consumers
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5. prefer buying ladies handbags from exclusive branded outlets (28 per cent) or department
stores (24 per cent). Forty-five per cent consumers prefer to shop for them at malls.
Growth
15 per cent annually in the next five years to Rs 4,000 crore
Key growth drivers
Increasing number of working women
Their rising incomes
Increasing fashion consciousness and aspiration levels
Growing influx of foreign brands
Product Life Cycle
About 70 per cent belongs to unbranded products, including local or regional brands.
The growth rate of the branded segment is estimated to be much higher (about 25 per
cent) than the overall market
Seasonal
Sales cyclicality
Restrictions in imports
Fashion is cyclical in nature
6. Methodology
The research is aimed at conducting primary and secondary market research to understand
industry players, industry growth potential, key success factors, risks and competitive
landscape. Business will be evaluated by building thorough understanding of different types
of cloth bag and understanding the production process (throughput time, bottlenecks etc).
Attempt has been made to understand the whole value chain, potential customer, competition,
projected financials and cost structure.
7. Market Analysis
Product
Broadly, a cloth bag can be manufactured using either a synthetic cloth or a traditional cloth.
Traditional cloth is typically a scrap from garment factory, retail outlet or old saree, used bed
sheets, old clothes etc.
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6. When both demand and price were determined by market analysis, it was noted that demand
is high and price are reasonable. The following table shows the prices of bags sold in
Pudhumandapam, Madurai and nearby areas.
PRODUCT TYPE PRICE(Rs.) NUMBER OF BAGS
SOLD PER DAY
Ethnic bag 250-300 30
Casual hand bag 100-180 50
Hunch bag 20-50-100 80
Rugged bag 70-150 25
Thamboola bag Seasonal Contract Basis
Shoppe bag 5-10-15 Cannot be determined
8. Industry Analysis
Due to legislation of ban on plastic bags, a huge opportunity for a substitute has cropped up.
Such a substitute has to provide minimum features, which were provided by plastic bags. For
e.g. the substitute has to be strong enough to bear weight of grocery, durable enough to be
used multiple times, cheap enough to be given almost free of cost by retailers, malls etc. A
cloth bag (and not paper bag) fit well as substitute of plastic bag as it carries weight, stays
long and cost a little.
Key Success Factors of industry
For a manufacturer to succeed in Cloth bag manufacturing, the manufacturer has to compete
well on following parameters3 of success in the industry -
1) Low cost of cloth bag
This is the cost of making a cloth bag. To compete well in market, the cost of
manufacturing cloth bag is low.
2) Turnaround time
This is time taken by manufacturer to service the order. For a player to compete well,
turnaround time to service a order has to be as low as possible.
3) Durability of cloth bag
More times a bag can be used, higher is its durability and higher is its demand
4) Strength of cloth bag
Stronger is the bag, higher is its demand
5) Least raw material cost
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7. 6) Durability
7) Environment friendly
8) Lack of branding
9) Non- perishable & all time demanded in market
Value Chain
The value chain starts with collection of scrap of cloth. Scrap of cloth may be sourced from
garment factories in Tirupur, Erode, Madurai, Karur, etc. It can also be sourced from export
garment factories in city and outskirts.
The value chain starts with pool of cloth wastes. The fabric waste could be designed
to a bag according to its size, fabric type etc. Packaging would be carried on after the
completion of stitching process with quality double-checks.
Both ladies hand bag and shoppers bag has the same production process and distribution
process only change in it are its end customer
Sewing are provide to household of women, they typically do not possess capital to buy
stitching machines, for women to work from home. Skill Training - women may be trained
for making high quality bags for bigger brands, for printing of the logos and for acting as
intermediary or supplier.
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8. Home delivery and collection – Women do not want to go out of their houses, even for
procurement and supply. There is need of a cab, which can give door delivery of the scrap/
fabric and can collect the cloth bags after production and which reduces the working space
cost and also reduces the labour cost.
9. Existing players
There is a lot of competition along with scope in cloth bag manufacturing in North
India particularly in Jaipur, since barriers to enter into this business are low.
Anyone possessing a sewing machine can start making fabric bags as the raw
materials costs is no big deal.
Despite huge competition, a garment export company utilising its own waste and
turning into profits is somewhat new and innovative.
The existing players are not as hard in South India as it is in North India.
10. Financial Analysis
Cost Structure
Cost structure of cloth bags made from synthetic fabric and one made from traditional cloth
(scrap) are different. The cost structures are discussed in detail below –
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9. Cost structure for fabric hand bag- Conservative level:
PARTICULARS UNITS AMOUNT
A. PRODUCTION OF BAGS PER DAY(after
returns) 150
B. PRODUCTION FOR ONE MONTH 3,600
C. SELLING PRICE PER BAG 70
D. SALE 252000
Less: Fixed cost NIL*
Less: Variable cost
LABOUR 10 30,000
PERQUISITES 5000
SALES AND ADVERTISEMENT 25000
MISCELLANEOUS (Handling, purchase of thread
etc, 25000
TOTAL EXPENSES 85,000
ESTIMATED PROFIT 1,67,000
*Since working space and machinery are available, there is no additional fixed cost.
**Cost of incorporating the hand bags in the existing website.
11. Marketing Channels
Retailing
Since the company has its own showrooms operating in the city retailing will be
considerable. It creates economic utility for consumers by providing the products in the form,
place and time desired by the consumer. Moreover it gives the pleasure of shopping
experience for the end users.
The consumers would like to feel and touch the product before they buy. This is possible
in retail markets.
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10. Online Marketing
Online shopping is the most emerging way for the customers to reach the product that
they desire to buy. There are several websites for online shopping that facilitates cash on
delivery, attractive discounts, daily deals etc.
http://www.snapdeal.com/products/lifestyle-handbags-wallets
As the price ranges from Rs.500 to Rs.2500 as it includes transportation cost.
Combination of retailing and internet marketing
By taking orders on the Internet the company avoids setting up an international
distribution infrastructure. However, another trend is that companies like to feel and touch the
product before they buy. That is hard to do on the Internet. So the combination of both
retailing and online marketing will be appropriate.
Advertising strategies
Website promotion
Updating in the company’s website providing the list of products available, price, discounts
and offers can be much easier for the customers to access and shop online from their place.
Articles in women’s magazine
There are several women’s magazines in the market so giving ads in those pages and giving
article or informative news about the seasonal packages like Navarathiri would be effective.
Promotional events in colleges and schools
As the product is an eco-friendly type it can be promoted by conducting events, stalls in
college cultural and functions as there will be a huge crowd of people from in and round
colleges.
12. Conclusion
Since there is a wide market for fabric bags, one can transform fabric waste to handbags
and make profits. It is much easier for the existing labour and resources such as work space,
machinery than setting up a new firm.
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