Fabindia case study (2)

FabIndia – Retail and Marketing Strategy

September 9, 2012

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Copyright © 2009 Monitor Company Group, L.P. — ConfidentialCAS-COD-Prez-Date 2

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

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Company OverviewFact Sheet

The Company FabIndia

Business Description

Fabindia is India's largest private platform for products that are made from traditional techniques, skills and 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, CottonsOrganic Food and Furniture: Several organized chains such as Godrej’s Nature Basket in food. Primarily unorganized sector in Furniture

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Company OverviewEvolution

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 OverviewProduct Mix

WIDTHWIDTH

• Women’s wear

• Indian (30%)

• Western (20%)

• Men’s wear (28%)

• Accessories (15%)

• Infant, Kids, teens (7%)

• Maternity wear

• Women’s wear

• Indian (30%)

• Western (20%)

• Men’s wear (28%)

• Accessories (15%)

• Infant, Kids, teens (7%)

• Maternity wear

• Upholstery and curtains (30%)

• Bed linens (30%)

• Table and bath linens, floor coverings (20%)

• Furniture, Lighting, Home accessories (20%)

• Upholstery and curtains (30%)

• Bed linens (30%)

• Table and bath linens, floor coverings (20%)

• Furniture, Lighting, Home accessories (20%)

· Body wash

· Shampoo

· Soap

· Body wash

· Shampoo

· Soap

· Cereal

· Honey

· Preservers

· Jams

· Relishes

· Coffee

· Cereal

· Honey

· Preservers

· Jams

· Relishes

· Coffee

Garments (70%

)

Home

Furnishings

(25%)

Body Care (3%)

Organic Food (2%)

DEPTH

Source: Qualitative Interviews from Store Manager

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RETAIL STRATEGY

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Retail Strategy Store Mix

• Premium

• Regular

• Concept

• Online

Type of Stores

• Self owned & leased Stores

• Joint Venture in Italy

• Franchisee in other Foreign Countries

Ownership

• Heritage Landmarks, Destination Stores

• Aesthetics connection to all things naturalLocation & Ambience

• Uniforms conveying their ideology

• Routine Visits to supplying weavers and training programsStaff

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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 OverviewInvolvement of Store Staff in Merchandising

• Allotted a budget for ordering goods and operational expenses

• Budgets: Store Location, Previous year’s Sales, other macroeconomic indicators

• Interacts regularly with the merchandisers at the HO

• Stocking plans

Entrepreneurial Store Managers

• To control the quality of sales process and customer service

Mystery Shopper Program

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BUSINESS STRATEGY

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Infusion of Funding

To aid the rapid growth, FabIndia will raise equity

either through IPO or Private Placements

Diversification

Expanding into new product categories such Furniture

and Organic Food

Fab India’ s Regional Business Programs

Develop retail stores based on region/genre

Rapid Expansion into newer cities

Plan to open 40-45 micro stores* every year

Global Expansion

Adapting to the local culture & expansion into areas with large Indian Diaspora such as South

Africa, Bahrain etc

BUSINESS STRATEGY: FOCUS 2012-13

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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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

FabIndia’s Strategy

• 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

Business Model

• Predominantly rural suppliers• 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

Fab India’s SCM Model

BUSINESS MODEL

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Distribution ChannelSupply Chain Management

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

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Existing Products New Products

MARKET PENETRATION• FabIndia has changed its selling strategy over the

recent few years by selling some of its trendier merchandise at a slightly higher price, thus enhancing higher margin products

• FabIndia is planning to remarket and expand its home furnishings range

PRODUCT DEVELOPMENT

• FabIndia has been experimenting with new products such as brass items and wooden artifacts for which it has developed 44 new product range

MARKET DEVELOPMENT

• It has plans to open stores in new markets such as South Africa and Bahrain

• Fabindia plans to increase its presence in B-category towns by opening ~40 micro stores this year

DIVERSIFICATION

• The company has also ventured into healthcare with its teeth-whitening ayurvedic product

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BUSINESS DEVELOPMENT STRATEGY

ANSOFF MATRIX

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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 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 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

A delighted Customer is our Best Brand Ambassador”

USP : quality of the fabric and the cultivated image of ‘Indianness’

Does not follow any customer acquisition strategy: focuses on customer retention

Key element: word of mouth publicity ( Zero advertising except print ads during promotions ), advertorials, mobile marketing, in-store 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 offeringsSOURCE: Interview of Mr. William Bissel, MD, Fabindia published in The Economic Times, Jun 2011

85%

15%

Customer Profile

Repeat customers

Other

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CUSTOMER SHOPPING EXPERINCE

Since Fabindia relies so heavily on Word of mouth publicity, we

conducted a market research of prospective customers to

understand their behavior and here are the findings…..

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CUSTOMER SHOPPING EXPERINCE

• 70% of respondents were above 30 years of age• 60% - Females, 40% - Males

Demographics

• 90% - Word of mouth• 10% - Print Media

Brand Awareness Sources

• 80% Extremely Satisfied• 10% Satisfied but consider them pricey

• 10% Not SatisfiedProduct Ratings

• 75% Delightful• 15% Good• 5% Average

• 5% Needs improvement

Shopping Experience at the Store

• Only 30% shopped online• Out of 30%, only half of them had purchased online from Fabindia,

but preferred coming to store for shoppingOnline Spending Behavior

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WHAT BRINGS THE CUSTOMERS TO FABINDIA

PRIORITY FACTORS* SATISFACTION

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

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

Internet Campaigns

Options for 2nd and 3rd tier

towns

Time Harried Upwardly Mobile

Focus on Foreign Markets

Partnership with major

online retailers

Online Strategy

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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

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