STRATEGIC ANALYSIS FABINDIA
Group V: Budhad Budhadity itya a Banerje Banerjee e Sour Sourab abh h Dhari Dhariw wal Tarun arun Dag Daga Uma Uma Balak Balakris rishn hnan an
AGENDA
Timeline Fabindi abindia a under under John Bisse Bissell ll Fabindia abindia under William Bissell Bissell Competitor Analysis SWOT Analysis Buying Behaviour and the Way Ahead ±
±
±
Organic Food Apparel Home Furnishings & Furniture
Financial Comparisons Recommendations Recommendations at a Glance
TIMELINE FabIndia
Indian Economy Economy Post Post 4747 - govt supports socialism & nationalism
1960- Incorpor Incorporation ation in Delhi
1957- Govt sets up KVIC
1976- First First retail retail store store in GK 1977- Contem Contempor porari arizzes design design 1981- Introduc Introduction tion of garmen garments ts
1990- Fiscal deficit reaches 8.5%
Indian economy economy opens opens up 1991- Indian 1992- Liaison with Habit Habitat at ends ends 1994-Second store opens in Delhi 1999- William William Bissell Bissell becomes becomes MD MD 2003-Vision Plan I originates 2004- Goes Goes onl onlin ine e 2005- Vision Vision Plan Plan II is born born
2006- 8% economic growth
brand 2006- Garments Garments make make 70% revenue revenue 2006- Govt allows foreign single brand outlets
FABINDIA UNDER JOHN BISSELL
Founded by American, John Bissell to: ± ±
Incorporated Incorporated in 1960 in Delhi to export upholstery fabric fabric By 1965, revenues revenues of Rs. 2 million due to: ± ±
Develop market for hand-woven products Provide rural employment
han d-woven en rugs etc from Panipat AS Khera, supplier of hand-wov Habitat, Habitat, major UK buyer buyer of Fabindia Pa Panipat nipat products products
1974 saw Fabindia Fabindiass first first retail store store in Greater Greater Kailash Kailash with ad-hoc ad-hoc merchandising 1977-Featured contemporary design to attract consumers and designers Garments were were introduced in 1980s after John Bissell got khadi shirts made for himself Habitat was was acquired in 1992 and and Fabindia Fabindia could no longer continue continue selling to it John Bissell dies in 1998, passing the baton to son William Bissell who becomes MD in 1999
FABINDIA UNDER WILLIAM BISSELL
End of license raj, and liberalization liberalization gave textiles duty concessions on machine imports Williams Williams vision included expansion, depending less on exports and setting up retail retail opera ope rations tions India saw robust economic growth, change in consumer patterns patterns and growth of middle class by 2006 20 06 2003 saw the birth of Vision Plan I ± ± ±
Planned to grow grow to revenues revenues of Rs. 1 b from Rs. 360 m in 4 years Achieved it in two years and Vision Plan II came along It planned to achieve revenues of Rs. 2 b by March 2009
COMPETITOR ANALYSIS
Organized Retail:
Shopper s Stop, Pantaloons, Globus, etc.) Retail Stores (Shopper
Strengths:-
Weaknesses:-
1. Str Strong ong Pan Pan-I -Ind ndia ia pre prese senc nce e and and
1. Prod Produc uctt dive divers rsit ity y lac lacki king ng
awareness
2. Stoc Stock k as as per per run runni ning ng tre trend ndss and and
2. Ma Mann-po powe werr expert pertis ise e
serve to fads-inconsistency
3. Comp ompeti etitive Pri Pricin cing
towards churning out quality
4. Robus obustt sup suppl ply y chai chains ns and and shor shortt
offerings in hand crafts
product development life cycles 5. High High mar mark ketin eting g commu communi nica cati tion onss spend 6. Qual Qualit ity y cons consci ciou ousn snes esss and and adherence to standards
3. Authenticity of handcrafts-No craftsmark present to validate the crafts as against the Fabindia offerings which have the same imprinted on them
COMPETITOR ANALYSIS
Government Initiatives ( Cottage Cottage Industries Emporium, Khadi Gram Udyog, State Government Department)
Strengths:-
Weaknesses:-
1. Sour Source ce of finan finance cess is fix fixed and and
1. Ambience-non-attractive mbience-non-attractive to
subsidies boost these initiatives initiatives
modern day shoppers are fed on
over time
the excellent excellent ambiences of the
2. Tie-u ie-ups ps with with forei oreign gn governments facilitating permanent trade of national handicrafts.
retail formats. 2. Stand Standar ardi diza zati tion on def defeats eats customization customization hands-down.
COMPETITOR ANALYSIS
Designer Boutiques: (Ritu Kumars, Ritu Beris, Rohit Bal, Manish
Malhotra, Sabyasachi Sabyasachi Mukherjee, Mukherj ee, etc.) Strengths:-
Weaknesses:-
1. Prod Produc uctt custo customi miza zati tion on
1. Exor Exorbi bita tant nt pric prices es-n -not ot
facilities-ex facilities-extremely tremely high 2. Highe ighesst lev level of
meant for masses 2. Not Not a robu robusst sup suppl ply y cha chain in--
customer intimacy-
not meant to be a pan-
Relationship marketing
India opera op eration tion
COMPETITOR ANALYSIS
Unorganized
Sector:-
Mom-and-pop stores
and local tailoring units:-
Strengths:-
Weaknesses:-
1. Effec ffecti tiv ve in addre address ssin ing g
1. Sour Source ce of finan finance ce-n -not ot sec secur ure e
high geographical geographical
2. Next Next-t -too-ni nill bran brand d equi equity ty
dispersion
3. Cus Custom tomer loy loyal alty ty-l -low ow
2. Cus Customi tomiza zati tion on facil acility ity available
4. Scar Scarci city ty of of ski skill lled ed manpo manpow wererlack of ability to employ the same-critical for expansion.
COMPETITOR ANALYSIS
NGOs & SHGs
Strengths:-
1. Stro Strong ng comm commit itme ment nt tow towar ards ds local communities 2. Help Helpss in maki making ng its its cli clien ents ts self-reliant 3. Enc Encour ourage ages wom women en entrepreneurs and hence a women can supplement supplement the males income towards a family
Weaknesses:
1. Lack Lack of exper xperti tise se on on par partt of the manpower 2. Lack Lack of am ambiti bition on to spread out on a pan-India or even a regional basis 3. Lack Lack scales ales of of ec econom onomy y
SWOT ANALYSIS
STRENGTHS
Quintessential Quintessential Indianness in fabric through the years ±
Popular for for authenticity of hand-woven fabric
Sourcing system from rural India ±
Strong supplier relationship
±
Provision of capital loans (in agreement with banks)
±
Leniency on order fulfilment & no-return policy
±
100% use of supplier supplier s capacity
Sustainable Sustainable employment opportunities to rural rural skilled skilled poor
Employees are given autonomy and hence inducing accountability
Focus on customer retention instead of generation
±
Large chunk of buyers are repeat purchasers
±
Product quality improvement improvement done don e keeping this in mind
Word-of-mouth strong enough not to require any advertising
WEAKNESSES
Delays in delivery from artisans ± ± ±
Insignificant spend on marketing marketing communications ±
Losing out on attracting new customers customers instead of depending only on repeat purchase
Not enough personnel personnel to push Fabindia Fabindia to greater greater growth growth ± ± ±
Opportunity losses due to irregularity Difficult to predict quantity and time of thaan coming from weaver Also arises as different stores are encouraged to order different stock
Unavailability Unavailability of people experienced in retail sector Unavailability Unavailability of people believing b elieving in the same mission More formal processes would face resistance from existing employees
Untimely delivery of products ± ±
Transport, storage and shelf-life issues of organic foods Suppliers were were spread pan-India
OPPORTUNITIES
Latent potential of organic foods market ± ±
Leveraging changing consumer tastes & perceptions Awareness genera generation tion of merit in these foods
Utilize multi-brand retail retail outlets and construction groups ±
Display of Fabindia Fabindia products products in MBOs and department department stores
±
Use of Fabindia Fabindia home furnishings furnishings in modular flats of buildings
Leverages footfalls of the store, increasing likelihood of sales If consumer buys this flat or any other, other, and is impressed, will use Fabindia furnishings furnishings
Leveraging Leveraging Web 2.0 tools and techniques ± ±
Tying up with matrimonial sites for designer fancy wedding wear Interactive website for designing as per individual requirements
Customization level is high Lead time between fixing of occasion date and event can be used for delivery
THREATS
Unorganized local operators ±
Handloom retail shops/chains in regional pockets
±
Souvenir shops providing indigenous products at lower prices
Entry of organized brands and companies into retail ±
High expected growth & entry of business houses in large ways
±
Competitors access funds from conglomerate partners or markets
Tilt of Indian consumers towards foreign brands ±
±
Foreign brands alter lifestyle choices of the target market Imported or designer home furnishings have greater flaunt value vis-a-vis Fabindia
Development of government co-operatives ±
Boost in future to KVIC and state handloom units
±
Improvement in their ambience and shopping experience
Rising prices of real estate could hamper growth ±
Opening new stand-alone stores will be tough
±
Experimenting with formats and markets may not be advisable
BUYING BEHAVIOUR & THE WAY AHEAD
Note: We We opine that Fabindia Fabindia cannot continue relying on just customer retention retention to fight off competition, and must focus on generating new customers also
ORGANIC FOOD
Increased consciousness about health, nutrition and physical physical well-being Display Display of price elasticity elasticity-- Do not mind paying paying more more for better health Organic food perceived as healthy, nutritious, non-synthetic and detoxifying Natural food encouraged by environment savvy consumers Domestic brands selling organic foods are trusted more as compared to multinationals selling org o rganic anic food
THE WAY AHEAD
Capacity expansion in terms of number of suppliers and quantity produced Significant investments investments in supply s upply back-end needed Skilled agricultural labour and experts are required for developing organic organic food chain We suggest investing in mutually beneficial CSR initiatives ±
±
Educating cultivators on soil building, pest management, crop rotation rotation and heirloom variety preservation Provision of organic organic soil nutrients like plant residue, mulch, green manure etc
APPAREL
Quality and prestigious brands brands are causing customers to drift Usually garments of different brands are tried while shopping Influencers Influencers are are primarily primarily of similar age groups and endorsers Consumers now identify with western brands which are high priced and are influential in making choices
THE WAY AHEAD
Capturing attention and engaging customers is critical Fabindia Fabindia can safely safely outclass many many established established brands brands in the same retail space We propose propose franchise model and selling sel ling in other stores ±
±
±
Higher brand awareness and attracts attracts consumers towards handcrafted apparel Reduces investment investment in Tier 1 and metros where real estate prices are high Consumers can can directly directly compare brands brands in same segment
Build partnerships with matrimonial sites to promote traditional design as wedding wear
FURNITURE AND HOME FURNISHINGS
Consumers Consumers tend towards towards non-branded non-branded players and hence brand consciousness is low Influencers tend to be the family members, especially the lady in the family Builder groups can be used as a platform to display furniture furniture in modular flats Consumers will hence get a touch-and-feel of the product product inst instead ead of going to the Fabind Fabindia ia store store
FINANCIAL COMPARISONS
Financial Financial aspects of Fabindia Fabindia have have been compared compared with Pantaloons Though not a direct competitor, competitor, it it represents the Indian Retail Retail Industry very well Financials for its direct competitors such as Anokhi, Cooptex optex etc. were not available, available, restricting comparison This assessment contrasts contrasts the performance of Fabindia with respect to the biggest big gest retailer retailer of India Indi a Hence, we get a sense s ense of the feasible options available available with Fabindia abindia to raise raise funds funds
FabIndia Interest Coverage Ratio
Pantaloons Interest Coverage Ratio
20.00
4.50
18.00
4.13
4.00
17.35 16.54
16.00
3.50 3.31
3.27
14.00 3.00 12.00 10.75
2.50
10.00 9.27 8.00
2.06
2.00
8.41
6.00
1.50
4.00
1.00
2.00
0.50
0.00
0.00 2002
2003
2004
2005
2006
2005
2006
2007
2008
The interest coverage coverage ratio ratio of Fabindia Fabindia is far higher than that of Pantaloons. Pantaloons. Hence, raising funds through debt is not no t a big challenge.
Pantaloons Interest Cost as a Pe rcentage of Sales
FabIndia Interest Cost as a Pe rcentage of Sales 1.20 1.14
4.00
1.09
3.67
1.00
3.50
0.96
3.00
0.80 0.69
2.50
0.60 2.00
2.25
2.14
0.48 1.50
0.40
1.49
1.00 0.20 0.50 0.00
0.00 2002
2003
2004
2005
2006
2005
2006
2007
2008
The interest interest cost cost as a percentage percentage of sales for Fabindia Fabindia is far lesser than that of Pantaloons. Hence, raising funds through debt is again not a big challenge.
FabIndia PAT %
Pantaloons PAT %
7.00
4.00 6.30 6.02
6.00 5.66 5.00
5.78
3.50
3.63 3.41 3.27
3.00 4.79
2.71 2.50
4.00 2.00 3.00 1.50 2.00 1.00 1.00
0.50
0.00
0.00 2002
2003
2004
2005
2006
2005
2006
2007
2008
The PAT as a percentag percentage e of sales of Fabindia Fabindia is higher than that that of Pantaloons. Pantaloons. Though retail industry works at low margins, Fabindias Fabindias margins are quite high. Hence, raising funds through debt is not a big challenge.
OPTIONS AVAILABLE
DEBT FINANCING ±
Pros
±
The decision authority stay with them, hence can stick to their mission Healthy current ratio (around 2:1 throughout th roughout years) A very healthy interest coverage ratio (as high as 16 times) which is quite higher compared to Pantaloons, Pantaloons, Shoppers Stop etc. (1.5%2.5%) A very healthy debt to equity ratio Interest cost as a percentage of Sales is very low (0.006%) Family owned
Cons
Debt acquired may not be huge Loose out on the expertise expertise of other organisa organisations tions which can be brought in through JVs or investments
OPTIONS AVAILABLE
PRIVATE INVESTORS/ INVESTORS/ JVs JVs ±
±
Pros
Huge investments can be brought in
Professional Professional expertise can be brought in
Cons
Decision authority gets diluted Emphasis may may shift to profit profit maximisatio maximisation n and hence Fabindias Fabindias mission may get diluted
RECOMMENDATIONS AT A GLANCE
Heavy investments investments in back-end of value chain chai n ±
Expansion aiding strong regional presence ± ±
Outlets to counter regional competition Sourcing from local suppliers for outlet and other regions will be easier
Growth through harnessing new customers customers ± ±
Supply chain development for efficiency and quality management
Cannot depend on existing customers to counter competition Must create new customers in all segments
Tie up with different different types of graduate graduate schools for talent ±
±
Rural management graduates for managing supply chain and rural initiatives Management graduates for helping growth in front-end and retail arms
THANK YOU
