This action might not be possible to undo. Are you sure you want to continue?
It (Archies) is a phenomenon that touches your life from womb to tomb. - An Archies Retail Outlet Owner, in December 2001. A company in trouble! In February 2002, the Delhi High Court dismissed an application for injunction filed by leading Indian greeting card and gift company, Archies Greetings & Gifts Ltd. (Archies). The company wanted a stop order to restrain Hindu fundamentalist groups—the Shiv Sena, the Vishwa Hindu Parishad (VHP) and the Bajrang Dal—from "interfering in the Valentine's Day celebrations and sales promotions in its showrooms and outlets." Archies filed the application fearing that the groups will vandalize their outlets as they had in February 2001.1 The Court's decision shocked Archies' management, for any disruption of business on Valentine's Day would translate into huge revenue losses for the company. Director Vijayant Chhabra said, "Everyone knows what happened last year. Our outlets were targeted in Mumbai, Delhi and other parts of the country. Our business has been affected severely." The dismissal of the injunction appeal came at a time when the company was facing a host of problems on various other fronts that were taking a toll on its performance. In the late-1990s, e-cards became very popular. Archies was forced to launch its own egreetings website, archiesonline.com, through its wholly-owned subsidiary Archies Online.com Ltd. in mid-2000. However, by late 2001, the company made archiesonline.com a paid service. Youhan Darrab Aria (Aria), Chief Officer (Logistics and Finance) of the portal commented, "E-commerce was not happening from our site as expected and ads were also not forthcoming. We wanted to increase our revenue and charging users was the solution." As expected, a large number of the 0.6 million registered users stopped using the service. Aria admitted, "We have suffered massive drops in our registered user base since we became a paid site." In addition to these problems, Archies' initiatives to convert its network of franchisee outlets into company-owned outlets and its distributor set up into a Carrying and Forwarding2 (C&F) set up were proving to be major burdens on its finances. As a result, in 2000-01, for the first time in its over 20-year history, the company experienced a negative growth. Turnover declined from Rs. 710 mn in 1999-2000 to Rs. 680 mn in 2000-01, while net profits for the same period declined by around 32% from Rs. 130 mn to Rs. 91 mn3. Archies' market share remained at 45% between 1998 and 2000. Analysts remarked that the company's leadership status in the Indian greeting card and gifts market seemed to be doing it no good in increasing its market share and sustaining profitability. Background note
Anil remarked.37 Indian Public 17. The name Archies was chosen after Anil took a fancy to a neighbor's dog named Archie. Sun. "I would spend hours listening to a sound track. 2002) Shareholder(s) % of shareholding Promoters 66. Anil then decided to enter the greeting cards business.23 FIIs 0." As customer awareness increased.11 Shares in transit 0. If we had to retail. Anil said.87 Total 100. Mother's Day.Archies was the brainchild of Delhi-based Anil Moolchandani (Anil). In the late 1970s.18 Institutional Investors 8.01 Private Corporate Bodies 6. we were so excited we could barely contain our emotions.44 NRIs/OCBs 0. we had to have a proper shop.archiesonline. "Theme cards—Valentine's Day. so when we finally managed to sell the entire lot to a music shop in Chanakyapuri. cards were typically sold out of dusty shoeboxes marked `Birthday' and `Anniversary' kept in the corners of stationery shops. he started getting posters of film stars. Commenting on his experiences.79 Banks/FIs/Insurance Companies 0.00 Source: www. Anil and his brother Jagdish Moolchandani (Jagdish) got `Archies Gifts & Greetings' registered as a partnership concern for starting the greeting cards business. He began to sell songbooks containing the lyrics of hits from groups such as ABBA. Commenting on the runaway success of the shop. meticulously translating lyrics which were initially incomprehensible. "The card shops there were like a Raymond or Bata showroom here. printed by local printers. named `Gift Gallery'. advertised in one of the popular magazines in those days. whose family business was selling saris. Anil decided to sell books containing lyrics of hit English songs in addition to the posters. During a visit to South-East Asia. which led to the launch of the first Archies' outlet in Delhi in 1984. When the demand increased. Anil was impressed with the exclusive greeting card shops offering good ambience and soft backdrop music. .com An avid music enthusiast." He decided to try out this concept in India as well. he decided to buy and sell good-quality posters through mail-order catalogs. Beatles and BoneyM. He wrote down the lyrics of songs himself while playing them on a gramophone.000 copies per year. He observed that in India. Exhibit I Archies – Shareholding Pattern (as on March 31. natural sceneries and other subjects of interest. In 1979. he started coming out with songbooks containing hits of a particular year and he was soon selling over 10. He said.
Archies tied-up with the US-based Gibson card .5 bn Indian social expression industry was growing at a rate of 20% per annum. Another 25% was accounted for by the unorganized sector consisting of over 200 manufacturers producing low-priced and low-quality cards. around 25% belonged to cards from charitable institutions like Child Relief and You (CRY) and Unicef. ft. the brothers decided to franchise the name to interested parties. then even our cards are priced competitively—our range starts at Rs. Everyday cards accounted for 50% of overall sales. the margins were going downhill for most players. The same year. Revenues for the greeting cards market were mainly concentrated in the urban areas. Christmas and New Year accounted for 25%. In 1990. and the rest by special occasion cards like Valentine's Day. Ltd. "Our cards are in a different category altogether. the US-based Hallmark company). The organized sector comprised only 50% of the greeting card market.2 mn. rented shop became an instant hit with college students who flocked to buy cards and gifts. which took over the partnership firm's business. Of the total market. However hard the unorganized sector tries. Gutka manufacturer Manikchand. He invested Rs. Friendship Day—were concepts entirely alien to Indian buyers. They immediately caught the fancy of teenager shoppers. We don't even view them as any threat because they don't fall in our segment. the brothers established Archies Greetings & Gifts Pvt. However. Though the unorganized sector accounted for almost 25% of the industry. In 1994. With sales touching Rs." With the economic slowdown in the country.. because it was no longer economical to get printing done from outside. Delhi and Bangalore. the first exclusive Archies gallery was set up in Kamla Nagar. A spokesperson for Archies said. organized sector players did not see them as a major threat. 80 mn in a five-color printing machinery and an additional Rs. season's cards for festivals such as Diwali. and pen company Rotomac. 50 mn over the next few years. of which Archies and Vintage had market shares of 38% and 35% respectively (Vintage Cards is a Pune-based company and the Indian franchisee for global greeting cards major. many players were entering the marketing including the tobacco-to-hotels major ITC (in association with the UK-based design company. specifically cities such as Mumbai. situated in the heart of the Delhi University campus. you only have to look at their production quality to realize the difference. Mother's Day. 4. 4. 2. the Rs. Exhibit II A Note on the Indian Social Expression Industry In 2001.Father's Day. and Friendship Day. If you're talking cheaper price tags. Simon Elvin)." In 1987. Anil decided to install a printing unit for the company. The 1000 sq. the Moolchandanis managed to break even in the first year itself. Following this.
quotation plaques. Archies had cards for almost every major festival in both English and Indian languages. and planners. wrought-iron frames. frames. which became operational in 1994. stuffed toys. clocks. The gift items include photo albums. Besides the retail route. By the end of the 1990s. In addition. gift-wraps. pen stands and other decorative articles. the music cassettes and CDs from its music division were also retailed under this division. The cards were sold with designs sourced from various international collaborators such as American Greetings Corporation (Paper Rose). it also sold greeting cards to corporate clients such as Reliance. gift items and stationery products (Refer Exhibit II for a note on the Indian social expression industry). Birla International and Dabur. Gibson Greetings (Fine Expressions and Gibson). In 1995. the division began to sell deodorants and perfumes under the brand names. posters.056 million equity shares at a premium of Rs. The company sold its products through a vast distribution network that covered every major state in India and even in remote towns. and later on launched the `01' range. fancy stationery. Kingsley of UK and Kel Geddes of New Zealand. the division was primarily outsourced by the company. The product range comprised autograph books. in India. diaries. The company launched cards with new designs every month to keep its portfolio updated. The stationery product division contributed 16% to the company's revenues—all its products were manufactured in-house. These branch offices catered to the needs of both franchisees and retailers. Ludhiana. Growing at 30%. 74 mn (1. contributed 15% to the turnover as in 1999-2000. friendship books. Portal Publications (Paper Magic).5 times (Refer Exhibit I for the company's shareholding pattern). Archies' products were sold through around 8000-10.8 million cards and was growing at 15%. Archies could sell cards that had Gibson's designs. telephone indexes. and were managed by the . LIC. Boyz. and Hyderabad to extend its reach and penetration. Archies had four branch offices in Mumbai. business organizers. The greeting cards division contributed 69% to the company's revenues in 1999-2000 with a sales volume of 85.manufacturing company. Thus. Ahmedabad. The division was growing at 10-15%.000 multi-brand retail stores across the country and serviced through 70 dedicated company distributors. calendars. The issue was oversubscribed 4. The gift items division. the company also sold cards under the HelpAge4 brand. with its initial public offering of Rs. Archies was incorporated as a public limited company. According to the agreement. In 1997. 60 per share). Gals. It was the first company to retail regional language cards on a national scale. Samsung. designer stationery. mementos. Archies had an in-house creative team of about 85 people—artists from premier art institutes and writers with excellent writing skills. Archies was operating in three clearly demarcated businesses— greeting cards. In 1999. sunglasses.
ft. • Premium Archies Galleries or Vision 2000 stores—Exclusive Archies showrooms housed at prominent locations. erasers and rulers. By the end of the 1990s. under license from Walt Disney Ltd. Jagdish Moolchandani joins Archies. 8 mn kids stationery business and launched crayons.. and school bags. The company starts producing cards and stationery products with Disney characters.000 people shopped for Archies products. AG&G ties up with HelpAge India to market and produce greeting . where 10. A 3-day exhibition. USA. poster colors. 100 mn mark by 2005. Archies entered into an alliance with Normak Fashions.ft. pencils. ‘The Archies Explosion’ at The Taj Palace Hotel. • Other retail outlets. • Paper Rose Shoppe—Shops with an area of 100-150 sq.company's representatives as well as its C&F agents. Archies had established automated production lines using the latest printing and card production technologies. Feelings outlets were renamed as `Archies Feelings'. in size. Estelle's line of fashion jewelry was to be made available at Archies outlets across India. typically 500-1000 sq. posters and stationery gallery opened in Kamla Nagar. with around 85% of Archies merchandise. geometry boxes. • Archies-The Card Shop—Smaller in size than the Archies Galleries. Following this. manufacturers of the famous Estelle brand of women's fashion jewelry. The first Archies cards. According to the agreement. The product range was to be extended to include glues. In April 2002. In the same month. New Delhi. The company planned to reach the Rs. Exihibit III Archies-Over The Years Year 1979 1980 1984 1985 1987 1989 Event Anil Moolchandani starts Archies as a mail order supplier of posters and songbooks. spread over a larger area with a lot more shelf space than the other outlets. Archies took over the popular 25-store `Feelings' chain of greeting card and gift outlets in the state of Gujarat. Products were retailed through the following channels: • Archies Gallery—The first concept store opened by Archies. cashing in on the fact that the Archies brand name was very popular among kids. New Delhi. • Archies Feelings—In April 2000. Archies entered the Rs.
music and perfumes are made available on the Net. All proceeds of the sale of HelpAge Cards are given to HelpAge India Charities. USA to produce an exquisite range of cards. The company had distributors for cards for Indian festivals and occasions in the US. 112 Archies Card Shops and 58 Paper Rose Shoppes. By 2002. UK. fully computerized paper cutting machine.. Archies goes regional by launching greetings in Marathi. The company's stock is listed and traded on the Delhi Stock Exchange. The Archies share price touches an all-time high of Rs 809 (ex-bonus price). stationery. AG&G stock makes its way to the BSE 200 Index.. insert-pasting machinery. thanks to the advertising initiatives. AG&G acquires a license from world-renowned photographer. AG&G launches the Archies Parfum Division. USA. the Middle East. There were six franchisee outlets in Bangladesh. AG&G launches Paper Rose Cards under license from American Greetings Corpn. Export revenues from these 15 outlets touched Rs. New Delhi. Archies cards. and releases 10 albums. and South-East Asia (Refer Exhibit III for a chronological profile of Archies' growth over the years). Enters the music business through a separate division. Archies converts into a Public Limited Company.. three in Sri Lanka and one each in Bhutan. – Comes out with the concept of Vision 2000 stores.1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 cards in aid of under privileged elderly. three in Nepal. 20 mn in 2002. The first Archies – The Card Shop opened in Saket. and comes to be known as Archies Greetings & Gifts Ltd. AG&G acquires an exclusive license from Kingsley UK. Archies Gallery opens the 100th outlet at Karnal. Archies becomes a household name. card packing machine and five colour offset printing machine. Muscat and Abu Dhabi. AG&G launches its portal archiesonline. automatic greeting card folding machine.com. -The company starts to develop in-house scanning facilities and installs automatic envelope making machinery. The story behind the success . USA. The company floats its first Public Issue. South Africa. to produce Kingsley Cards in India. Archies had 240 Archies Galleries. and over 50 Vision 2000 Stores in 120 cities across eight countries. Anne Geddes to print her designs on cards and posters under the brand name ‘Paper Magic’. AG&G ties up with Gibson Greetings Corpn. gifts. AG&G launches Fine Expressions Cards under license from Gibson Greetings Corpn. – The Archies scrip gets listed on the NSE and BSE.
such as greeting cards. lighting and display were standardized across all outlets. and smaller franchisees operated the Feelings and other retail outlets. Archies was not only able to save on real estate costs. The company entered into arrangements with movie producers. We created a branded franchise. space allocation. New Year and Valentine's Day. each franchisee paid a fixed amount to the company every month." By franchising. picture frames. As per the franchising agreement. It released a host of movie-specific items. While many players sold cards for Christmas. but in franchisee management. and the bottom level. Archies' franchisee model contributed a great deal to its success. Archies was the first cards and gifts company in India to advertise on a satellite television channel. it built a strong brand equity. These initiatives were backed by an aggressive promotional campaign in the media to create awareness and persuade people to communicate through cards. the middle level franchisees ran the Archies Card Shops and Paper Rose Shoppes. and Rakshabandhan. the company also started appointing franchisees on a commission or minimum guarantee basis under which the inventory cost was borne by the company while the franchisee invested in fixtures. Chief Investment Officer. but share the advertising and promotion expenditures with franchisees. Some of the movies the company associated itself were . "We made our own model suitable for Indian conditions. and posters to coincide with the release of movies that it thought will be a success. Birla Capital." Commenting on the decision to opt for the franchising route from the very beginning. Archies became the first to come out with cards for Indian festivals such as Holi. The top-level franchisees ran the Archies Galleries. calendars. The company divided the franchise operations into three segments targeting different set of franchisees. "The key to understanding Archies is to realize that it is not in the business of cards or gifts. products were sold to the franchisee. As part of group advertising." Anil agreed. But we were the first to do that kind of stuff. the mutual fund company. furniture and premises. Another success factor was the company's `localization' strategy. Diwali. who had the option of exchanging products. postcards. We then went in for tie-ups so as to get a greater range to support these stores because these were exclusive stores. letter pads. Archies' quality control team monitored the franchise stores and ensured that the ambience. which were not profitable with the more profitable ones. Anil said. through which it offered items associated with the latest Hindi. English and various regional language movie releases. With its tie-ups with companies like Pepsi and Pidilite. Bharat Shah.According to analysts. said. The tie-up with HelpAge helped attract corporate clientele. In the late 1990s. "You don't have malls in India so we have to manage in limited area. Now the scenario has changed in India and everybody talks about franchising. Archies constantly updated its strategies to ensure a smooth functioning of its franchising set up. Archies franchisees made their own investment in the business and paid royalty to Archies for the turnover generated from the sale of Archies products.
This compelled the brothers to launch archiesonline.1 mn in 2000. Some analysts even claimed that cards were still popular because people have used them for generations and many people did not have access to email and cellphones. Though the Moolchandanis initially denied that e-greetings posed a major threat to the paper cards industry." However. sending greetings through the Internet and mobile phones became very popular with youngsters. but we're hoping that it's just a fad. "We have a three-point program to ensure revenue flows by selling content on royalty basis. and a greetings scheduler." In addition.com in May 2000. These cards had an average eight-second long storyline with animation and sound effects incorporated into them. SMS was also very cheap and much more convenient than sending a paper card.com had three major sections—meet. In the `gift' section. Mohabbatein. During 1995-96 and 1999-2000. and Lagaan. the company's net profit grew at a compounded annual rate of 68%.Hum Aapke Hain Koun. 250. Archies tied up with courier companies Elbee and Blue Dart to deliver the gifts and cards purchased by customers. 25 as delivery charges. Anil said. soon the company discovered the negative impact e-greetings were having on its revenues. while returns on capital employed went from 46% to 78%. The near-monopoly status and the healthy track record helped the price of Archies shares reach Rs.5 mn in 1998 to Rs. E-greetings provided an opportunity to send personalized messages at a nominal cost and did not take more than a few minutes. the company went from strength-to-strength and remained the undisputed market leader throughout the 1980s and the 1990s.5% to an impressive 31%. Tera Jadoo Chal Gaya. Over 700 programmed e-cards were made available. while sales grew at 26%. The `greet' section was a consumer interaction area where registered customers could send and receive a variety of animated e-cards/greetings online for free. chat. 1.400 by August 1999. Operating profit margins over this period went up from 10. As a result of the above initiatives. Anil said. 460. Archies offered services such as free e-mail. Similarly. While residents of Delhi got free delivery of their purchases. In the late 1990s. The minimum value of each purchase was Rs. 712. consumers could purchase gifts and get them delivered at their doorstep. customers in other parts of the country had to pay Rs. creating a virtual marketplace for retailers and . reminder services. "We realize it is a threat. Tackling the e-greetings threat Archiesonline. greet and gift. they had to admit that the Internet caused a substantial dent in their revenues. the portal acted as a B2B platform. The company tied up with Easy Net Com for the payment gateway. sell banner advertisements and third-party gifting. After all one can't really replace the physical thing. These focused and well-executed marketing strategies helped Archies build good brand equity. which were quite different from the usual cards available on the Internet. Revenues also increased from Rs. who formed a major part of Archies' clientele. Under `meet'.
In fact. 399 per user for 100 e-greetings per year. 2 mn from ecommerce. which was sold through Archies outlets. Creating and hosting one card was costing us around Rs.5 mn.com.com charged Rs. Archies was not much worried.000.distributors who could have easy access to the company.com. The number of registered users reportedly reached a phenomenal 0. "We had invested Rs.com for a tie-up and finalized a 50:50 profit-sharing agreement. For Diwali. This attracted many new retailers and franchisees to the company. archiesonline. We have to really start very slow and make sure that the customer comes back and has a great experience in receiving or sending gifts. the portal claimed to have registered over four million page views and programming of 0. As a result of these initiatives. Surfers could also perform religious rituals at archiesonline." Archies snapped its ties with Yahoo! because Yahoo! did not want to be associated with Archies if it wanted to stop the free card service." . The portal also came out with advertisements that targeted non-resident Indians in the US. Archies' website was to have a hyperlink on Yahoo!'s homepage.15 million egreetings in September 2000. that introduced shoppers to the company's website and its services. 180 from Archies.com. This move was a part of the company's plan to secure online penetration in various youthoriented portals by leveraging the Archies brand equity. Archies discovered that the company gained no monetary benefit. We could not have continued with this free-for-all for ever since we accumulated losses of Rs. Archies then approached indiatimes. Under the agreement with Yahoo. According to the agreement with Mantraonline (an Internet Service Provider). The idea is that the site will complement the existing physical business. To bridge the gap between its Internet and retail outlet models. Although most of its existing registered users stopped using the website. the company came out with novel concepts like ecrackers that enabled surfers to burst `pollution-free' crackers. 20 mn in the online subsidiary but made just Rs. The website became very popular in a short span of time and began to receive over three million page views per month. Archies sold boxes containing these gifts and the passwords to access the website at its retail outlets. Indiagreetings.com. Users were also given 10 paper cards worth Rs. Aria said.6 million. Hence. archiesonline. Anil said. Jaldi. a music CD and cassette and 10% discount coupons for shopping at Archies Gallery and Planet M (a music retailing outlet) stores. the venture was proving to be a drain on the company's finances. Some of the alliance partners were Yahoo. 13.com a paid site. Mantraonline. India Post and India West. In late 2000. Even though the number of e-greetings sent through the site touched 54 million. Archies introduced the concept of e-kiosks. As per this agreement. Khaleej Times.com entered into strategic alliances with various portals. Archies launched an Internet access product. Archies decided to make archiesonline. 6. UK and the Middle East with the help of India Abroad News Service. "We don't want to have millions of people to come to our site and shop.com. and UthPlanet.
"The biggest advantage of this model is that the company owns the inventory. Rationalization gone wrong? The distribution revamp During the financial year 1999-2000. the company began to appoint C&F agent in a particular territory who. an Archies card was the best option. in place of 68 distributors in 21 states. Rajesh Syal. in 2001." In the earlier set up. Archies ran a nationwide advertisement campaign across various newspapers and television channels." The shift from distributors to C&F agents cut costs significantly—while the distributor margin was between 25-30%. Archies faced problems due to the distribution and retail outlet rationalization exercises it was undertaking. As a result. Manish Jain. appointed various area-wise distributors. Archies appointed 10 C&F agents in 10 states who catered to distributors who in turn reached out to the retailers. serious problems cropped up as a result of some of its strategic initiatives. the C&F margin was only 12%. Archies could not push its entire range of products into the retail channel. Archies decided to revamp its distribution network and replace existing distributors by a C&F agent network. Marketing Manager (Western Region). so the consumer is ensured of seeing the entire products range that is available. However. Now with the C&F agents and exclusive outlets we can at least continue to revamp our product portfolio. which was one of the key markets for Archies' products. Archies ran huge advertisements in leading Indian financial dailies. The C&F agent was given the full responsibility to control and manage these distributors. in turn. Though the C&F agents were themselves responsible for the distribution of products across the allotted territory. The idea was to `equate e-cards with fun' and tell people that when it came to `serious expressing of emotions'. Archies had to accept the distributors' decision when they picked up only those products. stating that egreetings or SMS could never be as effective as a physical greeting card. the company's revenues in 2000-01 took a severe beating due to a nationwide postal strike in end-2000 that affected the sale of Christmas and New Year cards. Company Secretary. which they believed would do well. send an Archies card. `When you really mean it. many were unable to exploit the market properly. Despite all the above measures taken to maintain its profitability. Similarly. these developments indicated that Archies had decided to treat the online venture as an extension of its business rather than as a thrust area for future growth. Archies. said. The company spent 6% of its turnover on the campaign. According to the new distribution system. it faced bottlenecks in some parts of the country. Archies. To add to the company's woes. Therefore. According to analysts.' In late 2001. after Archies adopted the concept of C&F agents.In June 2001. the Valentine's Day celebrations were hit hard due to opposition from religious fundamentalists and the earthquake in Gujarat. which had the tagline. The exercise enabled . "Distribution could not match the pace with which we introduced products and with their limited resources it was difficult. said.
which increased the working capital requirement.' by way of which all existing Archies Gallery franchisees were asked to keep only Archies range of products. where the company was not able to fine a suitable franchisee. and have better inventory management and product mix systems. Investments in real estate. If they did not want to be an exclusive outlet. the company took back all the stock lying with the distributors. Stores. The idea was to have only Archies Gallery and Archies Paper Rose Shoppe as the completely franchised outlets. These stores had world-class interiors and stocked all the products marketed by the company. Archies hoped that the higher costs of owning the retail infrastructure would be offset by substantial savings in trade margins. it had to incur substantial investments during the transition. it opened its own stores. in its own stores. However. The Vision 2000 stores were much bigger than any other Archies retail outlets and according to company sources. its own shops brought immediate cash flows. and therefore. rented or bought. either leased. they were the Moolchandanis' view of an `ideal Archies outlet'. the C&F agents were expected to help the company enlarge its retail network. During the conversion stage (from distributors to C&F agent set up). went up as the company had to invest heavily in real estate. Also. This increased the level of inventory. This forced the company to outsource fund requirements. which were negligible in the franchisee-based system. the fact that Archies had to pay higher interest on working capital and had to write off expenses incurred on an ERP initiative also contributed to the decline in performance. In addition. These two rationalization moves resulted in the company facing a decline in profitability. Archies believed that being in direct contact with the customer will help assess the detailed requirements of various product lines. The company planned to own at least 50% of the Vision 2000 stores in the future. Though Archies planned to take retail space on lease. were given a minimum business guarantee or a commission of sale (whichever was higher). the company was also planning to increase the number of Vision 2000 stores on a large scale. In the long-term. Archies began an `exclusivity drive. incur a heavy interest burden. many shops were revamped and some even had to be shut down. Archies was able to get full value for its products from Vision 2000 stores. In a sense. to allay the apprehensions of not being able to meet the targets. The company typically sold its products at 50% discount on MRP to retailers. The retail revamp In 2001. In addition. In order to ensure that franchisees delivered results. which had a reasonable size and prime location. As a part of this exercise. the new contract included a clause that demanded the franchisee to make a commitment of 30-35% growth annually. they were given the option of converting into an Archies Paper Rose Shoppe on a `non-exclusive' basis. thereby registering a sharp improvement in margins. while Archies had to give 30-60 day credit to its business partners. In prime locations. .Archies to penetrate deeper into the markets because of wider reach. brought in 40% more revenues as well. it could sell directly to customers at MRP. In the long run.
" . For the greeting cards business. Anil said. Archies decided to focus more on the gifts segment. The company expected the share of the gift segment to go up from 20% to 50% in the future. Archies decided to renew its focus on the corporate sector. which started at Rs. which had largely remained unaffected by ecards. ITC's entry into the greeting cards business was not great news either. as against other brands. Anil's business acumen and entrepreneurial spirit remained the same.7 mn. 99. For instance. then you never know." Many analysts saw this as a smart move. C&Fs will contribute 40% to sales and the balance 20% will come from distributors. he said. The idea was to make an Archies gallery a `one stop gift shop' for people from all walks of life. They also had their doubts about Archies regaining the growth rates it experienced in the mid-1990s. analysts also questioned the company's entry into the highly competitive music and perfumes businesses. which were lacking in the present set up. "We need to respond quickly and so don't want to invest in fixed assets. The company had already begun importing high-end gift articles such as crystal. The company also planned to cobrand the gift items in the near future.3 mn. The decision to outsource the gift items was taken because Archies realized that the business was `faddriven'. In May 2002. the revamping of the distribution and outlets was likely to affect the company's performance at least for some more years to come. which will contribute at least 40% to sales. The company planned to develop and introduce new lines in the gift segment including higher-end items. Though the company had cards in almost all the price ranges. The future—Shifting focus The Moolchandanis believed that the distribution and retail revamp exercises will yield positive results after the transition phase. 804. However. In addition. Hong Kong and Korea in addition to outsourcing from local vendors.For the financial year 2001-02. According to analysts. perfumes started at Rs. 75. mugs and key chains). as it believed the segment was under-exploited. the company's revenues were Rs. net profits declined to Rs. Archies priced the products competitively. The company also decided to outsource certain gift articles (such as posters. And. "Five years from now I think we will have 100 Vision 2000 stores. to be sold in small towns. Archies decided to change its name to Archies Limited. 150. it planned to launch a new range of economy cards (priced around Rs. soft toys and Feng Shui5 items from China. Archies was in direct competition with giants such as Saregama and Tips Cassettes in the music segment and with Hindustan Lever and Cavin Kare in the perfumes/deodorants segments. if the dotcom takes off. an increase of 18%. which it had manufactured till now. Summing up his vision for the company. 10) called `Heart Warmers'.
Discuss if Archies will be able to maintain its marketshare and leadership in the future with the entry of players such as ITC? Will the company's current strategies help sustain its competitive position? 1 The fundamentalist groups claimed that the concept of Valentine's Day was against Indian culture and hence companies should not be allowed to use sexually explicit images/words and make money from it. 5 Feng Shui is the Chinese art of arranging buildings. a sound business move? Justify your answer. Do you think the company's strategy in the initial years was right in the light of the rationalization exercises? Give reasons to support your stand. Analyze the circumstances in which Anil Moolchandani started Archies and highlight the reasons for the company's runaway success. objects. harmony and balance. which was established in 1978. focus of the case is on . However. ****** Archies: Vertical Integration or Vertical Co-ordination? . Rs. 48 equaled one US $. 3. Their operations include receiving. Reportedly. 410 mn.Questions for discussion 1. The NGO. and dispatching goods. 2 C&F agents appointed by manufacturers and distributors of goods. and space in the environment in order to achieve energy. Critically comment on Archies' franchising and distribution strategies for expansion. these groups resorted to vandalism and violence in various parts of the country to stop celebrations associated with the day. warehousing.Sukhpal Singh The case study. `Archies: The Way Indians Greet'. has 23 major centers in India and has assisted over 1. Why do you think Archies could not sustain its profitability growth in 2000-01? 2. provide clearing and forwarding services. 4 HelpAge India is a voluntary organization promoting the cause and care of the elderly. The author is a Faculty Member at ICMR. and maintaining records and invoices.500 age care projects worth Rs. 3 In September 2002. reveals the changing strategies of the company with the changing nature of the larger market. Do you think the measures taken by Archies to meet the threat of e-greetings were adequate? Was the company's decision to make its website a paid one. 4.
This helped the company to retain larger margins and have access to more immediate cash flows. quality control and continuing two-way communication. The company undertook many experiments in its distribution network ranging from franchised outlets to company-owned shops and even C&F agents. In fact. On the distribution side. Franchising. The difference between a franchisee and a distributor is that a distributor is an independently owned and financed business with the distributor holding title to goods supplied by the company whereas. a major initiative was to cut the channel short by attempting to integrate vertically on the marketing side. vertical coordination refers to control. is an ongoing business relationship between two parties which includes not only the product service and trademark. Franchising helps the franchiser to lower investment risk and have a wider reach in the market. franchising is a principal-to-principal relationship. it had to adopt outsourcing strategy in its gift article business to cut cost and reduce risk in a fad-driven business and an ever-changing market. besides its own retailing shops. vertical integration was complete in its stationery product division where all its products were manufactured in-house. It is also referred to as quasi-vertical integration. On the other hand. which is a part of the vertical coordination strategy. not ownership. of various stages in the product value chain. supervision costs are added. Vertical integration was achieved by Archies in terms of having an in-house creative team of 85 people and the setting up of the printing unit. The company kept changing franchising terms over time wherein it had . The case study also brings out the strategies of vertical integration and local and international strategic collaboration and alliances tried out by the company in the 1990s. While attempting vertical integration to deliver value to the market. the company seems to have ignored some of the disadvantages of vertical integration when there was a clear trend towards outsourcing or vertical disintegration in the economy and worldwide. Finally. Archies tried to harness the advantage of franchising and offered very favorable terms to begin with. the disadvantages of franchising are that the profits are lower. and a future competitor is created in the process of franchising. by a single business entity. like option of exchanging products not found profitable by the franchising with more profitable products. Vertical integration refers to the complete ownership of various stages in the production and marketing stages of a product or service. The company adopted the franchising model proactively and had the first mover advantage in this regard. operating manual. As against a principal-agent relationship in the case of distributors. a franchisee is a business partner of the company. The franchisees also paid a fixed amount to the company every month to support advertising. but also the entire business format including marketing strategy and plan.distribution and marketing aspects in general. Its decision to franchise retailing in the 1980s was a pioneering step that proved to be worthwhile. This is in line with the recent thought of moving closer to the consumer. and franchising in particular. On the other hand.
it made good use of new technology for business to consumer and business to business transactions. franchisees and exclusive retail stores besides its own shops in this case. it committed the mistake of making it a paid service which was earlier free. But. Print the address of your . Adaptation to the local market needs was another important strategy of the company wherein it brought in new products for new occasions and launched more Indianized products for Indian festivals. As other websites like Yahoo! or Perfect Greetings are free. It is important to realize that a business entity should not proactively involve itself in legal matters with public at large. since the outlets are dispersed over a wide area. cannot be manipulated. It even attempted segmentation of the franchisees in order to deploy them for different market segments. registered users stopped using the service. it is better to plan franchising more carefully due to the fad-driven nature of the business. It was one of the first companies in India to advertise on a satellite television channel. The case study also brings out the use of concept selling and market segmentation used by the entrepreneur (Anil Moolchandani) in the early years of the company's business. It also made high use of Internet for its business through strategic alliances with various portals. An interesting aspect of market handling is the substitute product threat which in this case was e-greetings and SMS. advertising and product development. As a result. and therefore. It included multi-brand retail stores serviced through dedicated company distributors. There were many external factors as well which affected company's business. furniture and premises. Another important strategy that comes out clearly from the case study is the use of strategic alliances and networks for marketing. These various focused and well-executed strategies helped the company to build good brand equity. Though the company tried to tackle it by launching its own egreeting website by its wholly-owned subsidiary. As an attempt to expand the market. An important learning from the case study about distribution management is about having multiple channels of distribution. it is important to remember that in a business like greeting cards and gifts. However.franchisees appointed on commission basis and on minimum guarantee basis under which the inventory cost was borne by the company while the franchisee invested in fixtures. released around the festival of Diwali "When you really mean it. The case study mentions the company taking on the fundamentalist groups legally. Further. The text of an Archies print advertisement in late-2001. the company targeted institutional markets and lower and (rural/semiurban) markets for mass customization. The company also attempted lateral diversifications in product lines in which it had no experience and faced strong competition. it becomes costly to supervise and ensure standard quality service. Have them put in envelopes. You will personally select cards. the company could not have expected the users to pay for the service. These factors are most of the time uncontrollable for most of the firms.
loved ones. And if you had really meant to wish your associates. Because unlike SMS or an e-card. we suggest." .associate. when you send an Archies Card. make sure you don't miss out on wishing them on New Year with a card. clients. you send a message along: That you really mean it. But in case you missed doing that. Paste a stamp. Diwali is here. And have them posted. you would have already sent cards and wished them Happy Diwali.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.